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Taxing Virtual Gaming Assets

Hemos posted more than 7 years ago | from the someday-the-ride-will-be-over dept.

The Almighty Buck 454

rijit writes " It appears very likely that taxation of online games assets is inevitable. Quote: 'That's because game publishers may well in the not too distant future have to send the forms — which individuals receive when earning nonemployee income from companies or institutions — to virtual world players engaging in transactions for valuable items like Ultima Online castles, EverQuest weapons or Second Life currency, even when those players don't convert the assets into cash.' "

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Oh, I know. (5, Funny)

AltGrendel (175092) | more than 7 years ago | (#17098846)

Since they are taxing virtual goods, we'll pay with virtual money.

If we don't pay (3, Funny)

Weaselmancer (533834) | more than 7 years ago | (#17098882)

Will they put our characters in a virtual debtor's prison?

Re:If we don't pay (5, Funny)

LordEd (840443) | more than 7 years ago | (#17099104)

Your character will be transferred from your originating game to the federal pound-me-in-the-ass prison game for a 6 month subscription. Unfortunately, the conjugal visit expansion will not be available anytime soon.

That's ok (4, Funny)

Weaselmancer (533834) | more than 7 years ago | (#17099558)

The conjugal visit expansion would confuse most online gamers anyways.

Re:Oh, I know. (4, Funny)

Lord_Slepnir (585350) | more than 7 years ago | (#17099128)

And watch the Warcraft economy get even more ruined when the IRS tries to convert their gold to cash.

To: Seren

From: IRS dude

Subject: $$$ GOLD NOW!!!

Go to for the LOWEST WARCRAFT PRICES GOLD PRICES EVER! Rates as low as $9.47 for 100 gold! Amazing!

Be careful if you live in FL (1)

Overzeetop (214511) | more than 7 years ago | (#17099196)

Somebody might get the bright idea to tax your in-world posessions as intangibles. Several states have such a tax - though not mine, so I don't know all the details. It may not stop at "income" taxes.

Re:Oh, I know. (5, Insightful)

Angostura (703910) | more than 7 years ago | (#17099260)

Excellent. I can't wait to start submitting all my virtual businesses expenses to them. I'm making a massive loss in my Second Life business, which I shall enjoy using to offset my real life business profits.

Re:Oh, I know. (1)

GeekDork (194851) | more than 7 years ago | (#17099418)

Just make sure you get proper receipt for that 20p artefact, and don't get caught trying to get a tax refund for you Trifecta addiction.

Monopoly Rent IS Next? (5, Insightful)

arthurpaliden (939626) | more than 7 years ago | (#17098856)

If that is the case, will they soon be taxing player earnings from board games as well?

Re:Monopoly Rent IS Next? (1, Funny)

Anonymous Coward | more than 7 years ago | (#17099266)

If you are playing Monopoly, you should now expect to pay for antitrust litigation as well.

Taxes suck, but why not? (3, Interesting)

QuantumFTL (197300) | more than 7 years ago | (#17098872)

Why do governments tax anything in the first place? It's because public services cost money, and that's a convenient way to of collecting said money (and because they are usually the ones that have all the guns).

I personally don't see how this is any different than, say, taxing sales of Beenie Babies, whose value (like so many things) is also largely virtual.

As a registered Libertarian, I can't say I'm too happy with trends towards new taxation (internet sales tax, etc), but this type of thing may be inevitable as more and more people make significant portions of their income in online environments. Maybe this should be targetted only at assets that can be legally converted to cash?

Re:Taxes suck, but why not? (4, Insightful)

voice_of_all_reason (926702) | more than 7 years ago | (#17098968)

Why do governments tax anything in the first place?

The same reason a dogs licks their balls. Because they can.

As to your comment about the guns, taxes usually increase in a fairly consistent matter through a nation's history up until enough people with guns have had enough.

