Last month, the Rhode Island Senate saw the introduction of Bill S. 0451. This legislation allows local residents and businesses to engage in up to 10 transactions per month using bitcoin, provided each transaction is valued under $1,000, without incurring state capital gains taxes.
The bill proposes an amendment to the existing state income tax regulations, and here’s the key detail:
“Any sale of bitcoin by an individual or business in Rhode Island will not be subject to state taxation if the total sales are less than one thousand dollars ($1,000) per day. The exemption is capped at ten transactions within a thirty-day period.”
Additionally, the legislation defines a “sale of bitcoin” as any deal where bitcoin is exchanged for other forms of value, be it fiat currency or different physical or digital assets.
It’s important to note that this exemption is strictly at the state level and does not alter federal tax responsibilities.
Those participating in these tax-free bitcoin transactions are expected to maintain thorough records of their daily sales values. This documentation could be requested by Rhode Island’s department of revenue for audits or compliance checks.
Chris Perrotta, the Chairman of the Rhode Island Blockchain Council, highlighted in a presentation shared with Bitcoin Magazine that adopting Bill S. 0451 could simplify digital asset transactions. He pointed out that “current tax rules around spending BTC limit its advantages for Rhode Islanders and curb economic expansion.”
Perrotta added that passing this legislation could invigorate blockchain-based economic initiatives within the state, potentially positioning Rhode Island as a leader in this innovative space. Furthermore, he urged small businesses to embrace bitcoin for their products and services, suggesting it could drive economic growth.
To date, no other state in the U.S. has rolled out similar proposals. On a federal note, the only related initiative is the Lummis-Gillibrand “Responsible Financial Innovation Act,” which suggests a modest tax exemption for bitcoin transactions up to $200.
