A few months age the SEC has regulated bitcoin as a commodity. Quick googling tells me than commodity wages are exempt from taxes and it looks like if a company can fully operate in bitcoin particularly, it has to pay no taxes according to the current law.

Does it really woke like this? How is Bitcoin operation taxable as a commodity by the current US law?

  • 4
    Set aside the bitcoin mythology for a moment. If you were paid in groceries you'd have taxable income equal to the market value of the groceries. If you were paid in widgets you'd have taxable income equal to the market value of the widgets. Same thing for bitcoin; there's no magic here. Sep 23 at 12:56
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    Income is taxable. It doesn't matter what currency, or what form of equities, or what kind of property the income is in. You couldn't dodge taxes by being paid in yen, or equities, or stone/wood/sheep/brick. Bitcoin is just another kind of property.
    – keshlam
    Sep 23 at 15:42

1 Answer 1


Often times, people "operating in bitcoin" are criminals. The whole point of Bitcoin is to evade taxes and detection while committing financial crimes.

You're describing one of these crimes. You're making a frivolous claim ("commodity wages are exempt from taxes"), and then chain another frivolous claim ("a company operating in bitcoin ... has to pay no taxes") to draw a conclusion that bitcoin is not taxable.

Clearly, that conclusion is false.

As with many other frivolous tax evasion schemes, it's based on misunderstanding and/or misrepresentation of the tax law.

What the tax law does say is that if an employee is given products of their labor instead of cash (for their use) - that is not subject to payroll taxes (still subject to income tax though). However, the IRS is very clear: if the substance of the exchange is cash payment then that doesn't hold. You can't just "get paid" in bitcoin instead of US dollars and miraculously not pay any taxes. See the IRS Publication 51:

Noncash wages (including commodity wages).

Noncash wages include food, lodging, clothing, transportation passes, farm products, or other goods or commodities. Noncash wages paid to farmworkers, including commodity wages, aren't subject to social security taxes, Medicare taxes, or federal income tax withholding. However, you and your employee can agree to have federal income tax withheld on noncash wages.

Noncash wages, including commodity wages, are treated as cash wages if the substance of the transaction is a cash payment. Noncash wages treated as cash wages are subject to social security taxes, Medicare taxes, and federal income tax withholding.

Report the value of noncash wages in box 1 of Form W-2 together with cash wages. Noncash wages for farmwork are subject to federal income tax unless a specific exclusion applies. Don't show noncash wages in box 3 or 5 of Form W-2 (unless the substance of the transaction is a cash payment and they’re being treated as cash wages).

Commodity payments are generally used in agriculture where the employees also get the farm products and/or accommodations as part of their compensation. I don't see how that would be applicable to bitcoin - are you eating bitcoin for breakfast? Sleeping in your bitcoin?

  • if you're working in company that focuses on building bitcoin farms and mining bitcoin, it is the product of your work. I could make an argument if you are a producer of dedicated mining hardware, bitcoin is also a product of your work
    – fixerlt
    Sep 22 at 22:10
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    Why would that make you exempt from taxes on the profit from your bitcoin?
    – D Stanley
    Sep 22 at 22:11
  • I mean, u're working on a mining farm
    – fixerlt
    Sep 22 at 22:21
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    Even if a company paid its employees "wages" in bitcoin, it would be "tread as cash wages" as mentioned in the answer.
    – D Stanley
    Sep 22 at 22:27
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    @fixerlt the point is not that it is "product of your work", but that it is something that you're using. Farm workers eat the produce, live on the farm, drive the trucks. What are you doing with the bitcoin?
    – littleadv
    Sep 22 at 22:32

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