Re:Taxes suck, but why not? (0, Troll)

tolan-b (230077) | more than 7 years ago | (#17099246)

[citation needed]

Re:Taxes suck, but why not? (4, Informative)

voice_of_all_reason (926702) | more than 7 years ago | (#17099372)

The English, French, and American Revolutions were all instigated partly by new or opressive taxes

Re:Taxes suck, but why not? (1)

joshetc (955226) | more than 7 years ago | (#17099042)

I see it the same as say, having your own tomato garden and eating tomatoes from it every day while the government taxes you. I could understand a sales tax if you sell items for real currency.. Income tax is quite rediculous though.

Re:Taxes suck, but why not? (3, Informative)

mr_mischief (456295) | more than 7 years ago | (#17099580)

The Chairman of the Joint Economic Committee agrees with you. []

Re:Taxes suck, but why not? (1)

GigsVT (208848) | more than 7 years ago | (#17099102)

I don't know. Seems like it would open a lot of strange precedents. Second Life for example is a platform. People pay me money there in the fictional currency Lindens, which I can sell legally and is fungible for cash.

Now, how is that very different from what PayPal does? PayPal doesn't have to send me a 1099 because it's just moving money around, I'm not earning it from them.

Linden Lab is in a similar situation, they aren't paying me, the people that sent me money through their service are paying me.

Re:Taxes suck, but why not? (1)

kalirion (728907) | more than 7 years ago | (#17099112)

I personally don't see how this is any different than, say, taxing sales of Beenie Babies, whose value (like so many things) is also largely virtual.

I point you to the end of the first sentence of the second paragraph of the article, which also appears in the summary: even when those players don't convert the assets into cash.

This seems to imply an analogue to paying tax when you aquire a Beenie Babie by trading a Cabbage Patch doll for it.

How can we be taxed on something we don't own? (5, Interesting)

IflyRC (956454) | more than 7 years ago | (#17099164)

Every single MMOPRG states in its own EULA that the virtual goods received in game are their own property. Now, even if they can't stop all E-bay auctions, web sites selling currency or characters it doesn't change the fact that the sellers do not own the property to begin with. If anything, its trafficing in stolen goods. The EULA loans you the virtual item for gameplay then you go and sell it for real world currency? Tax the sell, not the game company so those people who do not sell it don't have to pay it. Even in some states illegal drugs are taxable which is enforced on top of a fine in some cases.

Re:Taxes suck, but why not? (2, Insightful)

j00r0m4nc3r (959816) | more than 7 years ago | (#17099226)

Why do governments tax anything in the first place? It's because public services cost money, and that's a convenient way to of collecting said money (and because they are usually the ones that have all the guns).

Wrong. Governments will tax anything that they can so long as the people let them. The government doesn't run the country, the people do. I think many people have forgotten this. And as for them having all the guns, that's the purpose of the 2nd ammendment -- to make sure they NEVER have ALL the guns. Gun control is the single worst thing a society can institute because then the government WILL have all the guns, and the people will have no last-resort measure to overthrow their government when it becomes Evil(tm). I think people have too much faith that their government is inherently Good(tm) especially fools who support complete gun control. They're just BEGGING to be dominated by their government.

Re:Taxes suck, but why not? (1, Offtopic)

tomstdenis (446163) | more than 7 years ago | (#17099336)

The following is *NOT* a threat, I have no intentions on doing anything, just stating facts...

If I, or anyone else for that matter, really wanted you dead. You'd be dead. You must leave the house some time to go to work, shopping, for food, etc. A carefully placed round from a .30 and down you go. All the guns in the world won't save you from that.

What makes society half-useable is people don't usually have the desire or intentions to carry out such actions. You're "guns" don't protect you. Common decency does.


Re:Taxes suck, but why not? (1)

JakeX (978243) | more than 7 years ago | (#17099576)

The government doesn't run the country, the people do.
Then what is the point of electing them in the first place if 'we' run the country? And I don't see why American's are so bent on guns, and having them = Power(TM). I don't think they will tax virtual environments, this will create unnecessary taxation loopholes, etc that will just end up being exploited by people with the knowhow to pull it off.

