The Michigan Department of Treasury has deemed non-fungible tokens (NFTs) as taxable if they represent an ownership interest in tangible personal property. However, NFTs that represent digital goods are not taxable.
NFTs are an emerging area for many states, and legislators are updating their taxation requirements to cover this new space. The Michigan Department of Treasury defines NFTs as a “digital asset that links ownership to unique physical or digital items- such as works of art, music, or videos.” Similar to other types of cryptocurrency, NFTs are limited in number, bought and sold online, and can be linked to real world items or digital goods.
Michigan does not tax digital goods. With this clarification from the Department of Treasury, an NFT is not subject to sales tax if it solely exists online. However, when its value is linked to physical material or goods, then the NFT is taxable.
Those working in the digital space should take note of the taxability of their digital goods. As digital goods are developing and innovating, states will continue to update their own legislation and exemptions. (Michigan Department of Treasury, August 2024)