States Issue Guidance Addressing Tax Treatment of Cryptocurrency and Non-Fungible Tokens (NFTs)

January 31, 2023

By: Jeff Glickman, SALT Partner & Mitchell Kopelman, National Tax Practice Co-Leader, Technology and Blockchain Leader

At a glance

  • The main takeaway: Wisconsin, Minnesota and Arizona issued guidance addressing the state tax treatment of cryptocurrency and NFTs. 
  • Assess the impact: While only a small number of states have enacted laws or issued guidance on the tax treatment of cryptocurrency and/or NFTs, it does serve as a guide for taxpayers on how other states may address similar matters in the future. 
  • Take the next step: Aprio’s State and Local Tax (SALT) team can assist your business in addressing its state tax obligations involving cryptocurrency and NFT transactions, including obtaining a private ruling on your behalf.

Schedule a free consultation today to learn more!

The full story: 

In our July 2022 SALT Newsletter, we summarized guidance issued by Pennsylvania and Washington regarding the tax treatment of non-fungible tokens (NFTs). Below is a brief summary of guidance issued by Wisconsin, Minnesota and Arizona.


In October 2022, the Wisconsin Tax Bulletin, Number 219, addressed the sales tax treatment of NFTs.  The publication explains that an NFT is “a unique digital identifier that is recorded in blockchain” and “are used to certify authenticity and ownership of a particular product and cannot be copied or substituted.” It then states that “the sale or purchase of an NFT may be taxable if the underlying product, good, or service is taxable” and provides the following examples:

  • Example 1: The NFT entitles the purchaser to download music or movies; the sale of the NFT is a taxable specified digital good.
  • Example 2: The NFT entitles the purchaser an admission to a sporting event; the sale of the NFT is a taxable admission.
  • Example 3: The NFT entitles the purchaser to a tangible piece of artwork; the sale of the NFT is taxable tangible personal property.


Recently, Minnesota revised its Sales Tax Fact Sheet 177 entitled “Digital Products.” The guidance is similar to Wisconsin’s, explaining that NFT’s are “subject to sales and use tax when the underlying product (goods or services) is taxable” and that they may entitle purchasers to receive products or services including, but not limited to:

  • Digital products such as music, audio visual works, or video games,
  • Admissions to sporting events or concerts,
  • Prepared food and beverages, and
  • Tangible personal property, such as collectibles or memorabilia.


On July 6, 2022, then Arizona Governor, Doug Ducey, signed House Bill 2204, which enacted changes to the state’s individual income tax with regard to certain cryptocurrency and NFT transactions.[1] The legislation adds definitions of “non-fungible token” and “virtual currency” as well as other industry terms as follows:

  • Non-fungible token” means a non-fungible cryptographic asset on a blockchain that possesses unique identifiers or other metadata that distinguishes the asset from another token, or asset in a manner that makes the asset irreplaceable and non-exchangeable for a similar token or asset.
  • “Virtual currency” means a digital representation of value that functions as a medium of exchange, a unit of account and a store of value other than a representation of the United States dollar or a foreign currency.
  • “Gas fee” means a fee paid to the operator of a virtual network for the use of the network to facilitate the purchase, sale, or exchange of virtual currency or an NFT.
  • “Airdrop” means the receipt of virtual currency through a means of distribution of virtual currency to the distributed ledger addresses of multiple taxpayers.

Effective from and after December 31, 2022, for purposes of computing individual income, taxpayers are allowed to deduct from their Arizona gross income (to the extent not already excluded) “the value of virtual currency and non-fungible tokens the taxpayer received pursuant to an airdrop at the time of the airdrop.” In addition, taxpayers may subtract gas fees from their Arizona gross income if the taxpayer included in their income a gain or loss from the sale of virtual currency or a non-fungible token and did not, in calculating such gains or losses, include in basis any gas fees paid on the purchase of such virtual currency or non-fungible token.

The bottom line

Only a small minority of states have enacted laws or issued administrative guidance regarding the state tax treatment of cryptocurrency and/or NFTs. While the guidance we do have is not robust, it does serve to help guide practitioners and taxpayers regarding how other states may address similar matters. 

Aprio’s SALT team can assist your business in addressing its state tax obligations involving cryptocurrency and NFT transactions, including obtaining a private ruling on your behalf. We constantly monitor these and other important state tax topics, and we will include any significant developments in future issues of the Aprio SALT Newsletter.

[1] See Ariz. Rev. Stat. Ann. § 43-1022(29), (30) and Ariz. Rev. Stat. Ann. § 43-1028.

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About the Author

Jeff Glickman

Jeff Glickman is the partner-in-charge of Aprio, LLP’s State and Local Tax (SALT) practice. He has over 18 years of SALT consulting experience, advising domestic and international companies in all industries on minimizing their multistate liabilities and risks. He puts cash back into his clients’ businesses by identifying their eligibility for and assisting them in claiming various tax credits, including jobs/investment, retraining, and film/entertainment tax credits. Jeff also maintains a multistate administrative tax dispute and negotiations practice, including obtaining private letter rulings, preparing and negotiating voluntary disclosure agreements, pursuing refund claims, and assisting clients during audits.