In a recent Bloomberg Tax article, Baker McKenzie’s Drew Hemmings, Doug Wick, David Zaslowsky and Matthew Musano analyze Illinois’ Digital Asset Tax Act, or “cryptocurrency tax,” the first state-level transaction-based tax on digital asset activity.
Effective January 1, 2027, the tax imposes a 0.2% levy on covered digital asset business activity. The authors note that, while the regime resembles a sales tax framework, it functions more like a transaction-based excise tax and could apply multiple times across a single transaction chain.
The article highlights several practical, legal and policy issues, including:
- Scope and sourcing uncertainty, including how the law may apply to peer-to-peer transfers, DeFi transactions, NFTs, blockchain validation, staking, delegation and remote transactions tied to Illinois customers.
- Broker compliance obligations, including collection and remittance, registration, monthly filing, customer receipts, sourcing documentation and audit risk.
- Enforcement and legal uncertainty, including potential criminal penalties, repeal efforts and constitutional or federal law challenges.
The authors also examine whether added transaction costs could push activity through non-Illinois entities or offshore platforms, or lead participants to avoid intermediaries subject to state-level reporting and tax collection obligations.
Read the full article in Bloomberg Tax here.