This is something my 'friend' said to me when discussing bitcoins, how do i(you) respond?
It is only a profit if you convert it to your local currency. This is the same theory as if you were to buy a stock share. I on the other hand have to pay taxes on every sale I make with my business. On a personal level you should only have to pay taxes if you cash out. Of course you should pay your taxes although, it is not a big deal as it is only capital gains tax and you only pay on the profit.