Tax Insight

Illinois enacts transaction tax on cryptocurrency via “digital asset business activity”

Insight
5 minute read
July 31, 2026

What happened?

Effective January 1, 2027, the Digital Asset Tax Act imposes tax on Illinois customers that receive digital asset business activity from a digital asset broker. This activity includes exchanges, transfers, and storing of digital assets. The tax is imposed at 0.2% on the value of underlying digital assets involved in the transaction.

The fiscal year 2027 budget bill (SB 3019), signed by Illinois Governor Pritzker on June 16, 2026, includes the Digital Asset Tax Act, imposing tax on digital asset transactions. This tax resembles a transaction tax on gross receipts from digital asset transfers and requires digital asset brokers with nexus in Illinois to collect the tax on each sale. On June 22, 2026, HB 5798 was introduced in the Illinois General Assembly, which if passed, would repeal this tax completely.

Why is it relevant?

The Digital Asset Tax Act is a first-of-its-kind imposition on digital asset transactions, including cryptocurrency. The Act is designed to reach both in-state brokers and remote out-of-state brokers that exceed a $100,000 receipts threshold. The tax has already drawn legal challenges, and its full repeal has been proposed by HB 5798.

On July 21, 2026, The Digital Chamber filed suit in the Circuit Court of Sangamon County, Illinois, asking the court to declare the Act “void and unenforceable” on the grounds that it:

violates the US Constitution’s Commerce Clause and Due Process Clause
violates the Illinois Constitution’s Uniformity Clause, Due Process Clause, and Proportionate Penalties Clause
is preempted by the Internet Tax Freedom Act because it discriminates against Internet-based electronic commerce.

Actions to consider

Digital asset brokers will be required to register and collect the tax.
Out-of-state brokers will need to monitor digital asset business activity in Illinois against the $100,000 receipts threshold for registration.
Brokers will need to develop mechanisms to identify and track the transaction activity that gives rise to the gross receipts and to issue a receipt evidencing the tax collected for each taxable transaction upon customer request.
Brokers will need to evaluate the specific information that is available for their customers and then determine whether the transactions are properly sourced to Illinois.
Illinois customers will need to verify whether address information is current with any digital asset brokers.
Illinois customers will need to self-assess and report the tax in instances where the broker does not collect.
Monitor for additional administrative guidance from the department, updates on the progress of HB 5798, and the outcome of The Digital Chamber’s lawsuit, seeking to block the Act before it takes effect.