One of the leading developers of online sales and use tax automation software has developed the first such system to support bitcoin and other virtual online currencies.
Avalara,
Inc., which offers automated sales tax systems for businesses ranging
from small ecommerce shops to major international retailers, has enabled
the new bitcoin module for its AvaTax compliance engine. This feature
will enable the calculation and accounting of sales tax for bitcoin
transactions, allowing retailers, digital wallets, and other digital
currency processors to calculate sales tax and VAT tax for bitcoin
transactions in real-time.
A digital currency created in 2009,
bitcoin is described as a "peer-to-peer" payment system that isn't
controlled by a national government, as most traditional currencies are.
This has led to some concern from investors because of perceived volatility
in the value or exchange rate of bitcoin versus other currencies, as
well as actions by some governments to consider bitcoin something other
than a currency for the purpose of tracking and taxation. The U.S.
Treasury Department, for example, recently ruled that bitcoin holdings are property when it comes to tax purposes, not currency.
This hasn't stopped many individuals and businesses around the world
from having a preference for the e-currency, including a police chief in
the U.S. who, late last year, requested that his city pay his salary in the semi-legal tender.
However, with Avalara providing a tool for businesses to accurately
track, manage and report transactions that use the virtual currency, is
bitcoin going "legit?" It at least allows legitimate, tax-paying
organizations to comply with the taxing jurisdictions in which they do
business. After all, Avalara produces sales tax, use tax and value added
tax systems used by companies around the world - systems that are used
to pay the taxes these thousands of jurisdictions need and want as the
world continues a climb out of recession.
When it comes to
Avalara, however, this doesn't mean the company is taking a monetary or
political stance, it is only trying to help businesses stay in
compliance with their tax regulations, whether they accept transactions
in U.S. Dollars, Yen, Euros or even virtual currencies like bitcoin.
“Avalara has a history of researching and addressing sticky
compliance issues right from the get-go,” said Webb Stevens, Avalara’s
Head of Product. “Whether it’s preparing merchants to quickly address
the litany of sales tax holidays or helping businesses run entirely on
bitcoin, Avalara works hard to ensure customers have real solutions,
real fast. The ability to process sales tax for Bitcoin transactions is
one of the final, necessary steps to support bitcoin-driven business
models – and the latest example of our forward-thinking approach.”
Bitcoin has been growing in popularity
over the past few months, and point of sale applications and other key
payment technologies are also evolving to handle bitcoin transactions.
Bitcoin has generated growing interest among online businesses in part
because of its potential to enable frictionless transactions with
customers anywhere in the world. Moreover, merchants are attracted to
the promise to reduce or eliminate currency conversion fees, credit card
transaction fees and outright fraud.
That said, if a merchant conducts business using bitcoin in the
United States or Europe they must calculate, collect and file sales tax
of some sort. “With many online business processing millions of
transactions per day, it’s critical that they get accurate and compliant
sales tax rates for every transaction,” said Stevens. “Avalara intends
to innovate in the handling of cryptocurrencies, just as have in
handling tax and compliance issues for virtual goods, digital services
and highly mobile location-based transactions.”
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