Crypto Accounting Policy — Research Relay LLC¶

Prepared: February 2026 Entity: Research Relay LLC (California single-member LLC) Business: RUO peptide / research chemical e-commerce Crypto exposure: BTC received as payment via BTCPay Server (Lightning + on-chain)

Disclaimer: This document is for operational planning only. It is not tax or legal advice. All tax positions should be confirmed with a qualified CPA before implementation. IRS rules for digital assets are evolving rapidly — review annually.

1. BTC Revenue Recognition¶

1.1 When Is BTC Payment Recognized as Revenue?¶

Rule: Revenue is recognized at the time the BTC payment is received (i.e., when the business gains "dominion and control" over the cryptocurrency).

Per IRS Notice 2014-21 and subsequent guidance, cryptocurrency is treated as property, not currency. When a business receives BTC as payment for goods or services:

The transaction is recorded as ordinary business income at the fair market value (FMV) of the BTC in USD at the time of receipt
This FMV becomes the cost basis of the BTC received
Revenue recognition occurs at the moment the payment is confirmed — not at the later point when BTC is converted to USD

For BTCPay Server specifically: - On-chain payments: Revenue recognized when the transaction reaches sufficient confirmations (typically 1–3 blocks, per BTCPay Server settings). Use the BTC/USD spot price at the time of invoice payment confirmation. - Lightning payments: Revenue recognized immediately upon payment settlement. Use the BTC/USD spot price at the time of settlement.

1.2 Fair Market Value Determination¶

Primary source: Use a major exchange's spot price at the time of payment confirmation. Acceptable sources include:

Source	Method	Notes
CoinGecko	API spot price	Free API, widely accepted
Coinbase	Exchange rate	Major US-regulated exchange
Kraken	Exchange rate	Major US-regulated exchange
CoinMarketCap	Aggregated price	Aggregates across exchanges

Policy: Choose one exchange/source and use it consistently for all transactions throughout the tax year. Document the choice. Do not cherry-pick the most favorable rate per transaction.

Recommended approach: Use the exchange rate from the crypto accounting tool (Koinly or CoinTracker), which pulls pricing automatically and maintains an audit trail.

1.3 Recording the Transaction¶

For each BTC payment received, record:

Date and time of payment confirmation (UTC)
Amount of BTC received (to 8 decimal places)
USD fair market value at time of receipt
Invoice/order number linking to the sale
Exchange rate source used
Transaction ID (on-chain txid or Lightning payment hash)

Journal entry at time of BTC receipt (example):

Dr. BTC Wallet (Asset 1020)          $150.00
    Cr. Product Sales — Peptides (Revenue 4000)   $142.00
    Cr. Shipping Revenue (Revenue 4020)            $8.00

Journal entry when BTC is converted to USD (example — BTC appreciated):

Dr. Business Checking (Asset 1000)   $155.00
    Cr. BTC Wallet (Asset 1020)                   $150.00
    Cr. BTC Gain on Conversion (Income 4200)       $5.00

Journal entry when BTC is converted to USD (example — BTC depreciated):

Dr. Business Checking (Asset 1000)   $145.00
Dr. BTC Loss on Conversion (Exp 4210)  $5.00
    Cr. BTC Wallet (Asset 1020)                   $150.00

2. Cost Basis Tracking¶

2.1 IRS-Approved Methods¶

As of 2025, the IRS permits only two cost basis methods for digital assets:

FIFO (First In, First Out) — The default method. The oldest BTC in your wallet is deemed sold/converted first.
Specific Identification — You identify the exact lot being disposed of, before the transaction occurs. Must be documented contemporaneously.

Important changes effective 2025: - Wallet-by-wallet tracking is mandatory. Each wallet or account is treated as its own cost basis ledger. You cannot pool BTC across wallets. - HIFO (Highest In, First Out) and LIFO are only valid if properly executed as Specific Identification — they are not standalone IRS-approved methods. - Universal method eliminated. You can no longer treat all wallets as a single basis pool.

2.2 Recommended Method for Research Relay LLC¶

Use FIFO as the default method.

Rationale: - Simplest to implement and audit - Default if no other election is made - Most crypto accounting tools default to FIFO - For a business that converts BTC to USD quickly (within 24–48 hours), the difference between methods is minimal - FIFO is the safest choice for IRS compliance

If holding BTC for extended periods, consider Specific Identification to optimize tax outcomes — but this requires pre-trade documentation and CPA guidance.

