Wednesday, June 18, 2014

California Reminds Businesses to Apply Sales Taxes to Digital Currency Transactions

It's only the beginning folks as the long arm of government begins to regulate and insure it gets its cut from any Bitcoin transactions. And note well, unlike paying in cash, where you walk out the door and there is no connection of your transaction to the remainder of your life, a Bitcoin transaction is recorded for life. Unless you do contortionist maneuvers, the money you spent will be linked to you forever.

Bitcoin is not a libertarian currency. It is the opposite.

California State Board of Equalization has sent out a "Special Notice" to California businesses reminding them that they must collect sales tax on Bitcoin transactions and other digital currencies.

From the Special Notice:
Regulation 1654 , Barter, Exchange, “Trade-Ins” and Foreign Currency Transaction, further provides that the measure of tax from a barter or exchange transaction includes any amount allowed by a retailer to the customer for property or services of any kind.  Therefore, if a retailer enters into a contract where the consideration is virtual currency, the measure of tax from the sale of the product is the amount allowed by the retailer in exchange for the virtual currency (generally, the retailer’s advertised selling price of the product.)

Example: A restaurant sells a taxable meal to a customer with an advertised menu price of $50. Customer pays the restaurant 0.065 bitcoin for the meal. The measure of tax from the sale of the meal is $50, which is the amount allowed by the retailer for the 0.065 bitcoin at the time of the sale. Similarly, the restaurant sells a taxable meal to a customer with the menu price of $50. Customer pays the restaurant 1 bitcoin for the meal. The measure of tax from the sale of the meal is still $50. The restaurant should retain a copy of the menu in its records to document the measure of tax from its Bitcoin transactions.
-RW 

(ht JR)

1 comment:

  1. Contortionist? It's actually quite trivial to anonymize your transactions.

    ReplyDelete