SushiSwap sprang up in the summer of DeFi and quickly established itself as one of the biggest multichain decentralized exchanges, with daily trading volumes in the billions. Since then the SushiSwap has expanded to offer a buffet of farming and staking opportunities to satisfy even the hungriest of whales. But as with all crypto investments, the tax man is going to want his cut. Learn everything you need to know about SushiSwap in our guide, including how SushiSwap works, what you can do on SushiSwap and SushiSwap taxes.
What is SushiSwap?
SushiSwap was launched just after the DeFi summer of 2020, in September by anonymous developers Chef Nomi and 0xMaki and quickly became one of the largest decentralized exchanges (dex) going. It actually began as a fork from UniSwap - hence the name sake. Like Uniswap, it’s built on the Ethereum blockchain.
Though the foundations of SushiSwap are built from Uniswap’s code - the developers introduced some key differences, including offering additional staking and farming opportunities, as well as a recent NFT platform Shoyu.
One of the key things that helps SushiSwap stand out from other decentralized exchanges is the wide array of Ethereum compatible blockchains it supports, including:
- Binance Smart Chain
How does SushiSwap work?
Like many other dexes, SushiSwap uses the automated market maker (AMM model) - throwing out order books and instead facilitating transactions through smart contracts and liquidity pools.
Liquidity pools are created by liquidity providers - who add capital and are rewarded the trading fees from the pool for doing so. When a provider adds liquidity, they need to add both tokens from a given pool. In return, they'll receive SushiSwap Liquidity Provider tokens (SLP tokens). So for example, if you added WBTC and ETH to a pool - you'd get WBTC-ETH SLP tokens.
These liquidity pool tokens represent your proportional share of the overall pooled assets. Liquidity providers are rewarded with fees in the given pool.
SushiSwap charges a 0.3% fee on trades, 0.25% of which goes back into the liquidity pool to be split among liquidity providers proportionally. Like many other dexes, this means the value of your liquidity pool token grows the longer your capital is in the pool.
When you want your original asset back, you can withdraw it by trading your SLP tokens back. You’ll receive back your original asset, alongside the fees you’ve accumulated in the time it’s been in the pool.
Most liquidity providers also stake their SLP tokens in SushiSwap farms to earn SUSHI - SushiSwaps native governance token. You can harvest your SUSHI tokens as often as you like, although it does come with some hefty gas fees at times.
As well as this, you can stake your SUSHI tokens in the Sushi Bar to earn XSUSHI. XSUSHI tokens collect 0.05% of trading fees from all pools on the exchange. Like liquidity pool tokens, you'll only realize gains when you trade your XSUSHI tokens back for SUSHI tokens.
This is the basics of SushiSwap's tokenomics - but there’s a few more investment opportunities which we’ll cover below.
How to use SushiSwap
Like other decentralized exchanges - to access SushiSwap, you just need a Web3 wallet. SushiSwap supports:
- Coinbase Wallet.
- Binance Chain Wallet.
As soon as you’ve connected your chosen wallet(s) to SushiSwap, you can trade, transfer liquidity, stake, farm and more.
What can you do on SushiSwap?
We’ve touched on this a little above already, so we won’t repeat ourselves too much. In short, you can trade a huge variety of tokens on SushiSwap, as well as:
- Stake SLP tokens in the Farms (Onsen Menu) to earn SUSHI and other rewards.
- Stake SUSHI tokens to earn XSUSHI tokens (the SushiBar) - which collect 0.05% of all trading fees and 2.5% of NFT trading fees on the Shoyu platform.
It’s a lot already - but that’s by no means all you can do on SushiSwap. Let’s take a look at the other investment opportunities available.
Yield farming with BentoBox
The BentoBox is an innovative investment opportunity on SushiSwap. In brief, the BentoBox is a vault that securely stores your deposited tokens and automatically generates yield from flash loans, and other DeFi protocols built on top of it.
This essentially means you can stack multiple DeFi protocols all within one platform thanks to SushiSwap's AMM. So for example, if you're farming tokens in the Onsen, you can deposit the same tokens in the BentoBox.
Lending and yield farming with Kashi Money Market
Kashi is SushiSwap's lending protocol and it's built on the BentoBox - so the BentoBox holds your assets and Kashi utilizes those assets for lending and borrowing.
