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Ask HN: Tax Implications of Ethereum Smart Contracts?

5 points by whoisjohnkid ↗ HN
Hey Guys,

I’m thinking of building a web based app that uses smart contracts. If my app takes a percentage of a given transaction how does the IRS view that? Is it only taxed if I convert that to FIAT?

Hoping some of you have experience with this.

I also wonder if a given app utilizes smart contracts if that is considered a money transmitter business.

4 comments

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charlesdm
The taxable value will likely accrue at dollar value at the time you receive the fee.
whoisjohnkid
Ahh I see thanks Charles! Yeah I’m reading up all I can about this subject atm. Curious to see if any fellow HNers have been down this path.
charlesdm
I'm not American, but the thing with taxes is (especially if things are undefined / unclear in the law) that you need to go with the most straight forward solution so the tax authority can't call your "solution" unreasonable.

If you earn $100, you'll pay corporate tax on $100. If you earn 1 ETH on the 1st of January, and the value of 1 ETH at that point is $500, then you should value that ETH at $500 and pay the tax on the corresponding dollar value (in this case $500). You're not going to run into any problems there, as it is pretty much the most reasonable approach.

whoisjohnkid
Thanks for the input. Yeah I suspect it may be this way.