How did New Jersey TAM 2015-1(R) treat convertible virtual currency for business, income, sales, and inheritance taxes?

Plain-English summary

New Jersey treated convertible virtual currency as intangible property and required taxpayers to translate its value into U.S. dollars for the tax events addressed in the TAM.

Corporation Business Tax and Gross Income Tax

The TAM followed the federal virtual-currency treatment described in IRS Notice 2014-21, Revenue Ruling 2019-24, and IRS Chief Counsel Memorandum 202114020. Taxpayers had to determine fair market value in U.S. dollars on the payment or receipt date.

Because virtual currency was intangible rather than tangible personal property, the TAM said Public Law 86-272's nexus safe harbor did not protect an out-of-state company selling virtual currency to New Jersey customers. The company was considered to be doing business in New Jersey for Corporation Business Tax purposes.

For Gross Income Tax:

• gain or loss followed the federal property treatment described by the TAM;
• virtual currency paid as wages was subject to New Jersey withholding; and
• an independent contractor receiving virtual currency for services had to value it in U.S. dollars when received.

The same information-reporting requirements applied as for other property payments.

Sales and Use Tax

Purchasing convertible virtual currency for investment was not subject to Sales Tax because the currency was intangible property.

Using it to pay for taxable property or services did not make the underlying transaction exempt. The seller had to value the currency in U.S. dollars on the payment date, charge tax on the underlying taxable sale, record the dollar value and tax collected, and report and remit the tax in U.S. dollars.

Inheritance Tax

Virtual currency owned by a decedent was intangible estate property. The estate had to determine its fair market value in U.S. dollars as of the date of death and report that value on the Inheritance Tax Return under N.J.A.C. 18:26-8.8.

What this means for you

Businesses accepting virtual currency

Maintain contemporaneous U.S.-dollar valuations for each payment and separately record the Sales Tax collected. Tax returns and remittances remained dollar-denominated.

Out-of-state virtual-currency sellers

The TAM said the Public Law 86-272 safe harbor did not apply because the sold property was intangible, creating Corporation Business Tax exposure for sales to New Jersey customers.

Employers and independent contractors

Value virtual-currency compensation in U.S. dollars when paid or received and apply the withholding or reporting rules described in the TAM.

Estates

Document the currency's fair market value in U.S. dollars at the decedent's death for the New Jersey Inheritance Tax Return.

Common questions

Q: Was buying virtual currency as an investment subject to New Jersey Sales Tax?
A: No. The TAM treated the currency as intangible property.

Q: Did paying with Bitcoin or another convertible virtual currency avoid Sales Tax?
A: No. Tax still applied when the purchased goods or services were taxable.

Q: In what currency did sellers report and remit Sales Tax?
A: U.S. dollars.

Q: Did Public Law 86-272 protect an out-of-state seller of virtual currency?
A: No, according to this TAM, because virtual currency was intangible property.

Q: How did an estate report virtual currency?
A: As intangible property valued in U.S. dollars on the date of death.

Citations and references

• Public Law 86-272 — interstate income-tax nexus safe harbor discussed in the TAM
• N.J.S.A. 54:32B-3 — Sales and Use Tax
• N.J.S.A. 54:34-1 — Inheritance Tax
• N.J.A.C. 18:26-8.8 — inheritance-tax valuation
• IRS Notice 2014-21
• Rev. Rul. 2019-24
• IRS Chief Counsel Memorandum 202114020

Source

• Landing page: https://www.nj.gov/treasury/taxation/tam-pubs.shtml
• Original PDF: https://www.nj.gov/treasury/taxation/pdf/pubs/tams/tam-2015-1.pdf