Unlike many DeFi lending protocols, Kashi works as an isolated lending market. This means each market on Kashi is one asset and one collateral token, isolating risk.
To lend, like with liquidity pools, you simply need to add a supply and borrow pair - which you can pick from your BentoBox. Each lending pair has its own APR which denotes what your return will be from the pool - this isn't fixed, so it will change depending on how much liquidity there is and how much is borrowed. Like with the liquidity pools, you'll get a KMP token to represent your capital - for example, kmWETHUSDT-LINK.
Like with SLP tokens, you can stake KMP tokens in farms (just search Kashi farms) to earn more SUSHI and maximize your yield.
Double your yields and vote with Meowshi
You can wrap xSUSHI tokens as MEOW tokens in the BentoBox to earn double yields as assets are utilized for other strategies and protocols.
MEOW tokens also let you vote on special MEOW governor contracts.
Inari One-Click Yield Farming Strategies
The Inari tool lets you put your SUSHI tokens to work in one-click. You'll earn extra yields on your SUSHI as it's deposited to the BentoBox and invested into passive yield strategies or you can similarly deposit to Aave for collateral for lending and borrowing.
In return for your SUSHI, you'll get XSUSHI tokens - which increase in value.
Shoyu NFT Marketplace
Finally, Shoyu is SushiSwap's latest project - an NFT platform empowered by the SushiSwap community. You can mint, buy and sell ERC721 and ERC1155 NFTs. XSUSHI hodlers are rewarded with 2.5% of all trading fees from Shoyu.
With so many different ways to earn on SushiSwap - your taxes can get complicated fast. To make things even more difficult, the IRS and many other tax offices haven't yet given clear guidance for DeFi transactions - so investors are left interpreting the current crypto tax rules and applying them as best as possible to DeFi transactions. All this said, let's jump into it.
Do you pay taxes on SushiSwap?
Yes. You'll need to pay tax on any taxable transaction you make on SushiSwap.
In general, crypto is subject to either Income Tax or Capital Gains Tax - depending on the specific transaction you're making. This means each transaction is viewed slightly differently from a tax perspective, so let's break down each.
Do you pay tax on trades on SushiSwap?
Yes. In almost all countries, trading one crypto for another is subject to Capital Gains Tax.
You'll need to pay Capital Gains Tax on any profit you make from the trade. So for example, say you've traded WBTC for ETH - you'd need to pay tax on any profit you've made from your WBTC.
To figure this out, just subtract your cost basis (how much it cost you to acquire the asset plus fees) from the fair market value of the crypto on the day you bought it. If the price of the asset has increased, you have a capital gain and you'll pay Capital Gains Tax on that amount.
Do you pay tax on adding and removing liquidity on SushiSwap?
Like we said, there's no clear guidance from the IRS or just yet on adding and removing liquidity from a tax perspective which is causing a lot of confusion among investors as to whether to report these transactions.
However, when you add liquidity on SushiSwap, you'll get an SLP token in return. Similarly, when you remove liquidity on SushiSwap, you'll exchange your SLP token in return for your original capital. This could be seen as trading one token for another - even if you're only realizing a gain when you trade your SLP token(s) back - therefore it could be subject to Capital Gains Tax.
Do you pay tax on liquidity pool tokens on SushiSwap?
Like we said above, there's no clear guidance from the IRS (or other tax offices) on LP tokens from a tax perspective. What it all comes down to is how the specific DeFi protocol you're using works.
You don't earn new liquidity pool tokens on SushiSwap - instead the value of your liquidity pool token increases when trades are made in the pool you've added to. In this sense, you're not earning new tokens so it's unlikely this is going to be seen as income and subject to Income Tax.
It's only when you withdraw your original capital by trading your liquidity pool token back that you'll have a realized gain. This suggests the taxable transaction would be the token trade when you're removing liquidity - which could be subject to Capital Gains Tax.
Do you pay tax on staking SLP tokens on SushiSwap?
The IRS has not yet issued clear guidance on staking rewards tax. However, many other crypto rewards - like mining and referral bonuses - are subject to Income Tax at the point you receive them as you're earning new coins/tokens.
When you stake SLP tokens (or KMP tokens), you earn SUSHI tokens. You can harvest these rewards at any point. This would suggest that you'd need to pay Income Tax on your SUSHI based on the fair market value at the point you receive it.
