The rise in popularity of the crypto-currency bitcoin has been a boon for many, but has carried with it a number of issues. Setting aside the public’s association of bitcoin with illegal activity, issues with theft and bankruptcy and ongoing debates about bitcoin regulation, there is also the issue of the taxability of the virtual currency.
This spring, the Internal Revenue Service declared that bitcoins should be treated as property for income tax purposes, which caused a bit of a headache for individuals who transact in large amounts of the currency. But, for merchants who accept bitcoins, there are tax issues as well. For example, how does one comply with sales tax regulations?