Colorado Residents Can Now Pay State Taxes With Crypto, for a Fee

Col­orado res­i­dents can now pay state tax­es via cryp­tocur­ren­cy, a move Gov. Jared Polis said car­ries low­er fees than cred­it card payments. 

Col­orado is part­ner­ing with PayPal’s cryp­tocur­ren­cy arm on the endeav­or. The ser­vice fee for such trans­ac­tions is $1.00, plus 1.83% of the total, accord­ing to the state’s Depart­ment of Rev­enue. 

Tax­pay­ers opt­ing to use direct deb­it are not sub­ject to fees. Cred­it card pay­ments impose a $0.75 fee, plus 2.25% of the net payment. 

Res­i­dents can — for the first time — pay indi­vid­ual income tax, busi­ness income tax, sales and use tax, with­hold­ing tax, sev­er­ance tax and excise fuel tax using cryptocurrency. 

Trans­ac­tions can only be com­plet­ed through Pay­Pal per­son­al accounts, as opposed to Pay­Pal busi­ness accounts, and pay­ments must be made in full using only one cryp­tocur­ren­cy, the Depart­ment of Rev­enue said. 

“We are tout­ing Col­orado as the cen­ter of the cryp­to econ­o­my,” Polis said in an inter­view ahead of the ETH­Den­ver con­fer­ence con­fer­ence in Feb­ru­ary. “We have not only very favor­able laws and rules, but we also have a great ecosys­tem of inno­va­tion here.”

The Depart­ment of Revenue’s web­site did not list spe­cif­ic accept­able cryp­tocur­ren­cies, but Pay­Pal sup­ports bit­coin, bit­coin cash, ether and litecoin. 

“Our bud­get is still in dol­lars, our expen­di­tures are still in dol­lars, and, of course, we don’t want to take the spec­u­la­tive risk of hold­ing cryp­to, so we will be hav­ing a trans­ac­tion­al lay­er there,” Polis said. “It will be enter­ing our sys­tems as dol­lars. For con­sumer con­ve­nience, we want to accept pay­ments in a wide vari­ety of cryptocurrencies.” 

Tax­pay­ers opt­ing to use cryp­tos should expect addi­tion­al fees down the line. They will be respon­si­ble for keep­ing track of these trans­ac­tions and deter­min­ing tax oblig­a­tions, legal experts said.

“Colorado’s plan to accept cryp­to cur­ren­cy for state tax pay­ments and oth­er gov­ern­ment fees is proof of crypto’s wide accep­tance as both an invest­ment and pay­ment method,” Kell Canty, CEO of Ledg­i­ble, said, at the time of the ini­tial plan announce­ment. “Of course, using cryp­to to pay tax­es does not change the tax treat­ment of the trans­ac­tion for fed­er­al income or state income tax purposes.”

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