Crypto users were sent into a frenzy over March 4, 2019, reports that Starbucks had earned significant equity in Bakkt and might begin accepting crypto payments. However, this could prove to be a tax nightmare for Starbucks users.
In August 2018, it was revealed that Starbucks was one of the backers behind Bakkt, a new firm dedicated to bringing crypto-friendly payment technology to institutional investors. At the time, not a lot was known about the coffee giant’s involvement in the firm, except that they were one of the backers.
Now, more information has come to light and was made known to the public on March 4, 2019, that Starbucks has acquired significant equity in Bakkt and as a result, the coffee chain might begin accepting cryptocurrency as payment for their products. This was met with an outpouring of excitement from crypto users as well as coffee lovers who were simply happy at the thought of a new form of payment. After all, many businesses such as KFC have also begun accepting crypto as a means of payment.
However, on closer inspection, there are a number of factors that could make this new development overly complex and inconvenient for Starbucks and, surprisingly, the IRS.
Paying Your Dues
The idea of paying for coffee with crypto sounds simple enough. Consumers get their product and pay as they would with fiat currency. There is one thing that makes payment with crypto significantly different than those with fiat: the tax implications.
With the current tax rules in place in the United States, all purchases made with cryptocurrency, regardless of size, must be reported to the Internal Revenue Service to determine possible gains or losses on the transaction, even if it was as simple as a beverage. Crypto tax laws are already complicated and often confusing enough, but this would add yet another layer to the issue.
Also, it must be kept in mind that Starbucks serves millions of customers each day. If even a small fraction of them were to pay in crypto, the number of increased transactions being reported to the IRS would be ridiculous at best.
The volatility of the crypto market must also be taken into consideration. If the 2018 crash has shown anything, it is that the value of a token can be halved overnight and this means that the prices of something as simple as coffee could constantly be changing.