Re:Taxes suck, but why not? (1)

Orestesx (629343) | more than 7 years ago | (#17099326)

I agree. But either all value is virtual, or it's all real. It doesn't matter. If you can trade something, it has value. The value of bread isn't any more real than the value of beanie babies because you can sell a beanie baby and buy bread. Plus if you're in a pinch you can probably eat the beanie baby.

Re:Taxes suck, but why not? (2, Informative)

amigabill (146897) | more than 7 years ago | (#17099508)

>Why do governments tax anything in the first place? It's because public services cost money, and that's a
>convenient way to of collecting said money (and because they are usually the ones that have all the guns).

What public services are involved with playing World of Warcraft?

People pay $13 or so monthly to Blizzard to keep the WOW servers running. My internet connection costs me $50/month which goes to Comcast. I know there's already taxes related to my internet bill, I'm not sure what all is itemized in that Blizzard monthly fee. The taxes on my Comcast bill might go toward keeping the internet at large running, I'm not sure. Some of the rest of what I pay goes to keeping Comcast's private wires alive. Some of the Blizzard fee goes to keeping the game servers alive, toward their internet connection, and thus probably taxes to their internet provider to again help keep the internet at large running. Any real-life public survives are already being catered to somehow, as I'm not a big gamer and most of my internet time is email and web browsing. The internet isn't going to die if we all stop playing MMORPGs... Roads aren't going to crumble. North Korea isnt' going to take over America without a scuffle. All those public services are already paid for.

Since government is not involved with the running of the game universe, they aren't virtually building virtual roads, they aren't virtually protecting the alliance from the hoard, they aren't virtually protecting us from virtual pickpockets, they aren't virtually doing anything for my virtual character. If I'm not getting any benefit from my governemtn inside of my game, then what virtual public services are they providing which my virtual character needs to pay for beyond the real-life taxes that is being paid for my and Blizzard's internet connection fees?

Re:Taxes suck, but why not? (1)

ajs (35943) | more than 7 years ago | (#17099526)

Why not? Because when you tax goods that have no value, you give those goods a negative value. Games like Second Life attempt to convert in-game assets to real money, but in order to do so in a game like World of Warcraft, you would have to either pay taxes out-of-pocket (increasing the cost of playing the game) or you would have to violate the EULA and sell your items out-of-game.

A move like this would likely drop the World of Warcraft player base by a third overnight, sending the company scrambling to cut enough jobs and consolidate enough servers to drop the overhead... it would essentially destroy the game in short order.

virtual money (5, Interesting)

El_Muerte_TDS (592157) | more than 7 years ago | (#17098874)

If they want to tax virtual assets then they should also accept virtual money to be used for tax payments.

Also, do players actually own the virtual assets? Because aas far as I can tell it's the game operator that actually owns them since they can always take those assets away from the player (for example by cancelling their account).

Re:virtual money (5, Insightful)

kiberovca (524346) | more than 7 years ago | (#17098942)

Not only that. Government has to support virtual people just the same as real people. Citizens pay taxes to the state, but on the other hand, the state protects its citizens (yes, I know that is an ideal situation, but it's written in the constitution of every legal state). So, if someone kills me in the WOW, or steals something from me in Second Life, will he be sanctioned by the state, and in what way? What about other laws? Prostitution, drugs, pedophilia...? And also, what about us that are not citizens of the USA? To whom and in what way will we have to pay, and what will we get in the return?

Re:virtual money (1)

Xymor (943922) | more than 7 years ago | (#17099228)

I swear I though see was a halfling!

Re:virtual money (2)

Lord_Slepnir (585350) | more than 7 years ago | (#17099256)

Also: My guild forced my priest to spec to holy. Am I now eligible for welfare since I can't farm as well as I used to? Can I get food stamps to pay for my Morning Glory Dew? If my guild kicks me out, can I sue them for alimony until I find a new guild?

Re:virtual money (1)

kypper (446750) | more than 7 years ago | (#17099564)

Mod parent up. It's in the virtual constitution.

