By Mary Alexander and Charlie Kearns
The Missouri Department of Revenue determined in a letter ruling that Bitcoins are intangible property not subject to tax under Missouri’s Sales and Use Tax Law. As explained by the taxpayer, Bitcoins are “a form of digital currency that is created by software and stored electronically.” Here, the taxpayer sold Bitcoins in exchange for paper currency through automated teller machines. Because Missouri sales and use tax is imposed only on transactions involving tangible personal property and specifically enumerated services in Missouri – not intangible property – the Department stated that sales tax did not apply to purchases of Bitcoins. Moreover, the Department explained that the Missouri Sales and Use Tax Law does not contain an enumerated taxable service that would encompass intangible property such as Bitcoins. Mo. Dep’t of Rev. LR 7411 (Sept. 12, 2014).
Missouri’s letter ruling comes after guidance from the Internal Revenue Service (IRS) that Bitcoins will be treated as property, not currency, for federal tax purposes. California, Kentucky and Wisconsin have also issued administrative guidance stating that payment with Bitcoins does not alter the character of a transaction for sales tax purposes; any business that accepts Bitcoins as payment must collect sales and use tax if it is a taxable transaction. IRS Notice 2014-21 (Mar. 25, 2014); Cal. State Bd. of Equalization Special Notice L-382 (June 2, 2014); Ky. Dep’t of Rev. Sales Tax Facts (June 2014); Wis. Dep’t of Rev. Sales and Use Tax Report 1-14 (Mar. 2014).