Crypto Regulation: NFT Sales Charges Expected

Patrick Camuso, head of digital asset specialist firm Camuso CPAs, said major moves are being made to bring non-performing tokens into state-level sales and use tax regimes he described as “Wayfair 2.0” in terms of potential impact, pointing to a landmark 2018 Supreme Court case that completely shook up the world of online sales tax.

Camuso said he started thinking about this when he was working with a client who was selling physical prints of NFTs he had bought. The two began laying out a tax strategy for the venture, which raised questions about whether sales and use taxes would apply to these tokens. “The answer, I found, was yes,” he said.

He noted that sales of NFTs are occurring across jurisdictions, both state and national, and that tax authorities are beginning to take notice. There are already 31 states that impose sales and tax on digital goods in ways that it believes are likely to contain NFTs; Meanwhile, the states of Washington, Pennsylvania, Wisconsin, and Minnesota have all said it outright in the past few years, and have agreed to more in the future. He noted that Washington state has been particularly aggressive because it recently said in its tax guidance that NFTs have always been taxable, meaning the state can apply retroactive taxation to those who previously didn’t collect sales tax on NFTs — which Camuso says is almost everyone.

He noted that people are still getting used to how mundane income taxes apply to cryptocurrency — adding sales taxes related to NFTs into the mix adds even more confusion. Because of this, he says, few people even consider the tax implications of selling NFT transactions, given their high risk.

A similar risk exists with use taxes — he noted that if someone tries to claim NFT losses on their taxes, the state government could face them for not claiming their use taxes. This is not an issue that people should ignore, he said. “Historically speaking, [with regard to] States that require use taxes are unlikely to do so; This is something that is difficult to enforce. But all these transactions on the blockchain may be an exception. It’s a big problem that’s largely unsolved,” he said.

NFT’s illuminated neon sign is displayed in Hong Kong


Similarly, he said people should be aware of the application of value added tax when it comes to sales of NFTs that pass through Europe. EU Value Added Tax Committee Working Document 1060, published in March, confirmed that NFT transactions are subject to VAT in at least a few cases. Camuso said there were also country-level guidelines in several European countries that also said so (although Italy specifically said they wouldn’t use it there).

Further complicating the issue, Camuso said, is that there is no software that allows people to properly collect sales and use fees from NFT sales. He said this speaks to a larger issue in the crypto accounting space, namely that there remains a heavy manual element, and so practitioners in the space spend a lot of time entering transaction data into Excel spreadsheets and verifying the transaction on their blockchain, and if a transaction is reported incorrectly, it usually has to be updated manually.

All of this adds up to what Camuso believes will become a major issue in the near future. Tax authorities will begin enforcing sales taxes on populations that have historically been exempt from them.

“So I think NFT sales taxes are a ticking time bomb. You know, not all of these companies are compliant,” he said.

Home Page




Generic selectors
Exact matches only
Search in title
Search in content
Post Type Selectors