USA Updates NFT Tax Guidelines - What Changed??

Estimated Read Time: 5 min

Hey friends,

Lovely to have you back on today's edition of Morning NFTea. We have some interesting stories from Twitter's new NFT features to new NFT tax guidelines, so let's jump into it!

Apples New NFT Restrictions

Last Month Apple made the news cycle for officially allowing NFT sales on the App Store, but the move was met with scrutiny due to a 30% commission on all sales, quickly causing NFT marketplaces like Magic Eden to withdraw their services. On Monday, Apple updated these App Store Guidelines with new language around NFTs, they used to say “Apps may use in-app purchase to sell services related to non-fungible tokens (NFTs), such as minting, listing, and transferring”. The new guidelines add “Apps may allow users to view their own NFTs, provided that NFT ownership does not unlock features or functionality within the app”. Specifically, they say “Apps may not use their own mechanisms to unlock content or functionality, such as license keys, augmented reality markers, QR codes, cryptocurrencies and cryptocurrency wallets, etc”.

Unfortunately, this is not the best news for the NFT ecosystem, as one of the current benefits and use cases of NFTs is being able to unlock new utilities through token-gated content. Apple is quite strict on their new decision, even saying developers aren’t allowed to create “buttons, external links, or other calls to action” that might tell users how to circumvent the App Store commissions. Cryptocurrency is also targeted by these new rules, with Apple explicitly only allowing fiat currency purchases, ruling out crypto for any in-app purchases. There is a silver lining to one of the new guidelines though, Apple says that crypto-related apps will be “offered only in countries or regions where the app has appropriate licensing and permissions to provide a cryptocurrency exchange”, it is these official licenses and regulations that help legitimize Web3, in turn making it safer for the average user. These new rules around buying and using crypto/NFTs are more or less so Apple can enforce their 30% commission, the de-centralized future of Web3 is something Apple obviously doesn't like the sound of, but let's see how long that lasts.

USA IRS Releases New NFT Guidelines

A couple of editions ago we talked about The White Houses' new NFT regulations, this framework had the Biden administration looking into increased oversight over the digital assets ecosystem. A few weeks on and we now have the US Internal Revenue Service (IRS) updating its 2021 tax guide to explicitly include NFTs by changing the term “virtual currency” to “digital assets”. Specifically, the updated 2022 guide stated that “Digital assets include NFTs and virtual currencies, such as cryptocurrencies and stablecoins. If a particular asset has the characteristics of a digital asset, it will be treated as a digital asset for federal income tax purposes”.

The new 2022 tax guide will explicitly require everyone to reply to the digital assets section, with the IRS saying “The question must be answered by all taxpayers, not just taxpayers who engaged in a transaction involving digital assets”. Outlining the tax rules around NFTs mean they are officially labeled as assets, and not collectibles or artwork; the difference here is instead of around 28% US capital gains tax for art sales, NFTs will fall under crypto which ranges between 0% and 45% depending on varying factors. The IRS covering NFTs was likely inevitable as the agency ensures all aspects of the crypto market are covered, but also displays how early NFTs are if the technology is only being included in Taxes now, WAGMI. Overall, this is undoubtedly a positive step for NFTs as the digital asset taxation process becomes clearer and more legitimized, helping to further increase the credibility of the crypto and NFT market.

Twitter To Incorporate NFTs Into Tweets

It wasn't long ago back in January when Twitter added a new feature to set verifiable NFTs as your profile picture, but now they are taking it a step further by enabling users to share NFTs through tweet tiles. If you're wondering what a tweet tile is, they are Twitter posts but like customizable widgets with larger images, variable fonts, and built-in “Call To Action” links. The new functionality was in partnership with GaurdianLink, who said “the featured partners will be able to display colorful NFTs directly within tweets for the first time. The format allows for a larger picture of the NFT to be displayed alongside metadata such as the title and creator… the ability to embed NFTs, complete with pertinent information and a direct marketplace link, will drive sales and support the discovery of new and trending collections”. The important point here is “featured partners”, initially the new tweet feature will only be rolled out to select NFT marketplaces including OpenSea, Rarible, Magic Eden, Dapper Labs, and GuardianLink’s Jump.trade. However, this is just a pilot program, so should it prove successful, we could see it rolled out to all of Twitter’s users, providing NFT collectors with a new way to share their digital collectibles. We recently covered Meta's announcement of NFT posts on Instagram and Facebook, so Twitter following suit is not a surprise, but is just further evidence of the world's largest Web2 platforms making the transition to Web3, all powered by NFTs.

Big thank you for reading this edition of Morning NFTea, we hope you have a wonderful couple of days while we curate the next round-up of news, take care!

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