it is technically possible to do much better.

For example, a Bitcoin merchant could use a type 2 deterministic wallet to generate payment addresses, and share the master public key with tax authorities (IRS). Such a setup would make it possible for the IRS to see how much they receive in payments. In order to check if the merchant is dodging taxes, the IRS agents can operate controls, where they pretend to be a customer, and check that the payment address that provided by the merchant belongs to the deterministic sequence.

This is a very simple and basic example; there are certainly lots of other ways to ensure that bitcoin businesses are taxable.