Ohio is becoming the first state to offer businesses the option of paying their taxes using Bitcoin, though it’s unclear how many will want to use cutting-edge digital currency to settle their bills with the treasurer’s office.
Beginning Monday, Ohio businesses can make payments including sales and withholding taxes at OhioCrypto.com, which uses a third-party processor to convert digital currency into dollars that are then deposited into state coffers.
Other states have considered similar measures but Ohio is the first to make it official. Bills authorizing taxes to be paid with digital currency stalled in the Arizona, Georgia, and Illinois legislatures. The Ohio General Assembly did not play a role in the treasurer’s authorization of digital currency.
“We’re the first state in America to ever do this ... so whenever you’re doing something that’s pioneering you never know how it’s going to be developed. But we’re cautiously optimistic that it will be embraced over time,” outgoing state Treasurer Josh Mandel told The Blade Sunday, hours after the Wall Street Journal broke Ohio’s first-in-the-nation digital currency news.
“Most of the businesses we’ve heard from are small and medium-sized private businesses, but ultimately my vision is to have businesses of all kinds use it, everything from mom-and-pop diners to Fortune 500 companies,” he said.
Mr. Mandel only has until January to carry out the rest of his vision. The Republican, who earlier this year dropped out of the U.S. Senate race and did not run for re-election in his current post, will be replaced by Findlay Rep. Robert Sprague.
Mr. Sprague, also a Republican, said he applauds what he called a “pilot” program, but will review it once he begins his new role.
“Once we get into office we’ll do a more thorough analysis,” he said. “It’s certainly a risk, but it’s also an opportunity to show we’re pro-business and that we’re progressive.”
Mr. Mandel said OhioCrypto.com should make it easier for businesses to pay their taxes and “help project to the rest of the country that Ohio is a leader in embracing blockchain technology,” he said, referring to the type of technology that paved the way for cryptocurrency like Bitcoin. His announcement coincides with the Cleveland Blockland Conference beginning Dec. 1 as cities like Cleveland and Columbus vie to become the next generation of tech hubs.
Mr. Mandel didn’t say how many businesses are expected to take advantage of the new site, which will only accept Bitcoin from businesses, not individual taxpayers, to start.
Since its inception a decade ago, Bitcoin — a form of decentralized digital currency whose transactions are recorded in a public ledger called a blockchain — has yet to become mainstream, even after a surge of interest skyrocketed prices early on. It has also been criticized for price volatility and use in illicit transactions.
But the treasurer’s office is limiting its risk by using a third-party to convert Bitcoins into dollars, so the state government will never actually be in possession of digital currency. The office is using Georgia-based company BitPay to process transactions. Taxpayers can expect to incur a network fee, a mining fee (a charge specific to Bitcoin users), and a 1 percent processing fee after a short intro period.
“With BitPay, Ohio can leverage blockchain technology and benefit from reduced risk and identity fraud,” BitPay CEO Stephan Pair said in a news release.
When asked whether any of this requires approval from state lawmakers, Mr. Mandel said he has the authority to determine how taxes are collected.
“As state treasurer, my charge is to collect, protect, and invest the tax dollars of the state of Ohio,” he said. “So empowering taxpayers to pay their taxes via cryptocurrency is squarely under my purview as treasurer.”
Jeff Haymond, an economics professor at Cedarville University, said he doesn’t see much risk to the state — nor does he expect businesses will flock to the site to begin paying their taxes in Bitcoin.
“There’s always a desire to appear progressive and up with the times,” he said. “It’s really a marketing gimmick in a way.”
First Published November 26, 2018, 1:44 a.m.
