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Breaking News: Bitcoin Hits ATH Of $112,000, Expert Predicts Rally Is Just Beginning
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Breaking News: Bitcoin Hits ATH Of $112,000, Expert Predicts Rally Is Just Beginning

California Reminds Businesses ApplyTaxes Digital Currency Transactions

newsbtc
newsbtc
4 years ago
2 mins read

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It’s common sense, but it still deserves the title of a “Special Notice”. We are, of course, referring to a memo recently released by the California State Board of Equalization (BOE), which reminds business owners in the Golden State that they are not exempt from charging sales tax on virtual currency transactions simply because the IRS does not deem bitcoin and the like as legal tender.

A growing number of businesses and individuals are now accepting virtual currencies (for example, Bitcoin, Litecoin, Dogecoin, or Peercoin) as a payment method for their sales of goods and services. Businesses and individuals who accept virtual currencies as a payment method should be aware that sales and use tax applies to such transactions in the same manner as transaction paid using traditional payment methods such as cash or credit card.

Put simply, it’s the same exact process as paying with cash. Why wouldn’t it be, after all?

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.)

Accompanied with an appropriate example:

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.

According to the BOE, retailers and businesses that accept bitcoin and other virtual currencies should keep adequate documentation of the amount they regularly sell the same product for traditional means of payments (cash, for instance).

For the full document, follow this link.

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