Can bitcoins be taxed?
<p>Let's say I give someone a bitcoin and then they give me a phone. Could the IRS — or a similar organization, if outside the U.S. — say I bougth the phone and take a chunk of the bitcoins? </p>

<p>What if they set up an inventory of phones, and gave a phone to whomever gave him a bitcoin? Would the IRS get involved?</p>

<p>The United State doesn't have a national sales or value added tax, so the IRS would only care about the phone sale insofar as it might represent income to the seller. Insofar as it's income to the seller, it doesn't matter whether the transaction is cash, bitcoin or barter, the seller is supposed to account for it in their income taxes. If you are suggesting that bitcoin sales could be hidden, well, folks have been hiding cash transactions since taxes were invented. Worst case, the IRS discovers that the seller's spending is wildly out of line with their stated income and they begin a criminal investigation.</p>

<p>It isn't clear what kind of tax you are concerned about. The IRS would collect income taxes in connection with this transaction. </p>

<p>The seller of the phone (if a U.S. citizen or resident or conducting business in the U.S.) has sales revenue equal to the fair market value of the bitcoins in U.S. dollars, and if revenue exceeds expenses, there is a taxable profit. The buyer of the phone (if a U.S. citizen or resident or conducting the purchase in the U.S.) has a capital gain or loss based upon the fair market value of the bitcoins when acquired reduced by the fair market value of the bitcoins when the phone is purchased with them.</p>

<p>If the transactions exceeded $600, the transaction would have to be reported on the 1099 form for barter transactions.</p>

united-states internet tax-law cryptocurrency