Original ruling text

Convertible Virtual Currency
TAM – 2015-1(R) – Issued: March 21, 2022
Tax: Corporation Business Tax, Sales and Use Tax,
Gross Income Tax, Inheritance Tax
This TAM concerns New Jersey’s tax treatment of transactions involving convertible virtual
currency, such as Bitcoin.
Convertible virtual currency has an equivalent value in real currency or acts as a substitute for
real and legally recognized currency. It can be used as a medium of exchange or as a form of
digitally stored value. Taxpayers may use it to pay for goods or services, or hold it for investment
purposes.
CORPORATION BUSINESS TAX AND GROSS INCOME TAX
For both Corporation Business Tax and Gross Income Tax purposes, New Jersey conforms to the
federal tax treatment of convertible virtual currency as detailed in Notice 2014-21; Rev. Rul.
2019-24; and IRS Chief Counsel Memorandum 202114020 issued by the IRS. Because
transactions using virtual currency must be reported in U.S. dollars for federal tax purposes,
taxpayers are required to determine the fair market value of the convertible virtual currency in
U.S. dollars as of the date of payment or receipt.
Since virtual currency is intangible property rather than tangible personal property, the nexus
safe harbor protections afforded by the Federal Interstate Income Act (Public Law 86-272) do
not apply to a company that sells virtual currency to customers in New Jersey. Therefore, an out
of state company that sells virtual currency to customers in this State is considered to be doing
business in New Jersey for Corporation Business Tax purposes.
The New Jersey Gross Income Tax Act follows the federal treatment of the gain or loss from the
sale or exchange of property. In addition, the fair market value of convertible virtual currency
paid as wages is subject to New Jersey Gross Income Tax withholding. An independent
contractor that receives convertible virtual currency for services performed must determine the
fair market value of the currency in U.S. dollars as of the date received. A payment made using
convertible virtual currency is subject to information reporting requirements to the same extent
as any other payment made in property.
SALES AND USE TAX
New Jersey imposes Sales or Use Tax on receipts from the retail sales of tangible personal
property, specified digital products, and enumerated services, unless a valid exemption exists.
N.J.S.A. 54:32B-3.
For Sales Tax purposes, convertible virtual currency is treated as intangible property. As such,
the purchase of this currency for investment purposes is not subject to Sales Tax. However,
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when a person uses convertible virtual currency as payment for taxable goods or services, New
Jersey Sales or Use Tax applies. Any seller and/or retailer of taxable goods or services that
accepts convertible virtual currency as payment must determine the fair market value of the
currency in U.S. dollars as of the date of payment and charge the purchaser Sales Tax on the
underlying transaction.
In addition to complying with all other registration and recordkeeping requirements, sellers that
accept virtual convertible currency as payment for taxable property or services must:
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Record in their books and records the value of the convertible virtual
currency accepted at the time of each transaction, converted to U.S. dollars;

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Record in their books and records the amount of Sales Tax collected at the time
of each transaction, converted to U.S. dollars; and

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Report such sales and remit any Sales Tax due in U.S. dollars when filing their
periodic Sales Tax returns.

INHERITANCE TAX
The New Jersey Inheritance Tax is levied on a beneficiary’s right of succession to a taxpayer’s
tangible and intangible property upon the taxpayer’s death. N.J.S.A. 54:34-1.
For New Jersey Inheritance Tax purposes, convertible virtual currency owned by a decedent is
intangible property of the decedent’s estate. The estate is required to determine the fair market
value of the convertible virtual currency and report on the Inheritance Tax Return its fair market
value in U.S. dollars as of the decedent’s date of death per N.J.A.C. 18:26-8.8. New Jersey
Inheritance Tax follows federal tax guidelines for determining the fair market value of convertible
virtual currency as outlined in IRS Notice 2014-21.
For more information, see the publications and notices published by the IRS:
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Notice 2014-21
Rev. Rul. 2019-24
IRS Chief Counsel Memorandum Number: 202114020
Frequently Asked Questions on Virtual Currency Transactions

Note: A Technical Bulletin is an informational document that provides guidance on a topic of interest to
taxpayers and may describe recent changes to the relevant laws, regulations, and/or Division policies. It is
accurate as of the date issued. However, taxpayers should be aware that subsequent changes to the
applicable laws, regulations, and/or the Division’s interpretation thereof may affect the accuracy of a
Technical Bulletin. The information provided in this document does not cover every situation and is not
intended to replace the law or change its meaning.

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