Re:virtual money (3, Insightful)

Frosty Piss (770223) | more than 7 years ago | (#17098954)

Because aas far as I can tell it's the game operator that actually owns them since they can always take those assets away from the player (for example by cancelling their account).

Gamers can't have it both ways, try to monetize their virtual assets, and then say it's not really worth anything. We know very well than many people make lots of money on this useless crap, so obviously, it's worth something. One way or the other, people. Taxes are a bitch, but they too exist.

Re:virtual money (5, Insightful)

Neoprofin (871029) | more than 7 years ago | (#17099184)

The difference is real world value.

If you find a handkercheif on the ground that you're going to claim was used by William Shatner should you be taxed for the supposed real world value? No, but if you sell said item on ebay, suddenly it has value, value that you should be taxed on if you're honest when filling out your forms.

Finding the phatest l00t ever in WoW isn't worth anything, the items not really yours, the character who found it isn't really yours, the server it exists upon definitely isn't yours. The second you sell it for real world money though, that is income and it should be taxed.

Most people are not asking to have it both ways, a line should be drawn. Virtual assets are virtual assets, real money is real money, you can tax the real money that someone gets for selling access to virtual items, you can't tax virtual items which in an of themselves have no real value.

Re:virtual money (5, Informative)

Jon-1 (470969) | more than 7 years ago | (#17099544)

Not only is this a good idea, but this is what's happening now. Your virtual assets are worthless till you sell them for dollars. When you receive those dollars, that's a taxable event.

The IRS openly indicates in publication 525 that, "If you steal property, you must report its fair market value in your income in the year you steal it unless in the same year you return it to its rightful owner." The same applies to accepting bribes. You can read it here [] . Basically, it doesn't usually matter how you receive income, it's taxed.

Re:virtual money (0)

Anonymous Coward | more than 7 years ago | (#17099238)

The value of the assets is irrelevant if I don't own them. Last time I read the ToS for my particular poison it was made quite clear: the character, items, in-game currency, and everything within/associated with the game are the property of the host(not client). I can't be taxed for something I don'e own.

Re:virtual money (1)

mr_mischief (456295) | more than 7 years ago | (#17099248)

A retail store doesn't pay sales taxes on items sitting on the shelves. There's no sales tax until there's a sale. If I build a bookcase in my home for my own use, I'm not taxed on the possibility that I'll sell it. Income is only taxed as income once it's received as... income.

So why in the world would anyone stand for being taxed for doing well in a game? You're paying taxes on your real income, then you're paying for the sign-up kit, paying taxes on the sign-up kit, then you're paying taxes on the network access needed to play, (I'll ignore the full cost of network access since one hopefully uses their connection for other things too), then you're paying taxes on the subscription, using your unpaid time to have fun in the game world, then they want to tax you because you play the game well?

So someone's mind is actually spinning, "Must... level.. playing... field... in... computer... games..."? Someone get Vonnegut on the phone, Harrison Bergeron's just been spotted playing Anarchy Online.

Re:virtual money (1)

mr_mischief (456295) | more than 7 years ago | (#17099528)

The Chairman of the Joint Economic Committee has in fact said that only when real money is made from playing a game or from selling virtual assets is there a taxable event in the real world.

See his press release, which predates this /. story []

Re:virtual money (1)

cloricus (691063) | more than 7 years ago | (#17099298)

I don't want it both ways. I play my MMO for a few hours a week as a relaxing game and have no interest of selling any items, isk, or my account - if I stop playing my account will die away. To me it is a game and as far as I'm concerned I don't have to pay tax to play monopoly then I shouldn't have to pay taxes to play my favorite MMO. If they intend to push this sort of thing then I'm sorry to say that I will be evading tax for the first time in my life on this one item.

