Colorado taxpayers may now pay their taxes in Bitcoin, Ether, and other cryptocurrencies via a one-of-a-kind state tax payment scheme in partnership with PayPal, according to the state’s Department of Revenue on Tuesday. Individuals and businesses will be allowed to utilize bitcoin assets to pay tax obligations under Colorado’s principal tax programs, which include the individual income tax, corporate income tax, sales and use tax, withholding tax, severance tax, and excise fuel tax. Colorado taxpayers may pay their taxes in a variety of ways, including cash, check, money order, credit or debit card, ACH credit, and E-check.

Because Colorado cannot take cryptocurrency directly, the Revenue Department has engaged with PayPal to broker each transaction and convert digital currencies into US cash promptly. That implies that purchasing in cryptocurrency will come at a cost, with the payment processor charging a charge for each transaction. According to a PayPal spokesperson, tax payments for Colorado are now only accepted in Bitcoin, Bitcoin Cash, Ether, and Litecoin.
The state started with a “soft launch” on Sept. 1, but the program is now fully functioning, according to agency spokeswoman Daniel Carr. “Cryptocurrency has been adjusted as an extra payment option for taxpayers who are prepared to complete their online transactions to pay their state taxes on Revenue Online,” he said.
Utah is the only other state that has taken moves toward adopting digital currencies for statewide tax debt collection. The legislation that established the program (H.B. 456) required the Utah Division of Finance to begin collecting by January 1, 2023. Ohio had a program in 2018, but it was immediately canceled when Attorney General Dave Yost (R) released an opinion concluding that the state treasurer lacked clear legal authority to run the program.
Gov. Jared Polis (D), a major supporter of cryptocurrency and digital innovation, highlighted the tax scheme on Monday at a technology conference. Polis introduced the effort earlier this year, promising to accept digital currency tax payments by the end of the summer.
Colorado is employing a third party to take any value risk and convert crypto to US dollars before transfer to the state as a hedge against the severe volatility associated with digital assets. After spiking late last year, the value of many cryptocurrencies, including Bitcoin, has plunged.

Taxpayers will be led to PayPal, where they will be allowed to pick their preferred cryptocurrency for payment, according to Carr. Sufficient digital assets to pay the tax obligation and related costs will then be remitted and converted to dollars before being transferred to the revenue agency. The transactions will take three to five business days to clear.
Taxpayers will also be charged a fee to perform their tax responsibilities in digital currency. There will be a service fee of $1 each transaction, plus 1.83% of the payment amount. PayPal purchase fees and other costs imposed when moving cryptocurrencies from an external wallet to the PayPal Cryptocurrencies Hub may also apply.