Do you pay tax when you stake SUSHI on SushiSwap?
Yes - it's likely you'll need to pay tax on staked SUSHI tokens. However, due to the way the SUSHI staking protocol works, it's likely this would be Capital Gains Tax, not Income Tax.
When you stake your SUSHI tokens, you'll receive XSUSHI tokens in return. Like with SLP and KMP tokens, XSUSHI tokens grow in value, instead of you earning new tokens. So you'll only realize a gain when you unstake your SUSHI tokens by exchanging your XSUSHI tokens back. This would be more akin to a crypto to crypto trade and therefore subject to Capital Gains Tax.
Do you pay tax on lending on SushiSwap?
There is no guidance from the IRS on any DeFi lending protocols, so we can only interpret the current tax rules and infer how lending on SushiSwap might be treated from a tax perspective.
When you lend on SushiSwap, you'll receive KMP token(s) in return. These KMP tokens then grow in value based on the APR collected through lending. Similarly, when you want your original capital and returns, you'll trade your KMP token(s) back.
So even though you're not disposing of your asset, these transactions could be interpreted as crypto to crypto trades and therefore subject to Capital Gains Tax.
Do you pay tax on staking KMP tokens on SushiSwap?
Like with SLP tokens, you can stake KMP tokens to earn SUSHI tokens. Because of the way you earn SUSHI tokens - as in you earn new tokens you can harvest at any point - this would suggest these earnings could be subject to Income Tax.
Do you pay tax on borrowing on SushiSwap?
It's not clear how borrowing on DeFi protocols is seen from a tax perspective.
You need to provide collateral on SushiSwap to borrow - but many would argue this is not a disposal and therefore cannot be subject to Capital Gains Tax. Similarly, the tokens you borrow could be seen as more similar to an acquisition which is tax free. However, transactions you make with your borrowed tokens may be subject to tax.
Do you pay tax when you wrap XSUSHI for MEOW on SushiSwap?
It is likely this transaction could be seen as a crypto to crypto trade, even if you can get your asset back at any point. This means it could be subject to Capital Gains Tax.
Again - there's no tax guidance on one-click yield farming strategies (shockingly), so we have to look at how you earn and how rewards are paid out for an idea of how taxes may work.
When you use the Inari tool, you're staking SUSHI for xSUSHI - which is lent out through different protocols. You realize your gain when you trade your XSUSHI back for SUSHI. This is more akin to a crypto to crypto trade, which means it could be subject to Capital Gains Tax.
Do you pay tax on NFTs on Shoyu marketplace?
You can make a few different transactions on SushiSwap’s NFT marketplace Shoyu - so let’s break it down.
- Buying an NFT on Shoyu: As you’re buying your NFT with WETH, SUSHI or USDC - this is likely to be seen as a crypto to crypto trade and subject to Capital Gains Tax.
- Selling an NFT on Shoyu: As you’re receiving WETH in exchange for your NFT, this is likely to be seen as crypto to crypto trade and subject to Capital Gains Tax. However, if you’re minting and selling multiple NFTs - like a business - this could be seen as a kind of additional income and subject to Income Tax.
- Minting an NFT on Shoyu: Only whitelisted accounts - so specific creators - can mint NFTs on Shoyu. Minting an NFT generally comes with a fee, which will usually be in crypto i.e. SUSHI. This could be seen as spending crypto which is subject to Capital Gains Tax. However, it is also highly likely this could be added to part of your cost basis for the NFT - making it tax deductible.
What do I need to report to my tax office?
It depends on where you live - each tax office has different reporting requirements for crypto.
In the US, you need to report each taxable crypto transaction on Form 8949, including:
- A description of the asset
- The date you acquired the asset
- The date you disposed of the asset
- The sale price at fair market value
- The cost basis of the asset at fair market value
- Your capital gain or loss
You’ll also need to report your net capital gain and loss on Schedule D and any crypto income on Schedule 1 and potentially Schedule C.
If you’re an active trader on SushiSwap and utilizing the farming and staking opportunities, the list of transactions you need to report can quickly ramp up into the thousands per financial year. You’ll need good records of all your transactions on SushiSwap with all the information - you can do this manually or with a crypto tax app. Let’s look at both.
