However, in 2019, the Ohio attorney general issued an opinion indicating that no state statute gave the treasurer authority to use to collect state taxes. The program only accepted bitcoin and allowed payments for 23 types of business taxes (though, notably, not personal income taxes). It used a third-party payment processing service provider, BitPay, to convert cryptocurrencies into dollars before remitting proceeds to the state. In 2018, Ohio began accepting cryptocurrency as tax payments through a portal called. Early State Efforts Had Mixed ResultsĪlthough advocacy efforts are now expanding across states, the earliest state and local government attempts to accept cryptocurrency tax payments actually took place a few years ago. Generally, these proposals all require the state to contract a third-party cryptocurrency payment processing entity - similar to the Colorado law - that converts cryptocurrencies into dollars before depositing proceeds into the state’s accounts, thus avoiding expensive technical infrastructure-building and costly price fluctuations. In addition, about a half dozen other states established committees to research the feasibility of accepting cryptocurrency as tax payments and recommend policy options. Several other state legislatures - including Arizona, California, Hawaii, Illinois, New York, Oklahoma and Wyoming - introduced similar proposals but none of them advanced to become law. Utah also passed a bill that allows government agencies to collect tax payments in cryptocurrency starting in 2023. Ron DeSantis indicated that he believed Florida should allow businesses to pay taxes in cryptocurrencies and directed state agencies to investigate the possibility. Colorado Governor Jared Polis has also announced that this option will expand to include payments for driver’s and hunting licenses in the next phase.Ĭolorado became a frontrunner in this area by formally implementing the tax payment program this year, but it is not the only state that has considered similar approaches. This service costs taxpayers a fee at 1.83% of the payment amount plus $1 per transaction. An intermediary company, Paypal Cryptocurrencies Hub, instantly converts the cryptocurrencies to dollars so that the state does not expose itself to price fluctuations in the cryptocurrency market. Specifically, taxpayers can now use a state portal to pay a variety of taxes with cryptocurrency, including individual income tax, business income tax, sales and use tax, withholding tax, severance tax and excise tax. This September, Colorado began to accept cryptocurrency for tax payments. States Are Moving to Accept Cryptocurrency for Tax Payments This issue brief discusses recent state actions that allow state residents to pay taxes with cryptocurrency as well as the reasons behind the emergence of state incentives for the overall industry. However, this instability has not stopped state governments from leveraging cryptocurrency’s functionality or pursuing the cryptocurrency industry as an economic driver. Ĭlearly, as an investment, bitcoin’s significant fluctuations in value are not for the faint of heart. The estimated market capitalization for cryptocurrencies during the same period decreased from $2.7 trillion to $833 million. By November 2022, it was worth roughly $16,000, or a quarter of the value from a year ago. Headlines of FTX and BlockFi collapses and the recent arrest of FTX founder Sam Bankman-Fried on criminal charges have left many in the financial services industry wondering when – not if – regulations will be enacted for the cryptocurrency industry.Īfter peaking at nearly $67,000 last November, the price of the most popular cryptocurrency, bitcoin, began to plunge.
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