#asknostr

I have posted a similar question in the past with little to no engagement. Would like to follow others sharing their experience as well. I considered accepting but given everything other than holding is a taxable event, it’s tough to keep books. We sell lighting/fans/controls, and a significant portion of sales is COGS. Having to convert a large portion back to fiat to pay vendors adds additional complexity and triggers a tax event and additional bookkeeping (recording cap gains/loss for ex). This seems much easier to do in a service based business, especially for a soloprenuer, where you might prefer to keep and don’t need to convert into fiat. I’m aware of companies like bitpay which handle this conversion for you but I prefer not to deal with yet another merchant processor, seems to kind of defeat the purpose anyway. Hopefully one day tax laws change. If someone thinks I’m mistaken, please let me know. Would be great to be proven wrong in this case, ha! BTW, saw your repost via @Chriso🇺🇸🇦🇺🦘⚡️

I have ideas for from an accounting side of things but once you’re a scale, wouldn’t probably be feasible and would need to be automated in some way. What questions do you have?

Really just wanted to know how others handle the payments and backend part of the process. By backend I mean converting back to fiat and if there was any way to possibly avoid taxable events, which I think is non-existent.

If I was to implement Bitcoin into a business I would do the following: Create an account (similar to the checking account) in my accounting software so when I sold an item for bitcoin, I’d record the selling price and corresponding revenue. When entering the sale, I’d notate #sats received (date will be automatically done as long as recording entries real time or daily). This will : 1- recognize the revenue of selling the item 2-give you the cost basis of the sats and the date you received them. Then when you need to convert to fiat, you’d reduce the bitcoin account based on the #sats sold, recognize a gain or loss on the conversion, and receive the cash into you’re bank account. In this scenario, all income has been reported and you have cost basis documented. If you could find vendors that take Bitcoin, you could buy inventory with the Bitcoin and achieve the full circular economy that we hope to one day see. In that scenario, you’d recognize the cost of the inventory or other expense item and would have a gain or loss on that conversion as well. If you’re not running a computerized accounting software package, this can be done with a pen and paper. My guess is no one would accept Bitcoin if they didn’t run their company books on a computer system of some sort. If I was doing lots of small transactions, you might do a bulk entry (total sats and total fiat sold Value) at the end of the day vs entering each item. In that scenario I’d be looking to implement a BTCPayserver instance to use in collecting activity. (For instance a coffee shop or snowcone stand) My thoughts would be all bitcoin transactions will be slow for anyone in the beginning and scale up as interest increased. Is this anything close to what you’re asking? If not, and me specific questions and I’ll answer. I’ve given this a lot of thought but it’s the first time I’ve put it down for others to read. #bitcoinbusiness

Speaking my language here lol. I understand the recording of the transactions. The bulk recording you mention is similar to how some shopping cart software does, they bundle transactions into one invoice you import into Quickbooks or equivalent. My thing is having to also worry about taxable events and capital gain/loss in general. For ex: a $1,000 sale could have a COGS expense of $800. The short-term volatility of BTC could be either beneficial if price goes up or a loss if price goes down. Let’s say it takes a few hours or a day and BTC is down 5%. I’d have to sell more than $800 worth of BTC I collected into fiat now to cover vendor COGS (less profit for me). In theory I would have a capital loss but capital gains or loses can’t offset ordinary business income, so it would only apply to future capital gains from BTC or other assets/investments. Anyway, I think for most small businesses this is added work. Like I mentioned, bitpay does make this easier as they handle it all for you but defeats the point of removing middle-men. At the moment accepting BTC as payment seems great for soloprenuer service-based businesses with little to no COGS. They might keep all the BTC and pay ordinary income taxes with fiat income from other sales. Does that make sense or did I complicate it?

No I understand what you’re saying. I guess I’m approaching it from the idea that it’s more than likely a novelty in the beginning, you won’t have a lot of sales, and the inventory costs would be covered by the gross profit of the other items. This would allow the store owner the ability to “bank” the sats for future use therefore converting cash to the “harder” asset of sats. It certainly easier for a service business to get to a bitcoin standard since most service business revenue is “self generated “ and therefore has very little cost. But the idea still stands, the collection of bitcoin for a good or service would generate ordinary income , creates a basis for a future sale, and the future sale would generate a capital gains tax or benefit based on the holding period.

