US States With the Most Cryptocurrency Friendly Tax Laws
As more US states create cryptocurrency regulations, cryptocurrency holders feel the heat of the taxation that is to come. While some states are taking a hard stance with respect to the taxation of cryptocurrencies, others are taking a different approach, opting for tax laws that attract cryptocurrency businesses and owners.
Different Approaches To Cryptocurrency Taxation
Understandably, USA’s different states and government agencies have varying views of cryptocurrencies. The U.S. Financial Crimes Enforcement Network and IRS consider cryptocurrencies to be money transmitters and property with value. The SEC considers cryptocurrencies to be securities while U.S. Differing views are due in part to the unique objectives and history of each state and agency.
Wyoming has made bold efforts to become the cryptocurrency hub of America. In 2018, the state introduced Bill 111, which exempts digital currencies from property taxation. The state worked with lawyers from Consenys, a blockchain development company, to draft bills that exempt cryptocurrencies from state property taxes.
Ohio was the first state in US to allow taxes to be paid in Bitcoin.. The state recognised data stored on the blockchain. This means electronic signatures secured on blockchain have the same legal standing as other electronic signatures. Companies the state may pay different taxes using cryptocurrency.
Intersection of Industries
California introduced a bill to allow cannabis-related businesses to pay their taxes in stabecoins. Bill 953 and laws with similar objectives could eventually allow for California residents to bypass banks and physical cash when paying taxes. The associated costs of physical cash and using banks can be avoided with stablecoins and other digital currencies.
Similarly, Arizona has tried to find opportunities where cryptocurrencies and the cannabis industry intersect. It looks to find ways to make transactions in the industry cashless. Conflicts between the federal law and state law have scared many banks away from engaging with businesses in the industry.
In North Carolina introduced a bill to end the double taxation on cryptocurrency transactions by changing the 1986 Internal Revenue Code. The law puts a 40% tax rate on transactions. The bill states that the exchange of virtual currency for virtual currency shall be treated in the same way as exchange of real property.
Marketplace Facilitator Laws
More states have taken a leaf from Washington’s books when implementing marketplace facilitator laws. Marketplace facilitator laws require businesses like Amazon to collect and remit sales and use tax for their vendors. 16 states have demanded that marketplaces act in pursuance of these laws if they provide virtual currency payment options to their customers.
States with marketplace facilitator laws for virtual currencies include Alabama, California, Idaho, Nevada, New Jersey, North Dakota, Ohio, Kentucky, Utah, Rhode Island, Vermont, Virginia, Washington, Iowa, Massachusetts, and West Virginia. It is likely that these states are anticipating the introduction of more virtual currencies by SMEs and big names like Amazon who may eventually introduce their own digital currencies to the market.
Finding a qualified CPA is one of the best and most reliable ways of gaining clarity on the complex cryptocurrency tax climate. Laws are always changing and bills do not always make it through reviews.