New Jersey is known for many things. As a burial ground for New York mobsters. Home to an impressive array of environmentally toxic factories. Atlantic City is the established gambling capital of the Eastern United States. Newark, New Jersey: one of the United States’ most criminal-minded cities. And a catchy state tourism jingle “New Jersey and You. Perfect Together!”. Now you can add one more feature to its impressive resume. New Jersey is ready to begin the double taxation of New Jersey residents who own and use Bitcoin for retail transactions.
As someone who lived in New York for over thirty years, I could go deep into a rant of all the debilitating issues New Jersey injects into American culture. Today, we’ll focus on their generally shady business ethics.
New Jersey and Bitcoin Taxation
Here’s the thing with Bitcoin and state or national governments. Bitcoin is not “legal tender” anywhere in the United States. You can say the same about Bitcoin and pretty much any sovereign government on Earth. You cannot pay your taxes, parking tickets, or any state fees with Bitcoin. It is not accepted as money by any government. So where does the business ethics argument come from that it is indeed taxable by the state if it has no real value to the state? Bitcoin is, in effect, a digital marker of value to individuals and a few cutting-edge businesses. Yet, New Jersey sees fit to tax Bitcoin as property for owners, and as a taxable “barter transaction” when used for a retail transaction. So Bitcoin gets none of the benefits of being a currency in the state of New Jersey, but all of the downside of being “legal tender”.
Regarding the use of Bitcoin, the New Jersey Division of Taxation issued this technical advisory memorandum (Click here for it in its entirety.) It explains how New Jersey sees Bitcoin as a stream of revenue for the state’s coffer, as each party “gives something of value to the other in order to receive something of value in return,” according to the memorandum. It continues:
“As a result if a seller uses convertible virtual currency as consideration for goods or services, sales tax is due based on the amount allowed in exchange for the virtual currency. If the customer that provides convertible virtual currency in the trade receives property that is subject to tax, the customer owes tax based on the market value of the virtual currency at the time of the transaction, converted to U.S. dollars.”
In other words, according to the state, any barter transaction is taxable. If I give you a pair of shorts, and you give me a shirt, this is a state-taxable transaction. You can be legally seen as a tax cheat if you don’t submit for taxation any swap of goods, whether you use fiat currency or not.
Maybe that’s wonderful to all the statist out there who like more and more tax burdens on citizens, but double-taxation is “dirty pool”, no matter who plays it. Just because Bitcoin is innovative and can do many things doesn’t give the state an ethical leg to stand on in taxing it over and over again.
And, in the end, all this can serve to do is to drive Bitcoin and Bitcoin-related businesses to better locales with more ethical, less predatory tax codes. Bitcoin is not legal tender, so it should not be just another revenue stream for the state. A perfect example of where the government takes from the citizenry but doesn’t give back. This anti-Bitcoin memo, which is not up for a vote as a referendum by the citizens of New Jersey, is an authoritarian decree by a totally unaccountable arm of the state. It is anti-innovation and anti-digital currency. It just turns Bitcoin into a honey pot for the state to tax every time it’s used. Why would anyone use Bitcoin in New Jersey?
Did you really expect any better economic ideas from New Jersey? New Jersey seems very happy to sit in the shadow of New York, fearing innovation and new business, and driving it away into the light of more progressive locales like New Hampshire. Bitcoin is a new technology where everyone picks aside. Are we working with it, or against it? Do we see a future with it, or without it? New Jersey and its autocratic state memorandums have chosen which side they’re on.
New Jersey and you are not “perfect together” unless you like more taxes and less innovation. That goes for any government taxing Bitcoin, and essentially banning it through legislation and taxation.
Images courtesy of Wikimedia.commons
Last modified: March 4, 2021 4:43 PM