How to do your SushiSwap taxes
You need your SushiSwap transaction history to get started with your SushiSwap taxes. There’s two ways you can do this.
- Use crypto tax software and connect to SushiSwap via API. Connect the wallet you use to interact with SushiSwap to your chosen crypto tax app through API. This will automatically import your SushiSwap transaction history to your app, identify your taxable transactions and calculate your capital gains, losses and income.
- Create a CSV file of your SushiSwap transaction history. You can’t download a CSV file from the SushiSwap platform directly, so the only way to get a CSV file is to create one yourself. You can use third party tools like BSCscan and Etherscan to download a CSV file of your transaction history on a given blockchain too. You can then use this CSV file to identify your taxable transactions, capital gains, losses and income yourself.
Does SushiSwap provide a tax report?
No. SushiSwap doesn't provide a tax report - even if it did it would only cover your SushiSwap taxes and most crypto investors are using multiple platforms, so the tax report would be redundant.
Instead, you can get your SushiSwap tax report by importing your SushiSwap transaction history into a crypto tax app using API.
Does SushiSwap supply a financial statement?
No. SushiSwap doesn’t supply a financial statement.
How to generate a SushiSwap tax form
There’s two ways you can do this depending on whether you’re using crypto tax software or not so we’ll look at both.
If you’re doing your taxes yourself, you need a complete transaction history from SushiSwap for the financial year. As we said, there's no easy way to get this so your best bet is creating a custom CSV file yourself. You’ll then need to identify each taxable transaction, the subsequent income or capital gain/loss and report this to the IRS using Form 8949 for capital gains and losses, Schedule D for net capital gains and losses and Schedule 1 for crypto income (and potentially Schedule C too for income).
Alternatively, use a crypto tax app and skip all the spreadsheets and math. All you need to do is sync your SushiSwap transactions using the API. Your crypto tax app will then identify your taxable transactions and calculate any capital gains, losses and income for you. You can then download a tax report specific to your location to hand over to your tax office - for example, you can download a pre-filled Form 8949 and Schedule D.
SushiSwap CSV export
SushiSwap doesn't offer a CSV file export option. The best way to get a complete CSV file of your SushiSwap transaction history is to create one yourself. You can use third party services like BSCscan and Etherscan to download a CSV file of your transaction history on a given blockchain.
SushiSwap tax API
The easier option is to use an API to get your SushiSwap transaction history automatically imported into a crypto tax app.
All you need to do is sync the wallets you use to interact with SushiSwap. So for example, if you use MetaMask to interact with SushiSwap, you just need to sync your MetaMask wallet with your crypto tax app using the API. We've got instructions on how to get your API keys for the most popular SushiSwap wallets on our integration pages. Once you’ve got your API keys, enter them into your chosen crypto tax app and it’ll calculate your SushiSwap taxes for you and generate your tax report.
You might also find our help guide on integrating DeFi platforms with Koinly helpful.
Does SushiSwap report to the IRS?
Anonymity is a key tenet of DeFi - so like most other DeFi protocols, SushiSwap doesn't have a KYC verification process.
Most of the wallets you'll use to interact with SushiSwap also don't have a KYC process - so you might think you're in the clear. However, you'll need to link a card to many of these wallets. If you've got transactions from your bank account linking you to crypto activities, the IRS is going to want to know about it.
Similarly, if you're moving assets between SushiSwap and centralized exchanges - these centralized exchanges have seen a lot of pressure from the IRS to share KYC information to ensure tax compliance.
The best way to stay tax compliant is to report your crypto taxes accurately.
If you’ve been wondering is Koinly a SushiSwap tax calculator tool, the answer is, yes! Not only can Koinly import SushiSwap transaction history, but Koinly can also calculate your SushiSwap taxes in a format that makes sense for your country’s tax office. As a SushiSwap tax calculator, Koinly is able to do a bunch of impressive tasks that save you time and can even save you from paying too much taxes.
- Koinly will import all your SushiSwap trades including purchases, sales, swaps, income and more!
- Koinly will then convert your SushiSwap transactions into your country’s currency, at fair market value. This in itself is a massive time saver.
- Finally, Koinly works out which of your SushiSwap trades are taxable, and which are not - calculating your SushiSwap gains/losses, crypto income and more. All of this is really important for being able to submit an accurate SushiSwap tax return to your tax office.