How Florida Taxes Cryptocurrency

Ah, taxes. The inevitable consequence of making, spending, or even just holding money. And when that money is in the form of cryptocurrency? Well, things get even more interesting. Especially in Florida, a state known for its business-friendly environment, growing tech industry, and a tantalizing twist: no state income tax. How does this unique feature play into the world of crypto taxation in the Sunshine State?

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From capital gains to corporate tax implications, we'll break down what every individual and business needs to know about navigating Florida's crypto tax landscape. Stay tuned; the answers might surprise you!

Income tax

Florida does not have a state income tax for individuals. However, if you earn crypto as income, you still have to pay federal income tax.

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How do you establish yourself as a resident to get in on this sweet deal? According to the Florida Department of Revenue, “filing a declaration of domicile, qualifying for homestead exemption, or registering to vote in Florida can establish residency.”

Capital gains tax

If you sell crypto for more than what you paid to acquire it, capital gains tax is a tax on the profit from the sale. No such tax exists in Florida, though. Just remember you still have to pay federal capital gains tax.

Sales and use tax

Florida does tax transactions involving the sale or use of tangible personal property. Both the sales tax rate and the use tax rate is 6%.

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If you’ve never heard of a use tax before, it’s a tax paid on items that were purchased outside of the state and then brought into Florida for use, consumption, or storage. It's designed to complement the sales tax and ensure that all items used within the state are taxed equally, regardless of where they were purchased.

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Additionally, some local jurisdictions may impose their own discretionary sales surtax, which can vary by county. Miami-Dade County, for example, has an extra 1% on top of the state’s 6% for a total of 7%.

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Here’s where it gets interesting: since crypto transactions do not involve the transfer of tangible personal property, they are not considered a "sale" under Florida law. Therefore, exchanges of crypto alone do not trigger a taxable event that would result in the recognition of gain or loss.

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However, when crypto is exchanged for tangible personal property, it does meet the definition of a "sale" for sales and use tax purposes. For example, if you buy a surfboard for $1,000 and pay using Bitcoin, you will be subject to sales tax.

Inheritance and gift tax

Florida does not have an inheritance or gift tax. When it comes to leaving behind your crypto empire in Florida, the taxman takes a break, allowing your heirs to inherit it all with no strings attached.

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However, large estates may still be subject to federal estate tax.

Property tax

Property tax rates vary by county in Florida. Your property will be assessed annually by your county’s property appraiser.

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For example, Miami-Dade County collects, on average, 1.02% of a property's assessed fair market value as property tax. It’s actually one of the highest median property taxes in the US.

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That said, various exemptions and reductions are available to individual property owners, such as the homestead exemption, which can reduce the taxable value of a primary residence, and discounts for paying your tax early.

Corporate tax

If you have a company incorporated, registered, or doing business in Florida, you may need to pay corporate income tax. The rate is 5.5% for most corporations. Furthermore, your company is required to make estimated tax payments if you expect the corporate income tax liability to exceed $2,500.

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There's no difference in the rules if your company deals in crypto or not.

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Here are a few other taxes companies in Florida have to pay:

Payroll tax

There’s no payroll tax per se, but there is what Florida calls a reemployment tax. Employers who meet specific criteria, such as having a minimum number of employees or paying a minimum amount in wages, are required to pay. The tax rate varies for each employer and can range from 0.1% to 5.4% of the first $7,000 in wages paid to each employee during a calendar year.

Telecommunication Services Tax

Companies and individuals using telecommunications services in Florida are subject to a tax on their landline, mobile, cable, satellite, and other related communication services.

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The state portion of the Telecommunications Services Tax is 7.44%. This includes the state sales tax rate of 6% plus a gross receipts tax rate of 1.44%. In addition to the state rate, local governments in Florida may impose a local communications services tax. The local rate varies by jurisdiction and can range from 0% to 7.12%.

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Providers of telecommunications services are responsible for collecting the tax from customers and remitting it to the Florida Department of Revenue.

Good record-keeping is crucial

The intricacies of each tax type can be overwhelming, and good record-keeping can mean the difference between having a clear financial picture and being in the dark about your tax obligations.

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One tool that can significantly simplify this process is Bitwave, a crypto tax platform designed for businesses to streamline back-office operations, increase productivity, and reduce complexity. It helps track every crypto transaction and taxable event, simplifying quarter-end procedures. It even offers a solution for enterprises to pay bills, invoice, or run payroll in crypto. With advanced APIs, custom reporting, and out-of-the-box Gain-Loss Reports, Bitwave is a comprehensive solution for managing your crypto taxes.

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