2.3 Record-Keeping Requirements¶

For each BTC transaction, maintain:

Record	Requirement	Retention
Date and time of receipt	Timestamp (UTC)	7 years minimum
Amount of BTC received	To 8 decimal places (satoshi precision)	7 years minimum
FMV in USD at receipt	With exchange rate source	7 years minimum
Date and time of disposal/conversion	Timestamp (UTC)	7 years minimum
Amount of USD received on conversion	Actual amount after fees	7 years minimum
Transaction IDs	On-chain txid, Lightning hash	7 years minimum
Wallet addresses	Receiving addresses used	7 years minimum
Invoice/order linkage	Order # tied to each payment	7 years minimum
Exchange/platform used for conversion	Name and account ID	7 years minimum
Conversion fees paid	Exchange fees, network fees	7 years minimum

Seven-year retention aligns with the IRS statute of limitations for substantial understatement (6 years) plus a safety margin.

3. Tax Implications (Federal + California)¶

3.1 Federal Tax Treatment¶

BTC Received as Payment = Ordinary Income¶

When Research Relay LLC receives BTC as payment for products: - The FMV of BTC at receipt is ordinary business income, reported on Schedule C (Form 1040) - Subject to self-employment tax (15.3% — 12.4% Social Security + 2.9% Medicare) - Subject to federal income tax at the owner's marginal rate (up to 37%)

Capital Gains If BTC Is Held Before Conversion¶

If BTC is held and its value changes before conversion to USD: - Short-term capital gain/loss if held less than 1 year (taxed at ordinary income rates) - Long-term capital gain/loss if held more than 1 year (taxed at 0%, 15%, or 20%) - Gains/losses reported on Form 8949 and Schedule D

Practical note: If BTC is converted to USD within 24–48 hours of receipt (recommended), the gain/loss will typically be minimal and short-term.

$10,000 Cash Reporting (Form 8300)¶

The Infrastructure Investment and Jobs Act expanded the definition of "cash" to include digital assets. Businesses receiving more than $10,000 in crypto (single or related transactions) would need to file Form 8300 within 15 days. However, the Treasury has paused enforcement of this requirement pending final regulations. Monitor IRS announcements for when this takes effect.

Form 1099-DA (New for 2025+)¶

Starting in 2025, custodial brokers must report digital asset transactions on Form 1099-DA: - 2025 tax year: Brokers report gross proceeds only (no basis) - 2026 tax year onward: Brokers report both proceeds and basis - BTCPay Server is not a broker — self-custodied payments will not generate a 1099-DA. The burden of reporting falls entirely on the taxpayer.

3.2 California Tax Treatment¶

CA Income Tax on LLC Profits¶

As a single-member LLC, all profits pass through to the owner's CA personal income tax return (Form 540): - CA income tax rates range from 1% to 13.3% (highest state rate in the US) - No special CA treatment for crypto — follows federal treatment as property - BTC received as business income is subject to CA income tax at the owner's marginal rate

CA Franchise Tax¶

Obligation	Amount	Due Date	Form
Annual minimum franchise tax	$800/year	April 15 (or 15th day of 4th month after formation for first year)	FTB 3522
First-year exemption (AB 85)	Expired — no exemption for LLCs formed in 2024+	—	—
LLC fee (if gross receipts > $250K)	$900–$11,790 (tiered)	15th day of 6th month of tax year	FTB 3536

LLC Income-Based Fee Schedule:

CA Gross Receipts	Additional Fee
$250,000 – $499,999	$900
$500,000 – $999,999	$2,500
$1,000,000 – $4,999,999	$6,000
$5,000,000+	$11,790

Quarterly Estimated Tax Payments¶

If you expect to owe $500+ in CA income tax, you must make estimated payments. California uses a unique 30/40/0/30 schedule (not 25/25/25/25):

Installment	Due Date (Calendar Year)	% of Annual Tax
Q1	April 15	30%
Q2	June 15	40%
Q3	September 15	0% (no payment due)
Q4	January 15 (following year)	30%

Safe harbor: Pay 100% of prior year's tax (110% if AGI > $150K) to avoid underpayment penalties.

Federal estimated payments follow the standard quarterly schedule: April 15, June 15, September 15, January 15 — each 25%.

