What’s the deal with taxing lightning payments?

Just checked out this video: BTC007: Bitcoin Disrupting Payment Clearing Houses w/ Jack Mallers In this interview, Jack Mallers dives into the lightning network and its details, but I wanna highlight one point: He mentions that with the lightning network, you can pay at any store using bitcoin directly if they have it set up. If not, you can instantly swap it for cash through Visa. However, there's a catch. Due to new regulations in the US, stores that pull in more than $3k a day will now have to implement KYC too. Jack hinted that his company has a solution in mind but hasn't spilled the beans yet. Now, if you grab a coffee and pay with Visa after converting your bitcoin to dollars, you'll potentially get hit with capital gains tax. For example, if you bought bitcoin at $30k and it’s at $40k when you pay, the IRS could tax you on that gain according to how much you spent. Paying with bitcoin could lead to the same tax implications. Even if you don’t actually turn it into fiat, it seems the state will still expect you to report it like you did. This could get really complicated if they expect you to pay capital gains for every tiny transaction. I looked around and couldn’t find any discussions on this yet. If you shop at a small place making less than $3k a day, you might keep a low profile for now, but it looks like paying at big chains like Starbucks or McDonald's won’t be the same.

it seems that the tax regulations for each country are different. because what I know in my country, you know Bali? there was a coffee shop that used the payment feature using bitcoin, but now it's still open or not, I don't know. what is clear, there is no tax deduction at all. customers who buy there only pay as usual as fiat ..

Yes, well, in this case, Jack Mallers was referring to the United States. Anyway, I think the tendency of all governments around the world is to want to control all payments, absolutely all of them, and to charge taxes for it. Now maybe it's a little complicated yet but it's an information technology issue.

the IRS doesn't mind a big mess. the more complicated these transactions are, the more likely you are to violate the tax code. then they collect fines and penalties. if you go by the book, the tax implications are a massive deterrent from spending crypto. absolutely! it's gonna suck once KYC becomes more integrated. i'm praying the $3k threshold for KYC on domestic transactions is upheld because they're proposing to lower the international threshold to $250. https://www.fincen.gov/news/news-releases/agencies-invite-comment-proposed-rule-under-bank-secrecy-act that's insanely low and i reckon it's partially intended to make this sorta tax avoidance difficult. with the visa conversion method, the sending bank has all your KYC information. that seems like it should be sufficient, but what do i know?

I am not an expert, but it seems to me it would be reasonable to claim that all transactions on a Lightning channel are not realized until the channel is closed. That is when you find out the actual amount transacted, plus how else do you account for transactions in which you are just an intermediary? If that is the case, then Lightning makes taxes on cryptocurrency transactions much simpler.

If you're updating channel state in exchange for money or goods and services, that's a difficult legal argument to make. Gains and losses are obviously being realized when those state changes occur. I suspect that the IRS views value held on the Lightning Network as convertible virtual currency, just the same as bitcoins -- and subject to the same tax rules.