16/09/2022 Two States Start Taxing NFTs

Washington and Pennsylvania wade into a largely unregulated marketplace

A visitor at theSeattle NFT Museum in WashingtonA visitor at theSeattle NFT Museum in Washington, one of the first states to taxnon-fungible tokensPhoto by Jason Redmond / AFP via Getty Images

Earlier this summer, Washington and Pennsylvania became the first two states to tax the sale of non-fungible tokens, or NFTs. If other states follow their lead, the NFT marketplace, which has relied heavily on anonymity and a lack of government oversite, could face new challenges.

In June, Pennsylvania’s Department of Revenue “quietly” designated NFTs as taxable, though it provided no further instruction, reportsHyperallergic’s Jasmine Liu. Then, in July, Washington’s Department of Revenue released astatementlaying out preliminary taxation guidance, which indicates that the state will eventually require sellers to document where purchases take place.

Both states could retroactively collect money related to NFT sales going back several years. The reason, perHyperallergic, is that the new guidelines are both “[interpretations of] existing law rather than enactments of entirely new legislation.”

NFTsare unreplicable digital files, which can take the form of anything from concert tickets to Twitter profile pictures. (At the moment, they are particularly popularwithin the art market.) They are a “proof of ownership over a digital item,”Wired’s Eric Ravenscraft writes, which is part of the draw of owning one—the value derives from its exclusivity.

Some NFTs are indeed quite valuable: NFT sales hit $25 billion in 2021,Reuters’Elizabeth Howcroft reports. In March 2021, the artist Beeple sold one of his NFTs for$69 million. Earlier this year, the artist Pak sold his NFT artwork, titledClock, for over$52 million.

NFTs have always had detractors, who denounce them asget-rich-quick schemes, among other criticisms. And the 2022 cryptocurrency market isn’t booming the way it did in 2021. Still, where money can be made, money can be taxed—and state revenue officials are taking notice, New York lawyer Amelia K. Brankov tells theArt Newspaper’s Daniel Grant.

Another defining feature of NFTs is the baked-in anonymity. NFT transactionsoccur on the blockchain, which allows people to buy and sell without being traced. This feature will complicate how NFTs are taxed in Washington and Pennsylvania, explainsArtforum, since many transactions occur between unidentified buyers and sellers in unknown locations.

“Previously, sellers and buyers of NFTs weren’t evading taxes—they were merely enjoying the lack of regulations,” writesARTnewsShanti Escalante-De Mattei. “Whether people are willing to explicitly evade taxes is a different matter entirely.”

For over 80 years, the Scurlock photography studio catalogued the lives of the black middle class of Washington, D.C (The exhibit, The Scurlock Studio and Black Washington: Picturing the Promise, is on view at the National Museum of American History through November 15, 2009. Thanks to Lonnie Bunch, Director of the National Museum of African American History and Culture, which co-organized the exhibit)



Interesting NFTs
Bush warbler and roses
Katsushika Hokusai (1760-1849) Bush warbler and roses 1834 - Japan
Super Red Moon and Red Azadi Tower
What a coincidence! A Supermoon is a full moon at the closest distance from Earth in its elliptic orbit—resulting in a slightly larger-than-usual apparent size. I was lucky to capture it in 2016 when the Azadi Tower (Tower of Freedom, one of the Iranian modern symbols) was red as a coincidence. 75% of the sale goes to The Association of Families of Flight PS752 Victims.
Tile [20, 5] - Bring It to Me
20 5
The River of Emeralds
Golden conditions at one of my favorite locations in the Rockies. The light, the colors, the textures; what more can you ask for? I just loved the way this river flowed into the sunset and the mountains in the background. It's rare you find a scene as perfect as this one. But when you do, you have to take advantage of it.
José Delbo sent me his striking pencil sketch and powerful inked work, which I then interpreted in oil on canvas. I wanted to create a very painterly piece with obvious brush marks etc, but I was also aiming for a nostalgic feel, a kind of 1980’s superhero comic book look, the kind I grew up with. My goal with this animation was to try to recreate, in part, the creative process that both artists went through with the visual information I had. I was able to showcase my painting process more accurately as I could take photographs of my progress throughout. Consecutive images could then be layered like brush strokes over José’s drawing to create the impression that this was one continuous artwork from pencil, to ink, to completed painting. The representation of the line sketch at the beginning, then pencil/ink and lastly the paint layers being applied demonstrate both artists’ struggle for the right lines, tone, form, and colour until the work is finally completed. As the oil was still wet with each photograph the glare of my studio lights can be seen in the brush strokes. Eventually, the figure emerges and as it does, our hero comes to life, looking directly at the viewer -- but is he grimacing in approval or disgust? We will never know for sure as just before he can say anything, white paint is brushed across the canvas entirely and the process begins again. Only the bat is quick enough to escape.