3.3 Sales Tax on Research Chemicals in California¶

General Rule¶

California imposes sales tax on the sale of tangible personal property unless a specific exemption applies. RUO peptides and research chemicals are tangible personal property.

Sales tax applies to RUO peptide and research chemical sales in California.

Key details: - CA base sales tax rate: 7.25% - Combined rate (with district taxes): 7.25% to 10.75%, depending on the buyer's location - California is a hybrid origin/destination state: local rates based on seller's location, district taxes based on buyer's location - CDTFA seller's permit is required (free to obtain) if you sell tangible personal property in CA

Partial R&D Equipment Exemption¶

There is a partial sales tax exemption (4.8125%) for qualified R&D equipment under Regulation 1525.4, but this applies to purchasers of R&D equipment, not to retailers selling research chemicals. This exemption is not directly applicable to Research Relay's sales but may benefit customers (and is worth noting in B2B sales documentation).

Sales Tax on BTC Transactions¶

Key question: Does CA sales tax apply to sales paid in BTC?

Yes. The medium of payment does not affect the sales tax obligation. If the sale of tangible personal property is taxable, sales tax is due regardless of whether the customer pays in USD, BTC, or any other form. The taxable amount is the fair market value of the consideration received (i.e., the USD value of the BTC at the time of sale).

CDTFA Registration Requirements¶

Register for a seller's permit at cdtfa.ca.gov before making any sales
No cost to register
File sales tax returns per the assigned frequency (monthly, quarterly, or annually — based on expected volume)
Prepayments may be required if average monthly taxable sales exceed $17,000
Electronic funds transfer (EFT) required if average sales tax payments exceed $10,000

Interstate / Out-of-State Sales¶

CA sales tax generally applies to sales delivered within California
Sales shipped to customers in other states: check nexus in destination state
If selling through own website (not a marketplace facilitator), you must collect and remit sales tax in states where you have nexus or meet economic nexus thresholds

CPA confirmation needed: Confirm whether any specific exemption applies to RUO-labeled research chemicals sold to research institutions vs. individual consumers. Some states exempt sales to qualified research entities — verify CA's position.

4. Crypto Accounting Tools¶

4.1 Tool Comparison¶

Feature	Koinly	CoinTracker	TaxBit
Pricing (per tax year)	$49 (100 txns), $99 (1,000), $179 (3,000), $279 (10,000+)	$59 (base), $199 (DeFi/NFT), $299 (premium)	Free basic, enterprise pricing
Exchanges/wallets supported	900+	500+	500+
Cost basis methods	FIFO, LIFO, HIFO, Specific ID, Average Cost	FIFO, LIFO, HIFO, Specific ID	FIFO, LIFO, HIFO
Per-wallet tracking (2025 rule)	Yes	Yes (early adopter of Rev. Proc. 2024-28)	Yes
QuickBooks integration	Direct (Xero too)	Export-based	Export-based
Zoho Books integration	No direct integration (CSV export)	No direct integration (CSV export)	No direct integration
BTCPay Server integration	No native — import via CSV or wallet address	No native — import via wallet address	No native
TurboTax integration	Yes	Yes (official partner)	Yes
IRS forms generated	Form 8949, Schedule D, full tax reports	Form 8949, Schedule D, full tax reports	Form 8949, Schedule D
DeFi/NFT support	Yes	Yes (higher tiers)	Yes
Portfolio tracking	Yes (free)	Yes (free)	Limited
Customer support	Email + live chat	Tiered (faster on premium)	Email + chat (slow response times reported)
Best for	Value, international, high volume	US IRS compliance, portfolio tracking	Enterprise/institutional

4.2 Recommendation: Koinly¶

Primary choice: Koinly — $49–99/year (depending on transaction volume)

Rationale: 1. Best value — $49/year for up to 100 transactions covers early-stage needs. A business receiving 5–10 BTC payments per day would need the $179 tier (3,000 transactions), still cheaper than CoinTracker's comparable plan. 2. Direct QuickBooks and Xero integration — If we end up on QBO instead of Zoho Books, Koinly exports categorized transactions directly. 3. Comprehensive cost basis tracking — Supports FIFO (our chosen method), with per-wallet accounting compliant with 2025 rules. 4. 900+ exchange/wallet support — Broad coverage for importing BTC wallet transactions. 5. BTCPay Server compatibility — While no native BTCPay integration exists, Koinly can import transactions via: - CSV export from BTCPay Server - Importing the BTC wallet address directly (Koinly scans the blockchain) - API import from the exchange used for BTC-to-USD conversion

