TAM-2015-1(R) — Convertible Virtual Currency (tax treatment)

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Research, not advice. Part of the Bitcoin research archive (October 2026). Claims labelled unverified, contested or fringe are reported, not endorsed; statuses of bills and rules are as of the date checked. Government, court and patent records are public domain; the research notes are CC BY 4.0.

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:

         •   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;

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

         •   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:

         •   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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