Accounting and tax if you accept Bitcoin payments in your online store
For many online merchants, legal and tax aspects still present a certain hurdle when accepting Bitcoin payments. One of the main reasons is the tax treatment of Bitcoin and the question of how Bitcoin payments should be recorded in the accounts.
In this article we would like to explain to you:
- How you can record Bitcoin payments in your online store in your accounting.
- How you can prove receipt of the Bitcoin received in your Bitcoin wallet.
- How you can document all Bitcoin transactions with the help of Coinsnap.
- How you can use Coinsnap to download all transactions as a CSV file for further processing in other systems.
- How you can additionally process your Bitcoin transactions with the help of Cointracking.
Order in the online store
A customer orders a product in your online store for €100, for example, and the store system creates an invoice for this order. This invoice is issued in the currency of your country, i.e. in euros in Europe, with VAT shown and all legal and tax information required for issuing an invoice.
Payment in the online store
The customer is asked to pay the invoice. It does not matter whether the payment is made by credit card, PayPal or Bitcoin.
After successful payment, the invoice is marked as successfully paid by the store system and the store operator can start shipping the ordered goods.
Crediting of the Bitcoin received
If the customer has paid by credit card or PayPal, the merchant receives a statement of all transactions from their payment service provider and a credit of the sales to their bank account.
With Bitcoin, as a merchant you have the option of receiving the credit to your bank account or, if you prefer to keep the Bitcoin, to your Bitcoin wallet.
Bitcoin to your own bank account
If you would like to have your Bitcoin turnover paid out to your bank account, activate the payout to your bank account via the Swiss Bitcoin broker DFX in the Coinsnap backend.
The incoming Bitcoin is then automatically forwarded to DFX and sold there. The equivalent value is transferred directly to your bank account so that each invoice can be clearly assigned and documented to the corresponding incoming payment.
Bitcoin on your own Bitcoin wallet
However, most merchants who accept Bitcoin payments prefer to keep the Bitcoin they receive. Be it privately or within the company.
It is advisable to use separate wallets in order to clearly separate the Bitcoin received from the private Bitcoin.
Coinsnap requires a Bitcoin wallet with a Lightning address to which the Bitcoin is credited, such as the Strike Wallet, the Wallet of Satoshi or the Blink Wallet.
With the Strike Wallet, you can have a private wallet and also a business wallet for your company. If you already use one of the above wallets privately, you must use a different wallet for your company.
A Bitcoin Lightning Wallet is suitable for receiving Bitcoin payments, but not for the long-term storage of Bitcoin. It must be stored on a secure hardware wallet such as Bitbox02, Ledger or Trezor.
You can create different wallets on a hardware wallet and thus create a clean separation between your private Bitcoin and your company’s Bitcoin.
Then transfer your Bitcoin balance from the Lightning Wallet to the wallet on your hardware wallet.
The Bitcoin address of your hardware wallet is publicly visible and you can document how many Bitcoin your company currently owns.
Documentation of the “Bitcoin purchase”
If a customer pays you with Bitcoin, it is theoretically as if you were buying Bitcoin from your customer.
The price at which your company received the Bitcoin should now be documented.
If a customer buys a product from you for e.g. €100 and the Bitcoin price at the time of purchase is e.g. €100,000, you will receive 0.001 Bitcoin (BTC) or 100,000 Satoshi (Sats).
This information on how much Bitcoin you have received and at what rate is displayed in detail for each individual transaction in the Coinsnap Dashboard.
Including assignment to your customer and the corresponding order in your online store. You can also download this data as a CSV file to transfer it to other applications.
You can also import this data into the Cointracking software solution and then receive a corresponding evaluation for your accounting department or your tax advisor.
Buy Bitcoin privately from your company
Whether the Bitcoin received remains in the company or is sold immediately to a Bitcoin broker or to yourself privately depends on your personal preferences.
In the beginning, Bitcoin sales will probably not be so high that the sale of Bitcoin is absolutely necessary to cover the company’s running costs.
Nevertheless, there may be reasons not to hold Bitcoin in the company. Perhaps you have a fellow shareholder who is not convinced of the advantages of Bitcoin as an asset due to its volatility, but appreciates the benefits of Bitcoin as a payment method.
Instead of buying Bitcoin privately on a Bitcoin exchange, you can also buy Bitcoin from your own company.
The time at which you buy back the Bitcoin from your company and the respective Bitcoin price may play a role here.
Perhaps you can conclude a contract with your company to buy back the Bitcoin you receive immediately at the same Bitcoin rate.
Payment for the Bitcoin purchased by the company can be made by bank transfer. To do this, you transfer the purchase amount from your private account to the business account.
Alternatively, the payment is posted as a private withdrawal.
However, you should definitely consult your tax advisor here, as it depends on the individual situation of each person.
Summary
Uncertain tax and accounting issues are still preventing many online merchants from accepting Bitcoin payments.
As with every purchase transaction, the accounting department wants to know which invoices have been paid and where the payment has been received and how much is in the account or, in the case of Bitcoin, in the wallet.
With the help of Bitcoin payment processing via Coinsnap, this documentation and obligation to provide proof can be fulfilled.
Every Bitcoin payment is booked at the current Bitcoin exchange rate. Each Bitcoin transaction in the wallet is documented individually, similar to a bank statement.
These transactions can be exported and imported and used for other applications.
As with an account balance, the stock of Bitcoin is precisely recorded and can be viewed and checked by anyone via the blockchain.
