Bill S. 0451, which was introduced to the Rhode Island Senate last month, permits the state’s residents and businesses to make up to 10 payments in bitcoin valued at less than $1,000 per month (or sell the equivalent amount) without being subject to state capital gains taxes.
The bill is an amendment to existing state income tax laws, and the exact language in the proposed legislation is as follows:
“Any sale of [b]itcoin by an individual or business in Rhode Island shall be exempt from state taxation if the total value of sales is less than one thousand dollars ($1,000) per diem. The limit of the state tax exempt [b]itcoin transaction shall not exceed ten (10) sales per a thirty (30) day cycle.”
And the bill defines a “sale of [b]itcoin” as “any transaction in which [b]itcoin is sold or exchanged for another form of value, such as fiat currency or other physical or digital assets.”
The bill also clarifies that this exemption only applies at the state level and that it doesn’t affect federal tax obligations.
Under the bill, individuals and businesses who engage with these types of tax-exempt bitcoin transactions are responsible for keeping records of these transactions, including the total value of sales per day, and should be prepared to provide these records to the Rhode Island’s department of revenue for audit or compliance purposes.
In a slide deck prepared by the Rhode Island Blockchain Council that was shared with Bitcoin Magazine, Chris Perota, Chairman of the Council, wrote that the passing of Bill S. 0451 would help to reduce friction for digital asset payments.
He stated that “current tax implications of spending BTC hamper its utility for Rhode Island citizens and stifle economic activity.”
Perota also noted that the passing of this bill would stimulate blockchain-based economic activity in the state, making Rhode Island one of the states at the forefront of this technology.
What is more, he also proposed that small businesses accept bitcoin for products and services as a means to stimulate economic growth.
Thus far, no other U.S. states have introduced comparable bills.
At the federal level, the only bill that has proposed something similar is the Lummis-Gillibrand “Responsible Financial Innovation Act”, which provides a de minimus tax exemption on bitcoin transactions valued up to $200.