For Zoho Books workflow: 1. Koinly tracks all BTC received and converted 2. Export Koinly transaction report as CSV 3. Import into Zoho Books, mapping to the chart of accounts (BTC Wallet asset, revenue, gain/loss accounts) 4. At tax time, Koinly generates Form 8949 and Schedule D for the CPA

Fallback: CoinTracker — $59–199/year

Choose CoinTracker if: - You want the most polished mobile portfolio tracking - You prioritize the official TurboTax/H&R Block partnership - You need the most conservative IRS compliance approach (CoinTracker was an early adopter of per-wallet tracking under Rev. Proc. 2024-28)

5. Operational Procedures¶

5.1 BTC-to-USD Conversion Policy¶

Recommended: Convert BTC to USD within 24–48 hours of receipt.

Rationale: - Minimizes exchange rate risk and capital gain/loss complexity - Simplifies accounting (small/negligible gain/loss on each conversion) - Ensures cash availability for operating expenses - Reduces crypto accounting overhead

Procedure:

BTCPay Server receives BTC payment and confirms the transaction
Within 24 hours, transfer BTC from BTCPay wallet to exchange account (e.g., Coinbase, Kraken, Strike)
Execute market sell order for USD
Withdraw USD to business bank account (Mercury or Relay)
Record the conversion in Koinly (automatic if exchange is connected via API)
Record the bank deposit and any gain/loss in Zoho Books

Alternative: BTCPay Server auto-conversion. Some BTCPay Server configurations support automatic conversion to USD at the time of payment (via exchange plugins or payment processor integrations like Strike). If available, this is the simplest approach and minimizes holding period.

Exception: If the business decides to hold a BTC reserve (e.g., 10% of BTC revenue), document this policy separately and track the held BTC as an investment asset. CPA should be consulted on implications.

5.2 Record-Keeping Procedures¶

Daily: - BTCPay Server automatically logs all incoming payments with timestamps and amounts - Koinly automatically imports wallet transactions (if connected via API or wallet address)

Weekly: - Reconcile BTCPay Server transaction log with Koinly records - Verify all BTC-to-USD conversions are recorded in Koinly - Import/reconcile bank deposits in Zoho Books

Monthly: - Full bank reconciliation in Zoho Books - Verify Koinly BTC balance matches actual wallet balance - Generate and review Zoho Books P&L and balance sheet - File sales tax return if on monthly filing schedule

Quarterly: - Review estimated tax obligations (federal + CA) - Make quarterly estimated tax payments if required - Reconcile Koinly annual summary with Zoho Books BTC-related accounts - Review and adjust BTC conversion policy if needed

Annually: - Generate Koinly tax report (Form 8949, Schedule D) - Provide Koinly report + Zoho Books financials to CPA - File federal return (Form 1040 + Schedule C + Schedule D + Form 8949) - File CA return (Form 540 + Schedule CA) - File CA LLC return (Form 568) - Pay $800 franchise tax (FTB 3522) - Pay LLC fee if gross receipts > $250K (FTB 3536)

5.3 Reconciliation Process¶

BTC reconciliation (weekly):

BTCPay Server received       →  matches  →  Koinly imported transactions
Koinly BTC balance           →  matches  →  Actual wallet balance (on-chain)
Koinly conversion records    →  matches  →  Exchange transaction history
Exchange USD withdrawal      →  matches  →  Bank deposit in Zoho Books

Monthly closing checklist:

All BTC payments from BTCPay Server imported into Koinly
All BTC-to-USD conversions recorded in Koinly
Koinly BTC balance = actual wallet balance
All bank deposits from exchanges recorded in Zoho Books
Zoho Books BTC Wallet (Asset 1020) balance = Koinly USD value of held BTC
All gain/loss on conversion recorded (Accounts 4200/4210)
Sales tax collected matches Zoho Books sales tax payable (Account 2100)
Bank reconciliation complete for all accounts

6. California-Specific Tax Obligations¶

6.1 Annual Franchise Tax ($800)¶

Detail	Value
Amount	$800/year (minimum)
Who pays	Every LLC organized or doing business in CA
First-year exemption	Expired (AB 85 ended Dec 31, 2023)
First-year due date	15th day of 4th month after formation
Ongoing due date	April 15 each year
Form	FTB 3522 (LLC Tax Voucher)
Payment methods	Web Pay, EFW, credit card, check
Penalty for non-payment	Suspension of LLC + penalties + interest

Example: If the LLC is formed on March 15, 2026, the first $800 payment is due by July 15, 2026.

