The former Vice President of Payments of the super famous and giant coffee company Starbucks, Maria Smith promised that the company would play “a fundamental role in the development of practical and regulated applications for consumers, so that they pay their coffees with Bitcoin”.
However, US tax regulations continue to block the way to fulfill this promise so dreamed by all in the crypto ecosystem, but not all bad news, since recently several states within the US territory have embarked on a path of regulations pro – Bitcoin, and its other altcoin, which could clear the way not only for Starbucks but for any company that wants to accept crypto assets as payment method.
Accepting Bitcoin means a mountain of paperwork and bureaucracy:
Currently, the Internal Revenue Service or IRS in the United States, considers Bitcoin and other cryptocurrencies as a property.
For tax purposes, BTC is treated as a property, which generates capital gains every time a transaction is made, regardless of the amount negotiated. Therefore, all Bitcoin transactions, whether for a luxury yacht, a Lambo or even a cup of Starbucks coffee, are taxed as capital assets, such as stocks, bonds and commodities.
As a result, accepting Bitcoin or some other Altcoin can quickly become a bureaucratic nightmare.
And although defense groups like CoinCenter are pushing for an exemption from this, Starbucks is not waiting for the slow US Congress to act.
Its association with Bakkt, an Exchange of cryptography backed by the NYSE, is evidence of this.
Recall that in the month of August 2018, Bakkt and Starbucks signed an agreement, together with Microsoft and Boston Consulting Group, BCG, which reportedly would allow BTC hodliers to spend their cryptography in Starbucks stores. The crypto enthusiasts defended the movement as a “massive victory for general adoption”.
The developments launched by The Block Crypto now reveal that the coffee store chain mogul will in fact accept cryptographic payments through Bakkt’s BTC USD services.
In exchange for a large amount of capital in Bakkt, the Seattle-based company will detect the Bitcoin trade at the time of purchase and will immediately convert it into fiat money, so in the papers at least it will never hold any real crypto.
Unfortunately, the fiscal obstacles mentioned above can still prevent this pro-crypto movement from gaining significant traction.
As the IRS has indicated, each time there is an exchange of capital assets, the market value of the asset must be compared with the market value of the asset at the time of taxation, which is too complicated for a company that expects to move thousands of dollars. millions of dollars in Bitcoin. In the case of the infamous volatility of Bitcoin, these two values could be separated by a large amount, which could cause a big loss for the company that accepts BTC as a payment method, in this case Starbucks.
For example, if the price of a daily coffee at Starbucks costs $ 1.85, at the time of the purchase transaction, it would cost approximately 0.00047 BTC.
However, if a customer bought the same coffee in January 2018, when Bitcoin was quoted at almost $ 15,000, the cost of that coffee with milk would be approximately 0.000123 BTC.
During a tax presentation, this information should be processed, after which a taxpayer may see an abnormal increase in their tax return, or a decrease.
The opposite is true if the price of Bitcoin increases, as many cryptography users have recently discovered.
In a Reddit publication of May 2018, a US user reported that he owed the IRS $ 50,000 after buying eight Bitcoin for $ 7,200, reselling them for $ 120,000 and then buying a different lot of altcoins. The usury wrote:
“I did not know it back then, but it seems I owe income taxes on those operations, which adds up to about $ 50,000 if I add California and federal taxes. But with the fall that happened recently, I added my altcoins and only have a value of $ 30,000.”
It is likely that the cost of a single coffee does not have the same consequences, but it highlights some important flaws in the way Bitcoin is taxed in the United States.
Old rules for new money:
CoinCenter, the Crypto ecosystem’s defense group, has been aware of these problems since the IRS announced BTC’s “new” fiscal treatment in 2014.
Recall that in January of the year 2017, Peter van Valkenburgh explained that:
“THE INTERNET’S SUCCESS IS MOST OF THE EXISTENCE OF TWO LAWS APPROVED BY THE CONGRESS AT THE END OF THE 1990’S: THE LAW OF DECENCY IN COMMUNICATIONS (CDA) AND THE COPYRIGHT LAW OF THE DIGITAL MILLENNIUM (DMCA).”
By approving these two laws, it was easier for citizens and entrepreneurs to build what the Internet has become today, by defining “safe ports” for experimentation in what were new technologies to date.
And if opinion leaders, and many experts are right in comparing cryptography with the Internet, then Valkenburgh urges regulators to continue to help create similar ports for Bitcoin.
On the other hand, Jerry Brito described a possible solution to the problem of taxation and cryptography.
“ALTHOUGH THE TAXES ON CAPITAL GAINS, LIKE THOSE THAT APPLY TO BITCOIN, ARE MUCH LOWER THAN THE TRADITIONAL INCOME TAXES, ARE INCREDIBLY FULL WHEN SMALL PURCHASES ARE CARRIED OUT FOR SOMETHING LIKE A COFFEE CUP.”
Brito proposes an exemption to the current tax that would treat the cryptocurrencies more as “foreign money” than as property, as we previously announced.
“ALTHOUGH IT IS NOT THE BEST OPTION AS IT WOULD LOSE THE FAVORABLE PROCESSING OF CAPITAL GAINS FOR TRANSACTIONS OF MORE THAN $ 200 BECAUSE FOREIGN CURRENCY GAINS WOULD GENERALLY BE TAXED AS ORDINARY INCOME, IT WOULD HAVE THE DERIVED EFFECT OF PRESSING FOREIGN GOVERNMENTS THAT RECOGNIZE BITCOIN AS A LEGAL COURSE, IF THE UNITED STATES ARE THE FIRST TO MOVE THIS PIECE ON THE BOARD OF THE CRYPT GAME.”
In addition to this, currency transactions, provided they are less than $ 200, do not need to be reported to the IRS.
In the context of recent Starbucks news, this seems to be an ideal situation to encourage daily cryptographic transactions, at least for amounts under $ 200.
It is true that the incorporation of a great brand like Starbucks into the cryptocurrency industry and Blockchain technology is very exciting, but it is also true that it will have little real importance until members of Congress develop tax adjustments created especially for cryptocurrencies.