Bitcoin is to be treated as “intangible property” and transactions will not be subject to sales tax, the state of New York revealed today.

The New York State Department of Taxation and Finance released a memorandum dated December 5, stating that the exempt status applies to “convertible digital currency”, following months of speculation since an IRS note issued in March.  The Tax Department states:

“The use of convertible virtual currency by a customer to pay for goods or services delivered in New York State is treated as a barter transaction. For sales tax purposes, convertible virtual currency is intangible property. Since the purchase or use of intangible property is not subject to sales tax, any convertible virtual currency received by a party to a barter transaction is not subject to sales tax.”

The clarification goes on to differentiate various transaction scenarios and highlight that goods and services received under various circumstances would themselves still be liable for sales tax.

In addition, exact procedures for merchants wishing to deal in digital currency are outlined with regard to tax registration and other legislative obligations.

The announcement has gained a mixed response from the Bitcoin community, with the Tax Department’s provisos suggesting the departure from the original IRS guidance is not a large one.

“This ruling, while making perfect sense due to the IRS guidance, is yet another example of the old rusting monolith that is government showing its irrelevancy,” Bitcoin Association Co-Founder, David Mondrus told Cointelegraph.

“First, the law only applies to the NY resident in the transaction, since the Supreme Court ruled in 1992 that only companies with a presence in a state are liable for the collection of sales tax. Second, use tax compliance is notoriously low for internet purchases. And third since barter transactions are rare in the non-Bitcoin world, and therefore complex to most consumers and merchants, almost ensures that compliance with this ruling will be low.”

Counter to this runs a certain sigh of relief from those perhaps anticipating an even less favorable outcome, in light of recent turmoil produced by New York’s BitLicense proposals.

Business attorney and commercial litigator Marco Santori described the activity as “great news” in a tweet, while the Reddit community also expressed caution at criticism.

Meanwhile, the controversially-titled Cryptocurrency Protocol Protection and Moratorium Act put before Congress by Republican Senator Steve Stockman is currently being considered.

The bill calls for a 5-year freeze on further legislation regarding cryptocurrencies at national level, along with further tax exemptions and, in contrast to the New York declaration, treatment of virtual currencies as currency instead of property.

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