Washington to Impose NFT Sales and Use Tax

Washington has added non-fungible tokens (NFTs) to the list of assets that will be taxed. According to reports, these NFT’s tax is categorized and subjected to sales and use tax. Interestingly, Washington is the first American state to make such a move and it is likely that others will follow in a similar fashion. 

Meanwhile, the new rule applies to all sellers of NFTs and third-party marketplaces that help others to sell their tokens. 

Currently, Washington state does not impose any personal or corporate income tax on citizens or foreigners. This does not go to mean that sales of NFTs to customers in other states will attract income tax.

NFT End Users Liable to Pay 6.5% Sales Tax 

A sales tax is a consumption tax levied on the sales of goods and services by the government. Sometimes, a conventional tax is levied at the point of sale (POS) by the retailer and then passed on to the government. It is only charged to the end users of any goods or services.

According to the Washington state Department of Revenue, sales tax collection is destination-based. To enumerate, it depends on the location where the customer receives his goods and services. 

Related to sales tax, use tax is a conditional sales tax. It is levied on goods and services whose sales tax has not been paid especially if they are coming from a jurisdiction where sales tax does not apply. Most of the time, the use tax is equal to the local or state sales tax. 

Notably, Washington first issued an Interim Guidance Statement (IGS) which subjects NFTs to a sales tax of up to 6.5% in July. Whether the tax is collected by the retailer in cryptocurrency or fiat, it will be remitted to the tax department in fiat currency. 

Washington is able to achieve this feat due to its previous law to impose a tax on any digital goods.