I would like to start selling things in exchange for bitcoins. The problem is that I live in California, and we have a sales tax here. I was wondering if anybody knew how to deal with that. (If the government doesn't yet recognize Bitcoins as currency, do I still have to pay taxes to them for sales that I make?)
Ask yourself the following: If you are doing it with dollars, would you have to collect and report sales tax?
If the answer is yes, then calculate the fair market value of the Bitcoins involved in the transaction in US dollars, and take out the proper taxes to be paid to the government in USD; charge the proper sales tax, and deposit with the taxing authorities.
If you don't collect and pay sales tax on sales, and report income and pay income taxes on income, AND your business ever becomes large enough that you appear on the radar of the right authorities, you will pay more later.
If you want to minimize what you need to pay, seek the advice of a competent tax advisor.
The trouble may be finding one that understands what Bitcoin is and how it needs to be treated.
Perhaps they would be more understanding if you phrased it as: doing business with US customers using a foreign currency such as Euros.