Bitcoin to pay taxes?
Our expert's opinion
"Bitcoins have been a hot topic for the past years, not only for ‘IT lovers’ but also for people whom would normally not be especially interested in IT related topics. E-payments regarding online shopping are nothing new, but now a governmental institution in the USA (state of Ohio) accepts this as a way of paying your taxes. Do you think this is something that might be applicable in Europe too?"
- Yara Snikkers, Associate Consultant
Ohio becomes the first state to accept bitcoin for tax payments
Ohio businesses can now use the cryptocurrency to pay their taxes and view the transactions in real time online via a transparent blockchain ledger.
Ohio this week began accepting bitcoin as a form of tax payment from businesses, making it the first U.S. state to do so.
The Ohio Treasurer's office said it is working to help make the state a national leader in blockchain, the underlying platform for bitcoin. Blockchain can be used for many different types of business transactions – from supply chain tracking to the creation of a mesh network for IoT devices.
"We're doing this to provide Ohioans more options and ease in paying their taxes and also to project Ohio's leadership in embracing blockchain technology," Ohio Treasurer Josh Mandel said in a statement.
The state treasurer's office uses the Atlanta-based bitcoin payment service provider, BitPay, to process the bitcoin payments.
Payments move over BitPay's blockchain electronic ledger, which offers real-time tracking; the payments are processed on one to three days. A "minimal fee" is charged to confirm the transactions and anyone can view all transactions on the blockchain network.
Mandel has postured himself as a maverick for the advancement of technology and government transparency. In 2014, he launched OhioCheckbook.com, which put all state spending information online.
Bitcoin is currently the only cryptocurrency that can be used for payment at OhioCrypto.com, but the Treasurer's office said it plans to add other cryptocurrencies in the future.
Ohio businesses can also use ACH credit and debit, checks or money orders to pay taxes. The cryptocurrency payment option, via OhioCrypto.com, is the newest option for businesses and includes 23 different taxes.
"With BitPay, Ohio can leverage blockchain technology and benefit from reduced risk and identity fraud as well as enabling quick and easy payments from any device anywhere in the world and get paid in dollars," Stephen Pair, co-founder and CEO of BitPay, said in a statement. "This vision is at the forefront of moving blockchain payments into mainstream adoption."
In order to use the bitcoin payment service, Ohio businesses register online, enter their tax payment information and use a cryptocurrency wallet to pay the invoice with bitcoin. The payments are then processed by BitPay, which immediately converts the bitcoins to U.S. dollars before depositing the payment into a state account.
Ohio is protected against market volatility
The value of both bitcoin and Ether, Ethereum's cryptocurrency, have tanked over the past year. The price of bitcoin has plummeted from nearly $20,000 to about $3,660, while Ether has dropped from more than $1,400 to $106.
The Ohio Treasurer's Office said the state and taxpayers are protected against market volatility as BitPay sets the exchange rate for a 15-minute allotted time window for each transaction once a business taxpayer begins to make their payment at OhioCrypto.com. BitPay then assumes the risk of any market fluctuations during the allotted time window.
Lawmakers in Arizona, Georgia, and Illinois have filed legislative proposals to use bitcoin as a form of payment to their state governments, but those efforts either died without resolution or were vetoed. In 2016, New Hampshire lawmakers voted down a bill that would have enabled tax payments for residents. In 2015, the Utah Senate passed a similar billl; it ultimately died in the House.
Utah's bill included a mention of Overstock.com because the online retailer both accepts bitcoin for payment and has invested heavily in start-ups developing the underlying platform, blockchain.
Because Ohio's state treasurer is an elected official, he was able to roll out the bitcoin payment program without legislative approval.
"Ohio has become the first state in the United States, and one of the first governments in the world, to accept cryptocurrency," the Treasuret's Office said on an FAQ page. "From mom-and-pop coffee shops to Fortune 100 companies, businesses now have the ability to pay their taxes with OhioCrypto.com."