Assigned to FIN AS
PASSED BY HOUSE
Assigned to FIN AS
PASSED BY HOUSE
ARIZONA STATE SENATE
Fifty-Third Legislature, Second Regular Session
AMENDED
Purpose
Authorizes the Arizona Department of Revenue (DOR) to use a payment system for the immediate remittance of transaction privilege tax (TPT), study income tax payment using cryptocurrencies and explore use of technology for TPT and income tax payments.
Background
According to the Internal Revenue Service, virtual currency is a digital representation of value that functions as a medium of exchange, a unit of account or a store of value, which may be used as payment for goods or services, or held for investment purposes (Notice 2014-21). According to the National Conference of State Legislatures (NCSL), cryptocurrencies, such as bitcoin, are digital or virtual currencies that use encryption methods to make them secure (NCSL).
Current law requires state income tax, including any interest and penalties, to be paid to DOR. Payment may be in the form of a check payable to DOR during such time and under such regulations as the Director of DOR may prescribe (A.R.S. § 43-505). According to DOR, acceptable forms of payment, in addition to check, currently include credit card, cash or electronic transfer.
According to DOR, this legislation adds a new method of payment for taxpayers but makes no change to tax liability and therefore would have no state revenue impact. However, DOR does anticipate significant fiscal impact with respect to the cost of implementing the bill.
Provisions
2. Requires DOR to study whether a taxpayer may pay income tax liability using a payment gateway, such as bitcoin, litecoin or any other cryptocurrency that uses electronic peer-to-peer systems, including studying the conversion of cryptocurrency into dollars and crediting the taxpayer's account less any costs incurred.
3. Permits DOR to design, develop and provide for trial demonstrations of the adaptation, application and use of technology to enable immediate remittance and collection of TPT and income tax payments at the point of sale and post-audit payments. DOR may contract with one or more private vendors or consultants and identify practical and legal issues.
4. Requires DOR to report its findings on or before January 1, 2021, in a report to the Governor, President of the Senate, Speaker of the House of Representatives, the Chairpersons of the Senate Finance and House Ways and Means Committees, and the Secretary of State. The report would be posted on the DOR website.
5. Repeals the demonstration project provisions on July 1, 2021.
Amendments Adopted by Committee
1. Specifies acceptable cryptocurrencies as bitcoin, litecoin and any others that DOR recognizes.
2. Removes the requirement that DOR convert cryptocurrency payment within 24 hours.
3. Allows DOR to credit the converted dollar amount, less any fees or costs incurred for conversion.
4. Adds a delayed effective date of January 1, 2020.
Amendments Adopted by the House of Representatives
1. Adds permission for DOR to use an immediate remittance payment system for TPT.
2. Revises income tax payment provisions to authorize the study of cryptocurrency income tax payment, rather than requiring DOR to accept payment in cryptocurrency.
3. Authorizes DOR to study the use of technology for TPT and income tax remittance and collection purposes.
Senate Action House Action
FIN 1/24/18 DPA 4-3-0 WM 3/07/18 DPA 6-0-1-2
3rd Read 2/08/18 16-13-1 3rd Read 4/30/18 43-14-3
Prepared by Senate Research
April 30, 2018
FB/AF/lb