It was recently revealed that Starbucks has acquired a significant amount of equity from Bakkt, the much-anticipated Bitcoin trading platform which has yet to launch. The equity is in exchange for customers to be able to use Bitcoin for purchases in Starbucks’ U.S. stores.
While Starbucks isn’t technically an investor in the Bakkt equity, reports indicate that they have accepted the equity and have agreed to become Bakkt’s first merchant.
The use of Bitcoin will initially only be available to customers in North America sometime later this year, but the cryptocurrency transactions should eventually spread to other countries where Starbucks is located.
Many in the cryptocurrency community have been eagerly looking forward to the launch of Bakkt because it’s believed that by providing a suitable environment for investors to confidently diversify into cryptocurrency, Bakkt has the potential to promote mass adoption of Bitcoin. Several delays due to inadequate preparation and readiness has caused a few grumbles, but for the most part the community is still rather excited for the pending launch.
This collaboration news is likely to stoke those fires again as it’s a great sub-intro to the trading platform and will ensure that at the time of launch there are users available on the ground, which should significantly increase the chances of it being accepted and becoming popular.
However, the collaboration has some crypto-enthusiasts hitting social media and news outlets with words of warning. Especially when it comes to one area that’s sure to catch the attention of many – taxes.
The IRS made it clear in their 2014 guidance of A-1:, “For federal tax purposes, virtual currency is treated as property. General tax principals applicable to property transactions apply to transactions using virtual currency.”
Basically, with the current rules in place, this means that the swap of one property for another must be reported to the IRS and you’ll be required to calculate capital gains on every cup of coffee you purchase. When it’s time to file your taxes, you’d need to itemizes gains and losses and you’ll have to determine the current fair-market value of Bitcoin versus the fair-market value at the time of your Starbucks purchase and if you saw a gain, you’ll actually owe taxes.
In regards to using Bitcoin to purchase coffee, a Senior Researcher at Coin Center, James Foust, said “it’s technically feasible, but it would be extremely burdensome for tax purposes.” Coin Center is a nonprofit research and advocacy center focused on decentralized technology and cryptocurrency.
Coin Center has also stated that to resolve this issue, small filing changes could be implemented such as designating cryptocurrencies as foreign currency. However, this solution has its own inherent restrictions, including transactions over $200 losing capital-gains treatment.
However, tax issues aside, it’s a fair bet that Starbucks is just the first partner and that other companies will soon follow suit in joining Bakkt, if there’s not already pending announcements.