87 / PA sales tax
And the sock loophole

Discusses PA's sales tax on NFTs, with a spotlight on how they are defined and taxed. Surprisingly, regulations date back to 2016, but there was no retroactive enforcement before May 2022. The hosts highlight a loophole where NFTs linked to non-taxable items, like clothing, could avoid tax. They also delve into Su Squares, NFTs that allow pixel edits since 2018. Major queries raised include defining transfers and creations in the NFT world. The episode critiques PA's documentation style and juxtaposes regulations with real-world NFT products, underscoring potential inconsistencies.

Timeline

00:00 Intro

00:56 The PA statute

01:08 Summary webpage

01:22 NFT definition

02:33 What represented?

03:34 Determine taxability

04:34 The copout?

04:59 How to cop out?

05:29 Where is the nexis

06:18 Securitize everything?

07:00 What price?

07:24 Royalties tax?

07:48 Marketplace tax

08:09 Retroactive enforcement

08:17 Real world

Participants

@fulldecent

William Entriken

@dtedesco1

Daniel Tedesco

@037

AKM

@t012n4d0

???

@cryptonerdylady

???

Episode notes

• PA sales tax notes about NFT
• Definition: “A non-fungible token, or NFT, is a unique set of software codes recorded on a blockchain, which is used to certify authenticity and ownership of a digital representation of something of value that can be bought, sold, and traded.”
• The socks loophole “If the NFT is not a digital good as defined in 72 P.S. § 7201(m)(2) or is intended to grant ownership or use of a nontaxable product or service (for example clothing), the sale at retail of the transfer of ownership or a right to use an NFT is not taxable. “ // make your NFTs as socks

2023-08-01 / wrap-up Tweet

• https://youtu.be/AM2b4vVU9hU / tw /
• https://youtube.com/shorts/4d70u8j96TI

NOTES

• Some document that talks about it https://www.revenue.pa.gov/TaxTypes/SUT/Pages/Non-Fungible-Tokens.aspx
  • What meets the definition?
    • Definition: “A non-fungible token, or NFT, is a unique set of software codes recorded on a blockchain, which is used to certify authenticity and ownership of a digital representation of something of value that can be bought, sold, and traded.”
    • A watch phygital seems to fit
  • Strange list of examples
  • “If the NFT is not a digital good as defined in 72 P.S. § 7201(m)(2) or is intended to grant ownership or use of a nontaxable product or service (for example clothing), the sale at retail of the transfer of ownership or a right to use an NFT is not taxable. “ // make your NFTs as socks
• 2016 Act 84 (Penna.)
  • Claims that tax laws for NFTs were established in 2016
  • Department not planning retroactive enforcement before May 2022 guidelines
• May 2022 guidelines REV-717
• Legal citation: 72 P.S. § 7201(m)(2)
• One Title 72’s official page: https://www.legis.state.pa.us/cfdocs/legis/LI/consCheck.cfm?txtType=HTM&ttl=72
• RSS Feeds - PA General Assembly (state.pa.us)
• References to the “PS”
  • SUT-07-001 – Act 84 of 2016 - Digital Goods and Support Services to Canned Computer Software (pa.gov)
  • https://www.revenue.pa.gov/TaxLawPoliciesBulletinsNotices/TaxBulletins/SUT/Documents/st_bulletin_2021-03.pdf
  • Sales and Use Tax Bulletin 2021-05 – Taxation of Equipment Rentals and Equipment Rentals with Operators (pa.gov)
• Su Squares
  • Square NFTs since 2018
  • Paid income tax when sold
  • Most sold before May 2022
  • If you have the token, you can edit pixels on a page
  • All 10k Su Squares were minted in the first block
  • Minted the NFTs to itself (its smart contract)
  • The contract will sell the NFTs to the buyer
  • Lots of open questions:
    • Is a creation a transfer?
    • Or is creation only when a human makes something new?
    • Are sales of Su Squares subsequent sales?