Avalara has today added a bitcoin module to its AvaTax compliance engine.

The company is one of the leading providers of cloud-based compliance solutions focused on sales tax and other transactional taxes.

The first and only service provider to offer bitcoin functionality in a tax compliance platform, Avalara hopes the addition of bitcoin support will allow retailers, digital currency processors and wallet services to calculate sales tax and value added tax (VAT) in real-time.

History of sticky compliance issues

Avalara senior director Webb Stevens said the company has a history of researching and addressing ‘sticky’ compliance issues from the get-go. He added:

“Whether it’s preparing merchants to quickly address the litany of sales tax holidays or helping businesses run entirely on bitcoin, Avalara works hard […] The ability to process sales tax for bitcoin transactions is one of the final, necessary steps to support bitcoin-driven business models – and the latest example of our forward-thinking approach.”

Avalara’s reasoning is simple: bitcoin has been growing in popularity for months and point-of-sale applications and other payment technologies are evolving to handle bitcoin transactions. However, compliance platforms have not been forthcoming, at least not yet.

Merchants need all the support they can get

Avalara points out that merchants are drawn to bitcoin as it has the potential to reduce or completely eliminate currency conversion fees, credit card fees and even fraud.

One of the problems faced by merchants willing to consider bitcoin is industry compliance. Regulatory ambiguity has resulted in a legal vacuum of sorts, hence many tax issues need to be addressed.

In some jurisdictions the simple act of collecting and filing sales tax or VAT can prove problematic for merchants dealing with bitcoin transactions. Stevens added:

“With many online business processing millions of transactions per day, it’s critical that they get accurate and compliant sales tax rates for every transaction.”

“Avalara intends to innovate in the handling of cryptocurrencies, just as have in handling tax and compliance issues for virtual goods, digital services and highly mobile location-based transactions.”

In essence, Avalara is trying to tap an emerging niche that didn’t even exist a few years back.

A growing number of merchants are looking into bitcoin payments and many of them need an established player to handle any tax compliance issues that may emerge down the road.

Tax Image via Shutterstock

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