Colorado has become the first U.S. state to accept bitcoin for tax payments. Gov. Jared Polis announced the implementation of the new payment method on Monday, at Denver Startup Week, according to a report by Axios Denver.
Citizens can use cryptocurrency to pay individual income tax, business income tax, sales and use tax, withholding tax, severance tax and excise fuel tax are eligible, per the report.
The state government’s Department of Revenue now lists “cryptocurrency” as a payment method among the more well-established debit and credit cards, ACH debit and credit, and cash.
However, users interested in parting with their bitcoin holdings to pay Colorado state taxes need to use a PayPal account.
“Only PayPal Personal accounts can pay using cryptocurrency,” Colorado’s Department of Revenue details, adding that the user needs to have the entire value of their invoice in a single cryptocurrency in their PayPal Cryptocurrencies Hub.
Citizens paying their taxes with cryptocurrency will be charged an additional $1 plus 1.83% of the payment amount in fees.
U.S. states have raced for the trophy of the most cryptocurrency-friendly jurisdiction as they seek to attract workers and businesses of the new remote-first economy.
However, it is hard to make the case for paying taxes with bitcoin, especially in Colorado’s fixed arrangement with PayPal. While the user would likely forgo future capital appreciation from the bitcoin price by doing so, that buying power wouldn’t be transferred to Colorado as the state doesn’t seek to hold BTC or cryptocurrency on its balance sheet.