Starbucks wants customers to buy coffee with Bitcoin - taxes disagree
At the end of 2018, Starbucks signed a deal with Bakkt which enabled Starbucks to accept Bitcoin in exchange for coffee with a direct point of purchase transaction through Bakkt - which means that Starbucks itself would never hold onto Bitcoin and that it would be exchanged on the spot into USD. Cryptocurrency enthusiasts were over the moon at this giant step towards Bitcoin's mainstream adoption.
US tax systems are stepping in the way and making it incredibly difficult to carry out Starbucks' dream of playing a “pivotal role in developing practical, trusted and regulated applications for consumers” to pay for coffee with Bitcoin.
The Internal Revenue Services (IRS) in the US regards cryptocurrencies as property which means it will be taxed as a capital asset and this makes it difficult to buy and sell on the spot when trading Bitcoin for goods and services. Bitcoin being observed as property will trigger capital gains each and every time transactions are made. In short, accepting Bitcoin for coffee will most likely turn into a bookkeeping nightmare.
This hasn't prevented Starbucks from moving forward with their vision and they have already teamed up with Bakkt and intends to move forward with this movement. The Seattle-based company has every intention of spot trading Bitcoin through Bakkt.
The tax laws become particularly tricky and form many hurdles because the market value of the asset needs to be compared to the of the asset at the time of taxation when a capital asset exchange occurs. The issue with Bitcoin is how volatile and unpredictable its value is which can result in vastly different figures.
Customers may be in for a nice sum of money when they complete their tax return and receive money back if Bitcoin reduces in value between the time of taxation and the market value price. However, the opposite is true if Bitcoin rises and customers may be eligible to pay higher tax rates.
The outcome of this issue is unclear, however, Starbucks does not appear to be putting a stop to their deal with Bakkt and certain Starbucks branches in the US still plan to allow people to purchase coffee with Bitcoin.