Washington State Announces Plan to Tax NFTs

Washington state recently released guidance on how non-fungible tokens (NFTs) will be taxed under the state's sales tax rules. This guidance is the first to emerge at the state level and, while it only applies in Washington, it's expected that other states may follow suit. The Washington state guidance provides information on how the Washington state department of revenue would source the sales. Under the guidance, if the buyer received the digital product at a seller's business location, the sale would be sourced to that location. If not, the sale would be sourced to where the buyer receives the NFT. If neither of these two rules apply, the location of the customer's address that's given in the seller's records. If these three rules don't apply, the sale would be sourced to the location of the customer that can be derived from the sale process itself (including the buyer's credit card billing address). Finally, if none of this information is available, the location of the sale is the address from which the digital code was first available for transmission by the seller, or from which a digital automated service was provided. Any location that solely provides the digital transfer of the product is disregarded. The guidance does not directly address situations where the seller does not know the buyer's location, but seems to imply that the location of the seller's server would be the deemed location if the seller does not take steps to identify the buyer's location. For more information on virtual currency taxation, visit Tax Facts Online. : Q 7726.