The Kansas Department of Revenue (DOR) has issued guidance regarding the sales tax treatment of transactions related to digital currency. Per the guidance, digital currency includes, but is not limited to: digital money, electronic money, electronic currency, cyber cash, virtual currency, bitcoin, ethereum, and cryptocurrencies, whether they exist within the blockchain network or not. Digital currency does not include retailer coupons or gift cards.
Transaction fees for digital currency exchanges are not deemed a sale of tangible personal property or an enumerated taxable service and are therefore not subject to Kansas sales tax.
If a customer pays for their purchases of tangible personal property or an enumerated service entirely or in part by digital currency, the seller is a retailer and is obligated to collect and remit sales tax on the gross receipts received. Sales tax is measured by the fair retail market value of the property or service and will be calculated using the list price in U.S. dollars of the good or service, not the value of the digital currency. The measure of tax includes all charges made to the purchaser, such as storage and handling charges, that are not specifically exempted.
When the property is transferred simultaneously, the property received must be valued in money on the date and at the place the property is paid and delivered to the retailer. The date of the contract is immaterial.
When properties are transferred successively, each sale occurs when each property is transferred. If the obligations of the parties are specified in the contract, the measure of tax for each sale is the fair retail market value of the property on the contract date. If the obligations of the parties are not specified in the contract but rather are contingent on future events, the measure of tax for each sale is the fair retail market value of the property on the date of sale or on the date property received in payment for the sale is delivered to the retailer, whichever occurs first. The fair retail market value to be used must be the fair retail market value at the place where the property received in payment is delivered to the retailer.
Lastly, since digital currency is not recognized as legal tender, the DOR will not accept digital currency as a form of payment or remittance. While retailers may transact their sales using digital currency, when they remit sales tax to the DOR, they must remit the tax in U.S. dollars. Retailers should convert any digital currency into U.S. dollars prior to remittance to the DOR. The amount of tax to be remitted to the DOR is the amount calculated at the time of the sale on the fair market value of the property or service, without regard to any gain or loss on the conversion of the digital currency to U.S. dollars. (Notice 20-4, Kansas Department of Revenue, November 2, 2020)