Important: The $800 is owed even if the LLC has zero revenue. It continues until the LLC is formally dissolved with the Secretary of State.

6.2 CA Income Tax (Pass-Through)¶

As a single-member LLC (disregarded entity for tax purposes): - All LLC income flows to the owner's personal CA return (Form 540) - CA income tax rates: 1% to 13.3% (progressive brackets) - LLC files an informational return: Form 568 (Limited Liability Company Return of Income) - Form 568 due date: March 15 (or September 15 with extension)

6.3 CA Estimated Tax Payments¶

Schedule (unique to California — 30/40/0/30):

Payment	Due Date	% of Annual Tax	Form
1st installment	April 15	30%	FTB 540-ES
2nd installment	June 15	40%	FTB 540-ES
3rd installment	September 15	0% (none due)	—
4th installment	January 15	30%	FTB 540-ES

Underpayment penalty: 5% + monthly interest if you miss a deadline. Do not follow the federal 25/25/25/25 schedule for CA payments — that will result in Q1/Q2 underpayment penalties.

6.4 Sales and Use Tax¶

Detail	Value
Governing body	CDTFA (CA Dept of Tax and Fee Administration)
Permit required	Yes — Seller's Permit (free)
Base rate	7.25%
Combined rate range	7.25%–10.75% (varies by jurisdiction)
Filing frequency	Assigned by CDTFA (monthly, quarterly, or annual)
Prepayment threshold	$17,000+ average monthly taxable sales
EFT required	If average payments > $10,000
Applies to BTC payments	Yes — tax based on FMV of consideration
Returns due	Last day of month following filing period

Registration: Apply online at cdtfa.ca.gov before making first sale. No cost. Security deposit may be required.

6.5 Annual Calendar Summary¶

Date	Obligation	Agency	Form/Payment
January 15	CA estimated tax Q4 (prior year)	FTB	540-ES
January 15	Federal estimated tax Q4 (prior year)	IRS	1040-ES
March 15	CA LLC informational return	FTB	Form 568
April 15	Federal income tax return (or extension)	IRS	Form 1040 + Schedule C
April 15	CA income tax return (or extension)	FTB	Form 540
April 15	CA franchise tax ($800)	FTB	FTB 3522
April 15	CA estimated tax Q1	FTB	540-ES
April 15	Federal estimated tax Q1	IRS	1040-ES
June 15	CA estimated tax Q2	FTB	540-ES
June 15	Federal estimated tax Q2	IRS	1040-ES
June 15	CA LLC fee (if > $250K gross)	FTB	FTB 3536
September 15	Federal estimated tax Q3	IRS	1040-ES
September 15	CA estimated tax Q3	FTB	$0 (none due)
Monthly/Quarterly	Sales tax return	CDTFA	Online filing

7. Items Requiring CPA Confirmation¶

The following items involve nuance or ambiguity that should be validated by a qualified CPA before implementation:

RUO peptide sales tax exemptions: Are there any CA exemptions for sales of research-use-only chemicals to qualified research institutions? Does the buyer's intended use affect taxability?
BTC gain/loss characterization: When BTC is received as business payment and converted within 24–48 hours, is the small gain/loss on conversion treated as ordinary income (since it arises from business operations) or as capital gain/loss? Both treatments have been argued — confirm the CPA's position.
Self-employment tax on BTC gain/loss: If BTC received as payment appreciates before conversion, is the gain subject to self-employment tax (since it arose in the course of business)?
S-Corp election timing: At what revenue level does S-Corp election become beneficial for saving on self-employment tax? What are the implications for crypto accounting?
Nexus in other states: If shipping to customers in multiple states, what are the economic nexus thresholds and filing obligations? Does accepting BTC create any unique nexus considerations?
Form 8300 readiness: The $10,000 crypto cash reporting requirement is paused but expected. When it takes effect, what operational changes are needed?
BTCPay Server as self-custodied wallet: Confirm that BTCPay Server payments are not subject to 1099-DA reporting (since there is no custodial broker involved).
Sales tax on shipping charges: CA exempts separately-stated shipping charges when shipped by common carrier. Confirm this applies to our order flow.