The Tao of the DAO: Taxing an Entity that Lives on a Blockchain

23 Pages Posted: 11 Sep 2018

See all articles by David J. Shakow

David J. Shakow

University of Pennsylvania Law School

Date Written: August 13, 2018


In this report, Shakow explains how a decentralized autonomous organization functions and interacts with the U.S. tax system and presents the many tax issues that these structures raise. The possibility of using smart contracts to allow an entity to operate totally autonomously on a blockchain platform seems attractive. However, little thought has been given to how such an entity can comply with the requirements of a tax system. The DAO, the first major attempt to create such an organization, failed because of a programming error. If successful examples proliferate in the future, tax authorities will face significant problems in getting these organizations and their owners to comply with the tax laws.

Keywords: Income taxation, blockchain, smart contracts, The Ethereum Platform, blockchain forks, classification, Foreign Account Tax Compliance Act, FATCA, enforcement, taxation of owners, taxation of the entity, cryptocurrency, artificial intelligence

JEL Classification: K24, K34, O33

Suggested Citation

Shakow, David J., The Tao of the DAO: Taxing an Entity that Lives on a Blockchain (August 13, 2018). Tax Notes, Vol. 160, Pg. 929, August 13, 2018, U of Penn, Inst for Law & Econ Research Paper No. 18-23, Available at SSRN:

David J. Shakow (Contact Author)

University of Pennsylvania Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States

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