Re:virtual money (1)

dragonsomnolent (978815) | more than 7 years ago | (#17099324)

First, you're right, they can't have it both ways, but to expect that someone would have to pay taxes on something that isn't even real is kinda shifty. If someone finds a sucker willing to purchase virtual goods, then fine, tax them on the money they made from the sucker, no argument there. It would be the same as taxing someone for the gold that their D&D character got from slaying a dragon (talking old school here, pen, paper, and dice). It's all just make believe, and this (taxing the virtual stuff on people who haven't converted it to real money) is another way for the government of the U.S. to make money in a feeble attempt to "balance the budget" without having to cut out the pork.

Bullshit (2, Insightful)

Moraelin (679338) | more than 7 years ago | (#17099334)

Gamers can't have it both ways, try to monetize their virtual assets, and then say it's not really worth anything. We know very well than many people make lots of money on this useless crap, so obviously, it's worth something. One way or the other, people. Taxes are a bitch, but they too exist.

I'm sorry, but who is this homogenous "gamers" category where everyone says the same thing, does the same thing, etc? Has it ever occured to you that maybe two different people can actually have two different goals, two different ways to play, etc?

As far as I can tell, and supported by the backlash against Sony's sanctioning such transactions, most MMO gamers are actually _against_ trading in-game items for real cash. For a variety of reasons, including, but not limited to, the facts that:

- it seems to bring with it not only virtual crime, but real crime as well. (Breaking into someone's RL computer is a RL crime.) See for example the recent instances of keyloggers that, among other harm, stole WoW passwords for the purpose of striping those people's characters of all gold and equipment. So believe it or not, even if the other issues didn't exist, a lot of us would still have a problem with (A) buying something stolen from a fellow gamer, and (B) encouraging the script kiddies to infect even more computers.

- it devalues the achievements of those who actually worked and quested for that

- it fucks up the virtual economy, as in some cases it becomes tuned and balanced for the idiots who buy gold by the thousands instead of for the honest players

- it fills the world with farmers and farm-bots, to the point where in some areas you have to spend an hour to complete even the simplest quest, because the needed NPCs are farmed non-stop by a small horde of farm-bots

- buying a ton of ganker-grade equipment and level 60 characters attracts a certain kind of insecure loser who makes the game worse for everyone else.

- plus, as the lesser problem of whole armies of characters who just don't know how to function at their level, what to do, or what to use. You could group with, for example, a Kheldian (prestige classes unlocked by having 1 max-level character) on COH and they don't even know the elementary basics of playing the game. How'd they get through the whole game once without even learning how it works? Oh, wait, they didn't.

Etc, etc, etc.

So, basically, fuck off. Most gamers do _not_ support transforming virtual assets into real gold, and it's even against the TOS in most games. So you're telling me, what? That because a minority of idiots already ruin the game for the majority of us, let's all be taxed for it? That governments should just assume we're all doing something illegal, and tax it? Well, then how about we assume that you use your car as a taxi (some poeple do, so by your logic it applies to everyone) and tax you per mile, according to how much you _could_ have charged if you actually used your car like that.

Re:virtual money (1)

zotz (3951) | more than 7 years ago | (#17099454)

Yes, but if it comes out of game it is already real and not virtual and can be taxed there. No?

all the best,


Re:virtual money (0)

Anonymous Coward | more than 7 years ago | (#17098990)

I know that I don't own any of the gear of my characters - my warlock's full PvP set is owned by Blizzard, as are her weapons and her rather meagre amount of gold. IT FUCKING SAYS SO IN THE TERMS OF SERVICE I SIGNED AT THE START.

If I start getting taxed on things I don't even own, the we're reached a new low.

Re:virtual money (1)

bhmit1 (2270) | more than 7 years ago | (#17099162)

That would be the fair thing to do, but the government doesn't always play fair. Taxes on stock options or a huge example of this, where in some cases (when you hit the AMT threshold) you are responsible for the "income" you received from the difference between the cost of the option and the value of the stock, even if you never cashed out of the stock. There are lots of sad stories of people broke because they owe taxes on stocks that crashed during the dot come on money that they never saw. The Libertarian in me wants to see a few changes made to our tax system, and eliminating taxes on any kind of virtual money is a big one.

