Colorado is working towards accepting cryptocurrencies for tax payments by the end of summer after coming to light as the first American state to use blockchain technology in government infrastructure.
Jared Polis, the Governor, wants Colorado to become the center of the crypto economy. He said they are looking for companies that can handle crypto transactions. For consumer convenience, Polis highlighted that the state government will accept payment in a wide variety of cryptocurrencies – like it’s done with credit cards.
The governor underlined that the state doesn’t want to take the speculative risk of holding digital assets. As such, there will be a transactional layer. Polis said the government will partner with a crypto company to accept and convert cryptocurrencies.
The congressman highlighted that their budget and expenditures are still in dollars. Cryptocurrencies will be entering the Colorado system as dollars. However, some tax experts believe it could get complicated for Colorado citizens wanting to use crypto for tax obligations. Kell Canty, the CEO of Legible, said this shows cryptos wide acceptance as an investment and payment, both. He pointed out that paying taxes with crypto does not change the tax treatment of the transaction for federal income or state income tax purposes.
Legal experts said the taxpayers will be responsible for keeping track of their transactions and determining tax obligations. But for taxpayers, for whom the disposal of crypto is a tax event, it’s a challenge. This is because it will create a gain or loss that needs to be accounted for in the following tax year. Overall, tax experts believe it will create more tax implications for citizens.