A pair of U.S. states are following through with programs permitting people to make tax payments in cryptocurrency.
The revenue departments of Colorado and Utah are introducing programs that will enable individuals and businesses to pay their taxes with virtual currencies, among them Bitcoin, Ethereum, and Dogecoin. Implementation is planned for the next few months.
Utah and Colorado accepting crypto for taxes
The Utah state legislature enacted H.B. 456, directing state and local governments to accept crypto for the payment of taxes starting Jan. 1, 2023. The law also dictates that the Division of Finance contract with a third party, such as a cryptocurrency payment gateway, in order to expediently convert the cryptocurrency into dollars before remitting the funds.
Similarly in Colorado, crypto advocate Governor Jared Polis instructed the Department of Revenue to develop a program for accepting tax remittances in crypto. Although still working through some of the details, the government hopes to have a special crypto payment portal up and running for taxpayers to use by September.
Colorado also plans to hire a third party to immediately exchange the cryptocurrency into U.S. dollars. “We are working to make it similar to how we accept credit cards and other forms of payment,” said department spokesperson Meghan Tanis. “The state does not intend to hold a balance of cryptocurrency.”
Diminishing demand
While the pair of Rocky Mountain states were the only two to follow through with such legislation, some 37 states considered bills affecting some aspect of cryptocurrency during the 2022 legislative session, according to Heather Morton, a policy analyst at the National Conference of State Legislatures. Among them, Arizona, California, Hawaii, Illinois, Louisiana, New York, and Oklahoma had considered bills authorizing authorities to accept crypto.
Although these half-dozen states have considered following the lead of Colorado and Utah, the two Western states look to be outliers, as the sector’s selloff poses some logistical hurdles before the launch of the program.
For instance, Utah’s program would preclude it from risking state money during the conversion of cryptocurrency into U.S. dollars. Additionally, seeking out a vendor to absorb the risk could prove challenging, said John Valentine, chairman of the Utah State Tax Commission.
“I don’t know what they’re going to find when they go out to the marketplace,” Valentine said. “Markets have to be very effective at scoring their risk. With the uncertainty in the cryptocurrency markets right now, I think it’s going to be harder to find a third-party vendor than when it was more stable a year ago.”
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