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Arizona’s Consideration of Payment of Taxes with Cryptocurrencies

By Jon Hughes & Alexandra Levin Kramer

Arizona Considers Adopting Legislation Permitting Payment of Taxes via Cryptocurrencies

As originally introduced, Arizona Senate Bill 1091 (“SB 1091”) would have permitted remittance of cryptocurrencies for tax payments, including interest and penalties, and would have required the Arizona Department of Revenue, upon receipt of payments in cryptocurrency, to convert the cryptocurrency payment to U.S. dollars within 24 hours. 

If SB 1091 passed as introduced, Arizona would have become the first State or Commonwealth in the U.S. to permit the payment of taxes with cryptocurrencies.   

History of SB 1091

SB 1091 was introduced on January 10, 2018. 

Arizona State (Republican) Rep. Jeff Weninger, a co-sponsor, said SB 1091 is intended to turn the state into a center of “blockchain and digital currency technology in the future.”  Rep. Weninger cited convenience and the opportunity to attract new business to Arizona as driving forces behind introducing SB 1091 and stated, “...Arizona is going to be the place to be for [Blockchain] and digital currency technology in the future.  The ease of use, being able to do it in the middle of the night, being able to do it at home while you’re watching TV. I think in a few years this isn’t even going to be a question.

After having been introduced on January 10th, SB 1091 was passed by Arizona’s Senate Finance Committee on January 24th

On February 8th, the Arizona State Senate passed SB 1091. 

On March 7th, Arizona’s House Ways and Means Committee passed SB 1091. 

After passage by the House Ways and Means Committee, SB 1091 proceeded to Arizona’s House of Representatives. 

Arizona’s House of Representatives and SB 1091

Although SB 1091 was passed by Arizona’s House of Representatives on May 3rd, SB 1091 as passed by the House is very different from the version that was introduced.  In fact, if implemented the House of Representatives’ version of SB 1091 would have merely required Arizona’s Department of Revenue to study the issue of payment of taxes with cryptocurrencies. 

More specifically, the House of Representative’s revisions to SB 1091 directed that "The [Arizona] Department [of Revenue] shall study whether a taxpayer may pay the taxpayer's income tax liability by using a payment gateway, such as bitcoin, litecoin or any other cryptocurrency that uses electronic peer-to-peer systems. The [Arizona] Department [of Revenue] shall study the conversion of cryptocurrency payments to United States dollars at the prevailing rate after receipt and shall study the process of crediting the taxpayer's account with the converted dollar amount actually received less any fees or costs incurred by the Department for conversion."

Moreover, as revised by the House of Representatives, SB 1091 neither required the Arizona Department of Revenue to commence the study by a date certain nor mandated how long it might take for the results to be compiled into a report.  

Final Version of SB 1091

Approved by both the House of Representatives and the State Senate on May 3rd, the final version of SB 1091 does not mention cryptocurrencies as a payment method for taxes.  Instead, Subsection A of SB 1091 provides that, All remittances of taxes . . . shall be made by bank draft, check, cashier's check, money order, cash or electronic funds transfer to the [Arizona] department [of Revenue] . . .

However, Subsection B of SB 1091 provides that the Arizona Department of Revenue, “ . . .may develop, adopt and use a payment system that enables the immediate remittance and collection of tax . . .” and that “The [Arizona] Department of revenue may design, develop and provide for trial demonstrations of the adaptation, application and use of technology to enable immediate remittance and collection of transaction privilege tax payments, at the option of the taxpayer, at the point of sale and for payments of additional amounts after audit.”

Despite trial demonstrations of the “adaptation, application and use of technology” for the tax payments being permitted, the final version of SB 1091 does not, however, unlike previous versions of SB 1091, mention any specific cryptocurrency or even cryptocurrencies generally.  Accordingly, it is unclear what, if any, technologies are contemplated.

On May 4th, the version of SB 1091 that was passed by the House of Representatives and the State Senate was transmitted to the Governor. 


CKR Law LLP is a global firm of experienced lawyers with diverse international practices. We have over 50 locations and 300 Attorneys worldwide, with offices in North America, South America, Asia Pacific, Europe, Latin America and the Caribbean and the Middle East. Our partners have an average of more than 20 years of legal experience with deep connections to their local communities.

We specialize in complex, international and cross border transactions, disputes and legal challenges. Our firm has particular and distinctive strengths, both domestically and globally, in the areas of corporate, finance, capital markets, cross-border mergers and acquisitions, government advocacy, securities defense, litigation, international arbitration and intellectual property.

Blockchain Technology & Digital Currency Practice

Our commitment to representing clients on the cutting edge of new industries, led us to launching a Blockchain Technology & Digital Currency practice group, providing sophisticated value-added legal advice in underlying legal specialties such as real estate, intellectual property, banking, finance, securities, corporate, crowdfunding, investment funds, employment and litigation to clients including startups, cryptofunds, exchanges, investors, advisors and more.

Our international team of over 40 legal experts are in key jurisdictions including the United States, European Union, United Kingdom, Switzerland Brazil and Hong Kong, providing a comprehensive framework for startups and investors alike.

The Founding Chair of the CKR Blockchain Technology & Digital Currency practice group, Alexandra Levin Kramer, also serves as Chief Diversity Officer for the Wall Street Blockchain Alliance. For more information, contact akramer@ckrlaw.com or +1 (212) 259-7300.

Should you have any questions or desire further insight, feel free to contact one of the members of our Tax Department:

Mayer Nazarian, Chair of the Tax Department, Phone: (310) 400-0110 Email: mnazarian@ckrlaw.com

Eli Akhavan, Chair of the Private Clients and Wealth Preservation Practice Group, Phone: (212) 259-7300 Email: eakhavan@ckrlaw.com 
Aman Badyal, Phone: (619) 500-4540 Email:  abadyal@ckrlaw.com

Elizabeth Larrauri Chamulak,Phone: (212) 259-7300 Email:  echamulak@ckrlaw.com

Gary Edelstone, Phone:(310) 400-0110 Email:  gedelstone@ckrlaw.com

Gordon Einstein, Phone: (310) 400-0110 Email: geinstein@ckrlaw.com

Jon Hughes, Phone:(215) 618-8988 Email:  jhughes@ckrlaw.com

Ronniel Levy, Phone: (212) 259-7300 Email: rlevy@ckrlaw.com

Elizabeth Nelson, Phone: (310) 400-0110 Email: enelson@ckrlaw.com

Farzaneh Savoji,Phone: (310) 400-0110 Email: fsavoji@ckrlaw.com

Michael Shaff, Phone:(949) 265-2622 Email:  mshaff@ckrlaw.com

Zoila Villacorta, Phone: (424) 256-0171 Email: zvillacorta@ckrlaw.com

DISCLAIMER: This article is not intended to provide legal advice, and no legal or business decision should be made based on its contents.