MetaMask Updates Its Terms of Service to Include a Critical Tax Update.

MetaMask Updates Its Terms of Service to Include a Critical Tax Update.

23 May 2023

Because of this change in their service, the crypto community on Reddit is questioning ConsenSys’ choice to сhange their terms of usage.

It is not immediately obvious what prompted ConsenSys to change its agreements. On the other hand, companies revised their terms and conditions frequently to respond to changing regulatory contexts.

ConsenSys, the team behind MetaMask, agrees that taxes must be paid in accordance with applicable legislation. However, MetaMask reserves the right to withhold taxes where required under the revised terms of service.

When it comes to MetaMask itself, MetaMask began as a wallet where users may receive and spend Ethereum (ETH) and associated tokens created in Ethereum and other smart contracting platforms such as Polygon or Fantom.

It subsequently incorporated various services, such as direct crypto purchases using fiat currency through providers like PayPal or direct bank transfer.

The Cryptocurrency Tax Structure in the United States

Given the MetaMask update, the change in wording in the wallet terms of service may be a precautionary measure due to rapidly changing laws, especially cryptocurrency laws. Digging deeper and considering the new MetaMask revamp, where users can buy bitcoins directly from the wallet, this could directly refer to sales tax rather than capital gains tax.

Depending on the user’s jurisdiction and applicable law, MetaMask reserves the right to withhold sales taxes as necessary to meet tax obligations. As a result, every cryptocurrency purchase made through MetaMask will be subject to withholding tax at source.

Capital gains tax will be different from sales tax. Cryptocurrency holders who use MetaMask and follow U.S. rules must pay capital gains tax separately.

For tax reasons, cryptocurrencies are named as property in the U.S. This means that token holders will certainly have to pay capital gains tax when buying, selling, or exchanging digital assets.

The amount of tax is also determined by the time the cryptocurrency is held and the taxable income. Those holding cryptocurrency for less than a year often pay higher income tax rates than those with HODL. At the same time, cryptocurrency holders can deduct capital losses from capital gains of up to $3,000 annually.

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