SALT Report 3385 – Debit cards, charge cards, prepaid cards, money orders, and checks have been the most common alternative payment methods to cash when purchasing goods and services. An increasing number of businesses and consumers are now accepting and using virtual currencies. The California Board of Equalization (BOE) has released a special notice regarding the use of virtual currencies as a method of payment.
In the special notice, the BOE explains that the Internal Revenue Service (IRS) treats virtual currencies as property instead of United States or foreign currency. The BOE advises that the same will apply for the purposes of the sales and use tax law. Tax will apply to the sale of tangible personal property in exchange for virtual currency in the same manner it would if paid using alternative payment methods. The measure of tax will be based on the total amount of the sale and businesses accepting virtual currencies must keep proof of the normal and usual price of the items sold.
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