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May 05, 2022 The Tax Lawyer

U.S. State Taxation of Cryptocurrency- Involved Transactions: Trends and Considerations for Policy Makers

Vol. 75, No. 3 - Spring 2022

by Casey W. Baker, Thomas Norton, and Ralph E. McKinney


This Article examines legal doctrines relating to state-level taxation of cryptocurrency-involved commercial transactions in the United States, including constitutional limitations and current state approaches to income, sales and use, and property taxation systems. Thus far, state tax policy is underdeveloped with regard to transactions involving cryptocurrency. The vast majority of states defer to federal policy on taxation of income derived from such transactions as limited guidance is available from only a handful of states with regard to sales and use tax obligations, and no states have legislatively addressed cryptocurrency within state ad valorem property tax systems.

As commercial adoption of virtual currency grows, state policy makers and practitioners will need guidance in developing and navigating tax and regulatory systems. In particular, state policy makers and practitioners must consider the constitutional boundaries established by the four-prong test of Complete Auto Transit, Inc. v. Brady in developing state tax systems that can effectively reach cryptocurrency-involved transactions.

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