Colorado now accepts cryptocurrency for tax payments
Ohio made history in November 2018 when it became “the first state in the United States, and one of the first governments in the world, to accept cryptocurrency.” But its glory was short-lived, because Ohio stopped accepting cryptocurrency tax payments in October 2019.
Colorado now takes up the mantle. As of September 1, 2022, the Colorado Department of Revenue accepts cryptocurrency as payment for all state taxes, including business and individual income tax, excise and fuel tax, sales and use tax, severance tax, and withholding tax.
Taxpayers will pay a fee for the privilege of paying their taxes with crypto. Service fees include an additional dollar plus 1.83% of the payment amount.
Governor Jared Polis broke the news during a February 2022 interview with CoinDesk. When asked how it would work, Polis said Colorado is looking for crypto companies to act as a transactional intermediary, to accept and convert cryptocurrency payments on behalf of the state.
For now, payments can only be made through the PayPal Cryptocurrencies Hub.
“Our budget is still in dollars. Our expenditures are still in dollars. And of course, we don’t want to take the speculative risk of holding crypto,” Polis explained. Payments will enter the state’s system as dollars, “but for consumer convenience we want to accept payment in a wide variety of cryptocurrencies just as we do in credit cards.” He also noted that “the transaction cost is a lot less for crypto” than it is for credit cards.
Colorado plans to eventually accept cryptocurrencies for other transactions as well, such as payment for driver’s licenses and fishing licenses.
This is just one way Colorado is putting itself “at the center of the crypto economy,” said Polis. In 2019, the city of Denver used blockchain technology to facilitate voting for residents overseas. Colorado has its very own Blockchain Solution Architect. There’s even a project to “move the state’s cattle-brand system onto the blockchain,” though that seems a bit oxymoronic.
Though Colorado may be leading this charge, it isn’t acting in isolation. California Senate Bill 1275 would allow state agencies to accept cryptocurrencies as a method of payment for the provision of government services. Arizona and New York are among the states seeking to allow state agencies to accept cryptocurrency as payment for fines, penalties, taxes, and more. Hawaii and Massachusetts are two of the states looking to establish a blockchain and cryptocurrency task force.
Miami, Florida, brought “the first CityCoin to market,” and Miami Mayor Francis Suarez intends to be “the first city in America to give a bitcoin yield as a dividend directly to its residents.” Across the country, a Wyoming-based crypto bank is working to secure a master account with the U.S. Federal Reserve.
And on March 9, 2022, President Biden signed an executive order “on ensuring responsible development of digital assets” that lays out the following objectives:
- Protect consumers, investors, and businesses in the United States
- Protect U.S. and global financial stability and mitigate risk
- Mitigate illicit finance and national security risks posed by misuse of digital assets
- Reinforce U.S. leadership in the responsible development of payment innovations and digital assets
- Promote equitable access to safe and affordable financial services
- Support technological advances that promote responsible development and use of digital assets
- Explore a U.S. Central Bank Digital Currency (CBDC)
A White House Fact Sheet on the executive order explains: “The United States must maintain technological leadership in this rapidly growing space, supporting innovation while mitigating the risks for consumers, businesses, the broader financial system, and the climate.”
It may still seem like Monopoly money to some of us, but cryptocurrency is real. So is the metaverse, which is starting to get the attention of tax authorities.
This post was updated October 7, 2022; it originally published March 11, 2022.
Cover photo by Canva
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