Minnesota and Wisconsin include income from NFT sales within the sales tax base

Minnesota and Wisconsin include income from NFT sales within the sales tax base

The taxation of non-fungible tokens (NFTs) has been the subject of considerable debate throughout their relatively short existence. As reported in this newsletter earlier, some states (e.g. Washington and Pennsylvania) have announced their intention to impose sales tax on NFTs. Wisconsin and Minnesota recently made similar announcements.

An NFT is a unique digital code that cannot be exchanged, representing one specific piece of media and potentially the rights to that media. Although there are no clear federal or state tax guidelines for NFTs, investors in NFTs should expect the sale of an NFT to be treated as the sale of a capital asset, even though some NFTs may meet the definition of “collectibles ” (which will result in a capital gain of 28 percent). There are other tax implications for how NFTs are bought and sold – whether bought/sold for cryptocurrency or otherwise – that are generally covered in existing IRS guidance.


On October 28, 2022, the Wisconsin Department of Revenue (DOR) released its state tax bulletin, becoming the fourth US state to include NFTs in its sales tax base. The bulletin was not accompanied by any additional guidance or discussion on any key implementation points such as timing, procurement, what constitutes a sale, and whether DOR’s position will be applied retroactively. According to the bulletin, the sale or purchase of an NFT may be taxable if the purchase or sale of the underlying good, product or service is taxable. This includes NFTs that give the buyer the right to download music or movies, gain access to a sporting event or own a tangible work of art.

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For purposes of obtaining a sale, based on guidance from the DOR, Wisconsin indicates that it may use the customer’s billing address as a proxy for where the sale occurs. For situations where the customer’s address is not known, the sale may come to the place where the NFT was first available for transfer by the seller. Sales tax in Wisconsin is currently 5 percent of the purchase price.


In August 2022, Minnesota also published guidance on the taxation of digital products and specifically on NFTs.

Under rules similar to those in Wisconsin, Minnesota will impose sales tax on NFTs when the underlying product (whether goods or services) is taxable in the state. According to the Sourcing Policy, a sale or purchase of an NFT or any digital product occurs when the seller transfers possession to the buyer, or when the product is first used, whichever comes first. For tax purposes, Minnesota considers the source of a sale to be the buyer’s address as recorded by the seller. It is unclear what the purchasing rules will be if the buyer’s address is unreachable. The sales tax in Minnesota is currently 6.875 percent.

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