A customer pays $50 for a haircut using Bitcoin. At the moment of payment, Bitcoin is worth $95,000 per coin, and the customer sends the exact amount. What does the business owner report as taxable income for this transaction?

The IRS treats crypto received as payment as ordinary business income at fair market value on the date and time of receipt. The fair market value here is $50, which is the dollar amount the customer paid. It does not matter what Bitcoin does after the transaction. The business reports $50 of income, the same as if the customer had paid by card. If the business uses automatic conversion, the processor sells the crypto and deposits $50 in dollars to the bank account. The business never holds the crypto, so the accounting is identical to any other sale.