Avalara Inc. has launched a Bitcoin module for its AvaTax compliance engine to help merchants who accept Bitcoin manage their taxes. 

This offering comes several months after the U.S. Internal Revenue Service announced it would treat Bitcoin as property for tax purposes, subject to capital gain and loss rules.

"Avalara is believed to be the first and only service provider to support the calculation and accounting of transactional tax for bitcoin transactions, allowing retailers, digital wallets and other digital currency processors to calculate sales tax and [value-added tax] for bitcoin transactions in real time," says the company in a May 22 press release.

The number of merchants accepting Bitcoin in the U.S. and around the world has significantly increased as more government regulators clarify their views on digital currency. BloomNation, a marketplace for connecting customers with local florists, and Cory Vines, an online apparel retailer, are two merchants that recently began accepting the digital currency to expand their reach.

And payment technologies such as Toshiba's VisualTouch software and RevelSystem's iPad point of sale system are adding Bitcoin acceptance.

The IRS ruling put U.S. regulations in line with those of several other countries, including Sweden, Norway, Finland, Canada and Australia.

As a global company, Avalara will be able to help merchants in multiple regions with different tax rules. "The ability to process VAT 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," says Webb Stevens, head of product at Avalara, in the release.

Alternative digital currencies are also garnering some attention as payment methods. GoCoin, a cryptocurrency payment gateway, allows merchants such as EGifter, a mobile gift card provider, to accept Litecoin and Dogecoin as well.

Avalara does not manage tax in alternative digital currencies like these, but it's an area the company could expand into. “Avalara intends to innovate in the handling of cryptocurrencies, just as we have in handling tax and compliance issues for virtual goods, digital services and highly mobile location-based transactions," says Stevens. 

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