The majority of states have not yet issued guidance on the tax treatment of virtual currency or cryptocurrency. A major consideration from a state tax perspective is whether or not the purchase of virtual currency or cryptocurrency is a taxable sale for sales and use tax purposes.
Taxpayers should also seek guidance on how to calculate the sales tax due on purchases made with virtual currency or cryptocurrency, and how to report such sales to state taxing authorities. In states that have not addressed the tax issues arising from the use of virtual currency or cryptocurrency, taxpayers may want to examine the state’s approach to taxing the sale and use of other types of currency or other intangible property, as well as researching whether the state conforms to the federal tax treatment of convertible virtual currency.
So what’s your responsibility at the state level when it comes to sales and use taxes on cryptocurrency? This handy guide will give you a complete state-by-state breakdown of cryptocurrency sales and use tax laws and regulations.
Iowa does not address the sales and use tax treatment of transactions involving bitcoin or other virtual currency.
Kansas treats virtual currency as a cash equivalent and requires sellers accepting virtual currency as payment in a taxable transaction to convert the virtual currency into U.S. dollars and charge Kansas sales and use tax.
Kentucky treats bitcoin as a cash equivalent and requires sellers accepting bitcoins as payment in a taxable transaction to convert the bitcoin into U.S. dollars and charge Kentucky sales and use tax.
Louisiana does not specifically address the imposition of sales and use tax on purchases of virtual currency such as Bitcoin.
Maine does not address the sales and use tax treatment of virtual currency such as bitcoin.
Maryland has not addressed the taxability of virtual currency such as Bitcoin.
Massachusetts does not specify whether or not purchases of virtual currency or bitcoin are taxable.
Guidance from the Michigan Department of Treasury states that Michigan does not impose sales and use tax on purchases of convertible virtual currency because the virtual currency is not tangible personal property. The guidance refers to virtual currency as a digital representation of value that has an equivalent value in real currency . . . and acts as a substitute for real currency.
Bitcoin is treated as an intangible the same as cash.
Mississippi does not address the taxation of sales of virtual currency.
Missouri treats bitcoin as nontaxable intangible property.
Montana does not impose a sales and use tax.
Nebraska does not address the sales and use tax treatment of virtual currency such as bitcoin
Nevada does not address the sales and use tax treatment of transactions involving Bitcoin or other virtual currency.
New Hampshire does not impose a sales and use tax.
Utah does not address the sales and use tax treatment of transactions involving bitcoin or other virtual currency.
Vermont does not address the sales and use tax treatment of virtual currency such as bitcoin.
Virginia does not specifically address purchases using virtual currency.
Washington does not tax the purchase of cryptocurrency, such as Bitcoin, and treats purchases of taxable goods or services made with cryptocurrency as taxable transactions the same as if made with cash or other consideration.
West Virginia does not specifically address the sales and use taxes implications of virtual currency, such as Bitcoin, although West Virginia generally imposes sales and use taxes on sales of tangible personal property and services.
The sales price of virtual currency itself is not taxable because virtual currency represents an intangible right rather than tangible personal property or a taxable service.
Wyoming does not address the sales and use tax treatment of transactions involving Bitcoin or other virtual currency.
How can Bloomberg Tax help me with my crypto needs?
Bloomberg Tax can help you stay informed about changing cryptocurrency tax laws by providing you with comprehensive news coverage and analysis at state, federal, and international levels. Access expert insights and practical guidance to help you make informed decisions on the tax considerations and consequences of digital assets. Request a demo.