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With Bakkt due to launch sometime later in 2019, its partnership with Starbucks means that customers will soon be able to trade Bitcoin (BTC) for a cup of coffee. Analysts from crypto think tank CoinCenter are pointing out that this could lead to some difficulties when it comes to filling out tax returns.
Starbucks is integrating a new software solution in its stores that will directly convert BTC into fiat currency. This will allow customers to make purchases with their BTC without Starbucks having to handle the crypto itself.
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However, the fact that the customers are trading their crypto assets for goods means that they may have to make a record of all these transactions for tax purposes. Every purchase may need to be accounted for, and different tax deductions could be due depending on the fluctuating prices of BTC over time.
"If you were to use Bitcoin to buy coffee, it is technically feasible, but it would be extremely burdensome for tax purposes," said James Foust, senior research fellow at Coin Center (as reported by Market Watch). "You’d need to work out the fair-market value (of BTC) at the time (of a coffee purchase) versus the fair-market value (at tax-filing time), and you’d need to itemize the gains or losses. If you realized 40 cents on the gain, you’d need to pay a few pennies."
CoinCenter has suggested a new exemption for small gains as a solution to this potentially hugely complex tax situation. Some observers on Twitter are suggesting that the fact that transactions involved are so small means that it is unlikely most Starbucks customers will actually need to declare all their purchases.
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 IRS is not coming after people for not reporting gains on a coffee. They don't care that much. Also this assumes there are gains in the first place. With price stability any gains from buy-to-sell for coffee will be negligible anyway.
— Blingethy (@wakacocka) March 6, 2019
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