Starbucks Accepting Bitcoin Can be Troublesome for Calculating Capital Gains Tax, But a Fix is on the Way
A cup of coffee from the Starbucks may soon do the opposite of what it usually does for some, that is curing the headache as taxes gets into the picture on every single cup of your coffee.
It’s Gonna be Really Troublesome
Earlier this week, the coffee giant Starbucks has received significant equity from the to be launched Bakkt platform in lieu of installing the Bakkt software to allow coffee drinkers to pay with Bitcoin (BTC).
This would be no doubt a big step towards adoption as Bitcoin and by extension, crypto gets exposed to Starbucks’ an average of over 500 customers per day that is further expected to grow. The crypto community is excited about this prospect where Bitcoin for coffee would become a daily habit, but it has its own set of pain point and that is the tax man.
“If you were to use bitcoin to buy coffee, it is technically feasible, but it would be extremely burdensome for tax purposes,” told James Foust to MarketWatch, a senior researcher at Coin Center, a nonprofit research and advocacy center focused on cryptocurrency and decentralized technology.
Reminder that if Starbucks does accept bitcoin at some point, you will be required to calculate capital gains on every cup of coffee you buy https://t.co/nMZLGJTfc4 We are trying to change that
— Neeraj K. Agrawal (@NeerajKA) March 5, 2019
The organization is looking into this regulatory burden that revolves around the everyday purchases with digital assets. In its post on:
“Bitcoin taxation is broken. Here’s how to fix it,” from 2017, they are “proposing a simple legislation to create an exemption from taxation small personal gain on digital currency transactions.”
Current Taxation Rules Discourages Bitcoin’s use as an Everyday Payment Method
A big chain like Starbucks might be able to move the regulatory case forward for the leading digital asset and the wider cryptocurrency space. However, it is not outside the realm of Internal Revenue Service.
Hence there is a real requirement of such propositions as by announcing that Bitcoin is to be treated as property in March 2014, IRS has made it compulsory to report any gains to the agency, however small they might be.
“Obviously this creates a lot of friction and discourages the use of Bitcoin or any cryptocurrency as an everyday payment method.”
However, Starbucks is really keen on the idea as at the time of the launch in 2018, the vice president of partnership and payments of Starbucks Maria Smith had said,
“Starbucks will play a pivotal role in developing practical, trusted and regulated applications for consumers to convert their digital assets into U.S. dollars for use at Starbucks.”
Though Foust warns, “It would be really, really onerous,” Kirk Phillips of the BitcoinCPA says, it’s likely that new users will go ahead and enjoy coffee and bitcoin and not know what the real cost of compliance is.”