So, what do states need to keep in mind as they start implementing (and then creating legislation for) this technology? What exactly does it mean for sales tax?
This ebook breaks down the current digital asset dilemma and discusses what legislators, regulators and businesses need to understand, such as:
- Definitions of key terms and how they relate to sales tax
· What is considered a digital asset?
· What exactly is blockchain?
· Why is this important?
- How online marketplaces come into play
· Ecommerce markets v. non-fungible token (NFT) marketplaces
· The unique sourcing challenge for digital sales tax
· Will cryptocurrency have an impact?
- The questions surrounding sales tax collection – digitally
· When does someone possess a digital asset?
· How will states evaluate digital assets that can be exchanged for tangible property or services?
· Is tax better deferred until an asset is redeemed?
- Words of advice for regulators and legislators
· Know what you’re regulating before writing statutes
· Understand – and appreciate – that this is a new sales channel. Ecommerce, brick and mortar and now, digital assets will all likely be standing side by side.
· Short of official guidance, there is the chance for abuse of technology – how can you avoid it?
The application of sales tax on digital assets transferred on blockchain is becoming an increasingly important consideration for states. Before diving headfirst into blockchain technology and digital assets, states need to be sure they are adopting best practices. That can only be done with an accurate and comprehensive understanding of the industry itself. Sellers and marketplaces are ready to comply with reasonable and well-articulated sales tax compliance requirements – they just need to be given reasonable and well-articulated requirements to follow.