Re:virtual money (1)

weber (36246) | more than 7 years ago | (#17099288)

I guess that implies you can deduct any virtual losses as well? I see potential!

Re:virtual money (1)

intchanter (1035396) | more than 7 years ago | (#17099590)

Also, do players actually own the virtual assets? Because aas far as I can tell it's the game operator that actually owns them since they can always take those assets away from the player (for example by cancelling their account).

This is the same degree of ownership that we currently have for all forms of "real" assets. If you don't pay whatever rents in the form of taxation your government levies, they revoke your ownership.

As for me, living in a place where we are told we are free, but having to pay 1/3 of my income (averaged across the population, which is the net effect regardless of the up-front distribution) as rent on my income and property, I would truly like to see more of my government funded through transparent fees based on the usage of government services. By tying a government's income directly to its expenditures, this holds the government more accountable for its use/misuse of funds, keeps the real cost of government in the minds of the public, and erases most of the possibilities for waste, corruption, and misuse of government power.

It also reduces the scope of government, and having seen government abuse firsthand, I think this is a wonderful thing.

wont companies like Linden Labs just move (1)

InfoHighwayRoadkill (454730) | more than 7 years ago | (#17098876)

All the on line casinos moved out of the usa and uk into places like Gibraltar and Costa Rica... surely companies like Linden Labs would do the same

Re:wont companies like Linden Labs just move (1)

PreacherTom (1000306) | more than 7 years ago | (#17098994)

Indeed. All this will do is drive the servers and corporations outside of the U.S. jurisdiction. I doubt the kind of legislation that decimated online poker will go through as easily in this instance. It's not such a plum to the religious right.

Re:wont companies like Linden Labs just move (1)

voice_of_all_reason (926702) | more than 7 years ago | (#17098998)

They'll just pass laws prohibiting US-based credit card companies from dealing with those places. If they can't have the tax, they'll make sure you can't still enjoy the game.

ROFL (1)

tritonman (998572) | more than 7 years ago | (#17098878)

You've got to be kidding me. They are going to tax 8 year olds now? Because they own a bunch of junk in a game??

Kiss and attempt to tax my VIRTUAL (0, Troll)

davidsyes (765062) | more than 7 years ago | (#17098922)

ASS. Maybe there ought to be a category for shitty assets. Then, the IRS would have to create a new category. I'm sure they'll come up with euphemisms... SO, rename chair to shit-foundation-seat, etc... why not create a shitty situation for a shitty situation?

And, for the jobless who play these games (I don't; don't have job yet, and no money to play these games even if I were interested...), are they self-employed. I guess the IRS would class them as what, "self-employed professional gambler"? Sounds like a destructive life style for the losing of the gamblers.

Captcha: "compute" (doh!)

taxes on virtual goods? (5, Insightful)

deanj (519759) | more than 7 years ago | (#17098934)

Paying taxes on virtual goods that are exchanged for real money... That I can understand.

Paying taxes on virtual goods where you don't exchange for real money is stupid.

What, are they going to start looking through my character's inventory, evaluating how much my +10 Sword of Uberness is worth?

Re:taxes on virtual goods? (1, Interesting)

Anonymous Coward | more than 7 years ago | (#17099120)

I agree. I don't understand their idea either, as it's not fair when compared to most real world counterparts.

For example, if you purchased your home 20 years ago for $56,000, and it's worth $210,000 today, you don't pay tax the difference *until* you sell it. Property is admittedly not a good example, since there is property tax, but there are other examples. A business does not pay tax on profit of an item until the good is sold and then only in accumulation (profit/loss). Similarly, holding stocks is not taxable until the stock is sold.

Someone with a better understanding of property tax can comment, but my impression was that property tax was a holdover from the days when owning land was considered a special privilege (similar to only land owners had the right to vote for a time there).

Re:taxes on virtual goods? (3, Insightful)

Jasin Natael (14968) | more than 7 years ago | (#17099232)

How is it any different than having to pay capital gains tax on the part of your nominal gains counteracted by inflation? You haven't gained anything! Take the extreme example -- You have certificates of deposit for gold (the metal), and you have to pay capital gains tax when the dollar loses value, even though the gold's purchasing power is virtually guaranteed to be constant in the long run!

