What are the sales and use tax implications of the metaverse?


  • Metaverse assets and offerings create new sales and use tax challenges — and a new opportunity to enhance trust.
  • Uncertainties surround even basic questions of jurisdiction, tax base, the identity of the seller and the nature of what was sold.
  • Four guidelines can help craft a metaverse sales and use tax strategy that achieves tax compliance and optimal tax value — without holding the business back.

While the metaverse is still very much a work in progress, that progress is moving quickly. In PwC’s 2022 Metaverse Survey, 82% of the executives responding said they expect metaverse plans to be “fully embedded” and part of business activities within three years. But regulators and lawmakers from the municipal level on up are still wrestling with metaverse sales tax and use tax scenarios and, since just about everything your business does has tax implications, that creates quite a challenge. Even basic questions of jurisdiction and tax base could trip you up if you’re not careful.

There is a way forward, but it requires careful attention to the emerging metaverse-specific sales and use tax requirements and uncertainties.

New and thorny questions: why metaverse taxation is so complex

As an immersive digital world that aims to be fully global and interoperable, the metaverse raises several sales and use tax questions. Here are some of the most important ones.

  • What was sold? If you sell digital real estate in the metaverse, is it a digital product? If it requires ongoing support, is it a digital service? Is it both? Similar questions may arise for other digital assets that may be bought or sold in the metaverse. NFTs generally grant the right to consume, sell or license a digital product, such as a song or artwork. NFTs may also grant the right to receive (and perhaps resell) digital services, or the right to lease or receive physical products — or a combination of all of the above. How you characterize what’s sold could result in very different tax outcomes. 

  • Who sold it? If, in a metaverse peer-to-peer marketplace, you sell a digital product, it may be unclear under current laws which party may be required to collect the taxes. It could be you, the operator of the marketplace within the metaverse, or the metaverse operator itself. As interoperability creates more interconnected marketplaces, partnerships and alliances, this question may become even thornier.

  • Who has jurisdiction? If your Delaware-based company buys digital real estate hosted on a server in California from a seller in Australia, where did the sale take place and who can tax it? Say you use a metaverse platform owned by a company in Germany to hire a specialist in Taiwan to virtually assist in the repair of your wind turbine off the Florida coast, which authorities can impose taxes? Similar complexity can arise for transactions occurring wholly within the US, where various states and cities may want to collect sales and use taxes.

  • What is your tax base? Even after you’ve determined who sold what where, and to which authority taxes are owed, determining the tax base can present another challenge. If you pay in cryptocurrency, for example, the time-of-sale value and date-of-sale value may differ widely — so which do you use? How do you value exchanges in the metaverse? 

  • What are the rules? Policymakers all over the world are working on new tax rules and laws for the metaverse and the digital assets often used in it. Within the US, the rules for sales and use taxes are very much in flux.

Representative metaverse-related sales and use tax rules and guidance within the US

Multistate Tax Commission (MTC) Studying sales taxation of digital products, preparing recommendations for best practices to the states
Streamlined Sales Tax Government Board Reexamining its rules for sourcing digital transactions and determining the applicable tax rates
Minnesota, Pennsylvania, Washington, Wisconsin Have provided guidance on the sales taxation of NFTs, with Washington’s guidance (which is evolving quickly) the most detailed and potentially influential for other states

Navigating the uncertainty: guidelines for crafting a metaverse tax strategy

It’s challenging to achieve both tax compliance and optimal tax value when the technologies, the business opportunities and the rules are all evolving. Here are four ideas to help you craft a metaverse sales and use tax strategy that could reduce your risks without holding the business back. 

  • Monitor and engage. It’s important to keep a close eye on developments. Since many regulations are still tentative, it may also be a good time to develop a point of view and communicate it to policymakers.

  • Align form and commercial aims. If you’re realizing revenue through the metaverse and wrestling with some of the thorny questions above, it’s important to clearly document what you are selling and to whom. Documentation can help you align the contracting or use terms consistent with your business operations and assign reasonable treatments to metaverse transactions according to your existing tax processes.

  • Gather the right information. Given the potential rise in uncertainty around metaverse counterparties, whose identity and location may be unknown, you may be required to establish new procedures for your assets in the metaverse. With the proper tools and procedures, for example, your development team may be able to use data such as IP addresses to help you determine which jurisdiction may assert tax on your transactions. 

  • Bring in tax early. With so many different laws, some explicitly designed to encourage (or discourage) certain digital- and metaverse-related activities, it’s wise to consider tax implications at the start of a new metaverse-line of business. Tax may be able to help you assess the different jurisdictions in which you could choose to create and grow metaverse value.

Turn tax into a source of trust in the metaverse

The metaverse is a source of business opportunities, but it’s evolving quickly. Sales and use taxes in the metaverse are the source of one uncertainty, but you can approach that with an informed framework to address the top sales and use tax questions around metaverse assets and offerings, and by embedding tax early in the development cycle. By staying on top of the rules and demonstrating your commitment to compliance, this forward-looking approach can help drive trust among your customers, regulators and the broader ecosystem.

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Rebecca Lee

Principal, International Tax Services, PwC US


Dorothy Lo

Principal, Indirect Tax Services, PwC US


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