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 VAT tax for bitcoin transactions in real-time.

"Avalara has a history of researching and addressing sticky compliance issues right from the get-go," said Webb Stevens, Avalara's Head of Product. "Whether it's preparing merchants to quickly address the litany of tax holidays or helping businesses run entirely on bitcoin, Avalara works hard to ensure customers have real solutions, real fast. 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."

Bitcoin has been growing in popularity over the past few months, and point of sale applications and other key payment technologies are also evolving to handle bitcoin transactions. Bitcoin has generated growing interest among online businesses in part because of its potential to enable frictionless transactions with customers anywhere in the world. Moreover, merchants are attracted to the promise to reduce or eliminate currency conversion fees, credit card transaction fees and outright fraud.

That said, if a merchant conducts business using bitcoin in the United States or Europe they must calculate, collect and file sales tax of some sort. "With many online businesses processing millions of transactions per day, it's critical that they get accurate and compliant VAT rates for every transaction," said Stevens. "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."