Leading in Washington and Pennsylvania NFT Taxation. Recently, two states have taken steps to change this, and the US has become the first country to explicitly list NFTs as digital assets subject to sales and use taxes. The actions of Pennsylvania and Washington point to a growing understanding of the tax implications of NFTs, as well as a willingness to adapt existing tax laws to this new asset class.
The Pennsylvania Department of Revenue was the first to take action by adding NFTs to its “taxability matrix” in June without providing any guidance. Washington followed suit in July and issued an interim statement recommending a plan to determine the “resource use” of NFTs (or where transactions for tax purposes take place physically).
Taxation Rules of NFTs
The actions of Pennsylvania and Washington demonstrate recognition of the need to provide clarity on the taxation of NFTs, even as the asset class itself continues to evolve.
The International Revenue Service (IRS) has been treating cryptocurrency as property since 2014; Any benefit derived from its use is taxable. As a component of the Infrastructure Investment and Jobs Act, enacted in November 2021, President Biden has requested the disclosure of new prerequisites for cryptocurrency exchanges that will require organizations to collect extra data. The IRS is required to publish more guidelines for government evaluation of computerized resources to determine how to apply these new regulations.