Digital currency Bitcoin is being tested. Probably most people don’t even know what a bitcoin is, let alone how should our government tax it? Singapore has gone a step further. CoinRepublic, a news site, reported that the Singapore government will give guidance to those merchants needing it. The advice will be for capital gains, earnings, sales tax and Bitcoin exchanges and sales.
CoinRepublic founder, David Moskowitz, says, “The guidance which IRAS laid out is rational and well thought out. As a business owner, I can clearly account for my earnings on Bitcoin trades for my clients and my own positions and pay the proper taxes.” The Singapore government considers Bitcoin to be an amount of services supplied, not money.
Further, if Bitcoins are used as a barter system, say for virtual goods/services, then no taxation will occur until the Bitcoins are turned in for real money. A Bitcoin is not money and it will be treated as a supply of services and the right to those services or Bitcoins. Therefore, the treatment of Bitcoins depends upon arrangements made in business and contracts between parties.
Overstock.com now accepts Bitcoin payment. This online retailer is the first to use Bitcoins. In the first day of accepting the digital currency, the company processed 800 orders, worth $126,000. In the first two hours alone $10,000 was spent using Bitcoins. Two consumers who have been using Bitcoins since last March and May, purchased items such as a smart phone case and a cell phone screen protector. The young male consumers seemed pleased that Overstock was offering this payment option.
Bitcoin is operated by a global computer network. Coinbase is a start-up company based in San Francisco to oversee these transactions. And just today eZanga, a Delaware business who places advertisement on the internet, opened using Bitcoins for customers and paying their sites digitally as well. The digital currency Bitcoin is being tested and getting its feet wet globally.
Who’s left out? The credit card company, wire-transfers and exchange fees for currency are avoided. Some think this will make it cheaper to travel overseas.
Customer, Matt Rush, paid for his drinks at the bar called Volstead Act in Spokane, Washington. The Bitcoin transaction was worth $24. Hayden, the bartender has been learning about Bitcoin, the digital currency for the past year. In Idaho, half a dozen companies have dove into the Bitcoin payment method.
What are the advantages? The purchases are more secure and no one can trace the name or other information about the buyer. The merchant doesn’t have to pay the 3% service fee. This may sound like the future or even something out of the past, when we bartered or traded in exchange for goods and services.
Skeptics see the problem as these coins are not managed by one bank or the government. No regulation equals volatility. The Bitcoin last January in 2013 was equal to $50, then in the fall it went as high as $1,200. Analysts predicted the bubble would burst. This past Friday the digital currency for a Bitcoin was $862.
On the upside, the recent hack of Target customers which exposed 70 million cards and personal information, could be prevented. Hayden, the bartender says this is all an experiment and, “No one really knows where this will lead.” Digital currency Bitcoin is being tested and probably seems like a cool idea for younger people having grown up in a digital world.
By Kim Troike