Yes from that angle I would agree, just to help the network. I would consider it for sure. In my case, we provide lighting design services (layouts, consultations, photometrics, heatmaps, etc.) and accepting for these services is a no brainer. A few months ago I posted if anyone was interested but had no takers. Could try again in the future, would be a great experience! The tax laws have to change for it to truly become a medium of exchange. At the moment, if the goal is to accumulate BTC it’s probably easier to just use some fiat profits and buy BTC directly and hold on the balance sheet. A tiny $MSTR if you will.

I think the real challenge is to get people to spend it. I can see Lightning payments replacing cc’s. From the stand point of just buying vs selling a good or service, i would argue that it’s marginally cheaper than buying since you’re getting the gross profit as a markup. For instance, I’m swapping a $50 (cost) lamp that is sold for $100 in Bitcoin. Yes there’s a tax cost to account for but it should still be better if you can get people to spend their Bitcoin. Good conversations, maybe someone reads and gets inspired. 🤝

That’s an excellent answer!

I’ve heard @Peter McCormack mention about the different businesses he owns and manages Bitcoin for all of them. Football club, bar, etc. #Bitcoin comes in, some employees get paid in #BTC, and I *think* some venders of his also accept Bitcoin. @PUBKEY is a dive bar in New York City that accepts BTC.

The problem with any transaction (on-chain, lightning, or other layers) is we go back to the same taxable event. I buy a cup of coffee with lightning or liquid and it’s a taxable event. Maybe a bill gets passed waiving transactions less than $10K (or w/e is reasonable) per year from being taxed. That would be insanely positive. Ideally no limits but not holding my breath. What would be cool, and maybe you know if this exists or not, is having a lightning wallet that smash buys BTC/lightning at the same moment you make the purchase. Only downside is you need a bank account to fund the purchase with fiat unless there’s some other way to do it. I thought about this a few years ago. Vendor still has the same issue though. For example, I walk into a coffee shop and order a cold brew and we scan the lightning invoice for 8,000 sats (approx $5). The lightning wallet immediately buys the equivalent amount of lightning/BTC resulting in no taxable event for the user since there was no cap gain or loss (bought and sold for the same price). I’m ignoring fees but maybe the wallet can charge a flat subscription fee instead of a service charge/fee per transaction to truly be a no tax event. Are you a developer? Let’s work on this! Haha

I’m so grateful for this thread, thanks to you both for taking the time to articulate these ideas. I’m in agreement with whichever one of you suggested that BTC payments would be slow to start. I am currently running a BTCpay server and a lightning node. I am just marking BTC payments as cash, effectively buying KYC free sats. I think? I have not had an accountant review any of this. BTC payments so far are a minuscule portion of the business so I’m willing to face the music for any mistakes I make now. I have an account called “Cash on Hand” and I deposit all cash to that account. If I don’t wind up moving it to a real bank account before the end of the year then the real cash is never actually there anymore, because I spent it, so I settle that balance to another account called Owner’s Pay. I should also mention that I have two businesses operating under the same umbrella, one is service and the other is retail sales. The service business retails parts that are installed, and is probably about 65:35 service:COGS. The retail outfit is new and is where I’m experimenting with the BTCpay server. Bigger picture, I’m trying to figure out how to sweep profits into BTC and what kind of ratio of operating capital to keep in fiat to avoid those taxable events of selling or spending the BTC until laws become more sensible. I have levered some BTC a couple of times for operating capital when needed to avoid the taxable events.

I’ve heard him mention that too, but he never goes too deep. I’m in a different jurisdiction so I don’t know how much of what he’s doing would be relevant anyway, but I’m definitely interested in all discussion on this topic. I believe merchants will ultimately drive adoption, legally or not

Strike has the ability to do exactly this. Basically you’d have fiat funds in your wallet and pay lightning invoices with it. I’ve never done it that way though. Jack Mallers talks about it in some videos to combat this exact problem.

