The first half of the year saw a flurry of virtual currency-related legislation introduced at the state level, and two recently signed laws specifically address cryptocurrency’s treatment as unclaimed property (UP). According to Illinois S.B. 338, entities holding abandoned virtual currency are required to liquidate the UP and remit the proceeds to the state Treasurer. And effective August 1, 2021, Delaware added “virtual currency” to the definition of property subject to reporting requirements for unclaimed property. Like Illinois, the state says virtual currency UP must be liquidated prior to reporting and remitting the proceeds of the liquidation to the state.
In June 2018, in a 5-4 decision, the U.S. Supreme Court ruled in favor of South Dakota in South Dakota v. Wayfair, Inc. and its decision to allow states to enforce tax collection and remittance requirements against remote sellers. Thanks to the expansion of income tax nexus as a result of the Wayfair case, three years later, every state with a sales tax has enacted rules that mandate sales tax collection for remote sellers. And while states continue to develop their own rules and requirements, one thing is quite clear — managing compliance remains an enormous challenge.
For far too long, global businesses would assume that indirect taxes including VAT ought to reside in the domain of local subsidiaries. Now, as tax administrations accelerate their digital transformation strategies, this mindset is not just untenable: it’s a profound danger to the very lifeblood of businesses’ digital transformation efforts.