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Do Sales Tax Holiday Rules Apply in the Metaverse?

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Summer sales tax holidays are about to get in full swing. Nearly 20 states will provide 27 sales tax holidays in July and August, fully or partially exempting everything from clothing and school supplies to food and fuel, regardless of how the goods are sold.

Jul 6th 2022
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During a time period that is tax free, registered retailers selling affected goods must abide by the terms of a sales tax holiday whether selling through a brick-and-mortar store, online — or the metaverse.

International advisory and accounting firm Prager Metis describes the metaverse as “a centrally located, virtual marketplace and social forum where persons and entities from across the globe can come together to socialize, play, learn, access entertainment, and trade goods and services.” Regardless of whether that appeals to you, what transpired during the pandemic shows how such virtual spaces could be beneficial. Even now, many of us work from home and socialize via Zoom.

As always when new opportunities and technologies emerge, there are both early adopters and footdraggers. While some companies are still not sure how to make the metaverse work for them (aka, be profitable), others are busily selling non-fungible tokens (NFTs), unique pieces of digital data registered and stored in a blockchain.

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Nike is one of several brands selling through the online platform Roblox, a space created for both play and commerce. Nike made headlines last year when, during six lucrative minutes in the virtual realm Nikeland, it sold 600 pairs of NFT sneakers for a total of $3.1 million.

Gap Inc. started testing the virtual waters with digital hoodie NFTs in January 2022. You can’t yet clothe your avatars in these hoodies — Gap would need to “develop its own virtual realm or find a way to make its NFTs compatible with existing realms” for that to happen. However, anyone who purchased enough of the NFT collectibles could win “access to purchase a limited edition Epic NFT” and ultimately “claim the physical hoodie co-designed by Brandon Sines,” creator of Frank Ape.

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