Treating BTC as cash is fine but I would consider creating an account for BTC in your accounting software since it could become a problem when you reconcile. It’s a solvable problem for sure, just no one is discussing best practices yet. Crazy to think this is a 15-year old asset and it still seems early in this aspect. You do BTCpayserver POS or online?

Oh man, wasn’t aware of this. Could be a game changer if that’s how it works. It makes sense if you have fiat in the wallet. I hope @jack mallers can confirm? If it truly avoids the tax event adoption I would for sure choose to pay with lightning just to support the network. Honestly, even a little easier. Though CC’s do have the buyer protection feature in case vendor is a jerk… can’t 1-800-Bitcoin for a dispute lol

POS. I actually do capture the BTC payments at the register as Bitcoin but when that data gets pushed to the bookkeeping backend I deposit it to “Cash on Hand”. I’m using Lightspeed POS and I need to build a middleware to automate the payment workflow between Lightspeed and BTCpay. But I’m not really a developer so I’ve been avoiding that and just added a payment method called bitcoin in the POS, create the sale, and then jump to a browser where the BTCpay server page is and enter the amount. Once it goes through I jump back to Lightspeed and hit bitcoin as the payment method and it prints the receipt. It’s more or less the same as accepting a check, which I also have as a payment method in Lightspeed.

I think that could work, but I’m definitely no CPA lol. I might have to message you in the future to see how your process is going. I setup BTCpayserver but haven’t yet pulled the trigger. Our payment flow is different, we don’t really do retail. Most of what we do is high-dollar and estimates could take days, weeks, even years by the time we consult/quote/invoice since we’re in the construction

Hit enter too soon! *since we’re in the construction industry (lighting mainly). We have projects where we quote and it could take a year even two for client to finally pull the trigger. In between there are likely several revisions. Since it’s higher dollar it’s rare to be CC. Usually check or wire transfer. Smaller orders and online sites could be interesting with lightning and BTCpayserver but then you have to properly manage the channels and whatnot. Early-ish days still in my opinion.

From what I recall from the video @jack mallers published, the idea is when you use fiat and pay via lightning, the @strike app makes the purchase and simultaneously sends the payment via lightning so essentially your buying and selling at the same time. I’m sure he or someone at Strike will confirm this for us.

The service side of my business is that way, so I can relate. To add a layer of complexity, I deal with about 20% international customers who I think I can make a great case to for using bitcoin. They struggle with time zones, bank hours, exchange rates, fraud alerts, etc. I’m going to have new problems once I start to convince a few of them to pay in bitcoin instead of fiat. This is closer than most people think too. At our last meetup, someone demoed using Strike payment rails to spend fiat out of their bank account to seamlessly send bitcoin to me with a zero balance in their actual strike account. No taxable event there. Strike does this in something like 30 countries already. It’s fully KYC’d but it solves a real problem

I agree, we’re super early. That’s why I want to talk to others who are trying to run real businesses and figure this out. We can identify the problems so that developers can start building the tools

Yea that’s exactly, what I was thinking. If that’s how it works, they should definitely make a bigger deal about it. Vendors still have the same issue we discussed previously though, I wonder if strike allows businesses to accept in a similar fashion as bitpay (choose how much to allocate into fiat/btc from a lightning or on-chain payment)?

That’s life. Solve one set of problems to find a new set of problems… It’s great that strike does that, I’m surprised I wasn’t aware of it!

I recently learned about a Strike plugin for @BTCPay Server . From what I read, it will automatically convert the BTC to cash when you use it. I could be wrong on that but that’s the feeling I got. If that’s the case, I don’t really see much use for it here in the USA but maybe it is beneficial in other countries. I think for anything of real significance, BTCPayserver is the way to go. I think Square also has integration with @ZEUS but I think small businesses could start accepting bitcoin like we have discussed and then as it scales, move to other solutions to make it more efficient/easier. But unless someone just wants to understand and use something like BTCpayserver, no one would start with it day 1. I’ve been playing with BTCPayserver for a good while and do a few things here and there to get others to interact with it here on NOSTR, as well as it helps me learn. Someone can take it and open a store front with it in an hour or two if they wanted. You should check it out if you’ve never played around with it.

gr8! nice 2 c