Colorado Becomes Latest State to Accept Crypto for Taxes, Payments
Colorado has become the latest state to accept crypto payments for taxes and other state payments, Cointelegraph reports, following the path of Arizona, Wyoming and our home state of Utah.
There is much to gain economically for states who embrace blockchain technology, they need to understand the tax dilemma inherent to making payments with crypto and lean into the solution of accepting stablecoins as a means of payment.
Let’s hope more states follow Colorado’s lead, but they should also learn from where Colorado’s initiative falls short. If states, in the future, want to find success in accepting crypto as payment, they need to understand the tax dilemma inherent to making payments with crypto and lean into the solution of accepting stablecoins as a means of payment.
This past summer, Utah passed HB 456, which requires the state Division of Finance to contract with a third party in order to accept payments in the form of digital assets. This also gives the division their own rulemaking authority to determine the standards a third party must meet to provide these payment services.
Silvermint spoke to the bill’s sponsor, State Rep. Jordan Teuscher, earlier this spring, and he told us these kinds of measures make certain states more attractive to tech companies looking to escape Silicon Valley, and that states should adopt the very technologies used by the companies they are trying to recruit.
“We really want to stay in the forefront of not just making Utah more attractive to the tech companies we talk to, but in adopting these very technologies that the companies we bring here use and invest in,” Teuscher told us.
“We need this to make it possible for people to pay in crypto the fines, taxes or fees that go along with operating a business in the state of Utah,” Teuscher said. “For instance, it doesn’t make sense for one of our state’s legal marijuana growers to have to come pay their taxes carrying literally millions in cash. And this is one of the things the tech companies we talk to about relocating to Utah say they want.”
Cointelegraph notes one problematic issue arising from crypto payments for taxes.
The big knock on states accepting taxes paid in crypto is that using crypto to pay state taxes is considered taxable disposal for individuals — making a payment triggers its own income event.
The IRS treats cryptocurrency as property, which means if the price of the crypto you're using to pay state taxes has appreciated in value over time, you have taxable income equal to how much the price appreciated since you bought it.
It's important for people to know that paying off their tax bill with crypto will trigger another taxable event for the following tax year.
Still, the more states that adopt crypto, the more mainstream it becomes.