I'm not entirely sure that logical ratiocination and taxation have ever been formally introduced. If they were, they probably decided pretty quickly that they didn't belong in the same room together.

Sign Up (3, Funny)

lupine_stalker (1000459) | more than 7 years ago | (#17098950)

One last step remains before you can step into our magical world, forgetting your mortgage, your car loan, and your family commitments. Just pick up form number 34C-XCVII from your local tax office, and let the fun begin. The are only two things that are certain in MMO's of the future: Ganks and taxes.

pwned!!! (0)

Anonymous Coward | more than 7 years ago | (#17098964)

That is all.

Unemployment and Social Security Benefits? (2, Interesting)

gaspar ilom (859751) | more than 7 years ago | (#17098974)

If it's taxable -- or otherwise treated like "income" -- does it then get treated like any other "work:"

When I loose my loot, is that now a write-off? (is it like investment depreciation, or a gambling loss?)

Am I running a "business" -- and can I hire in-game "employees" ?

When my skills decline, can I consider myself unemployed?

Can I avail myself of anti-discrimination laws?

Can I retire and collect social security?

When you think about it, it's pretty absurd.

Tax free. (1)

GodInHell (258915) | more than 7 years ago | (#17098986)

Uhm.. since the internet is already a tax free zone... no.

Corporate CMA != change in tax policies.


Yes! Sim CPA (3, Funny)

FlopEJoe (784551) | more than 7 years ago | (#17098996)

Now I can implement an idea I've had back when the Sim-X and Y-Tycoon games came out... Sim CPA. You too can play in the exciting CPA world. Manage end of the quarter forms for online players in this RTS game. Bonus points for keeping two sets of books and making a little on the side. But don't get caught or you're character will be stuck in virtual jail.

Hmm (5, Insightful)

Spykk (823586) | more than 7 years ago | (#17099014)

I'm not sure how they can do this. MMORPGs generaly have a clause in the EULA stating that all virtual goods belong to them and have no intrinsic value. If the government decides that they do in fact have value, what happens when a server goes down just after you recieved a valuable item and you are rolled back to before you got it? Can you sue the game's owner for the value of the item? Can these games survive if a hardware failure could result in massive lawsuits against them?

I'm not paying a dime for my WoW character... (2, Interesting)

A Name Similar to Di (875837) | more than 7 years ago | (#17099016)

As blizzard has made incredibly clear, all characters, items, and gold, belong to them, and anyone buying/selling gold/characters/items is breaking the policy.

In reality, I think that all MMOs /need/ to make the same claims as blizzard and fight to protect them. Once the IRS starts to tax virtual assets, what's next? If I get someone killed in game can I now be sued for financial hardship? IANAL, but it seems like I would have effectively cost them some of their personal assets. How about Eve and all of the financial scandals we've had stories about. If the in game currency is recognized as having "real world" value, are all of those folks going to court? In short, I think it would destroy most MMOs.

Taxation...boundary between RW & virtual money (2, Informative)

WyrdOne (96731) | more than 7 years ago | (#17099032)

If you are deriving real world cash from these transactions, likely you are already being taxed on it. I find it a non-issue.

It would be all but impossible to tax a virtual economy of a game system. Why? Because the rules of the economics within the game world are not static. The developers (who are not governmental bodies at all) can change that economy or rule at whim. Raise the drop rate of X item here, reduce the spawn rate of Y item there and it plays havok with the economy until it restabilizes. Also who is to say x gold equals x dollars of real world money? The devs could devalue the market very easily by making any number of changes.

The point at which the government would have any say, is when said virtual item is sold for real world currency. (Ebay and the like.) This is already happening and already being taxed, or at least supposed to be taxed.

No Taxation without Representation! (5, Funny)

mmdog (34909) | more than 7 years ago | (#17099034)

Thrall for Senate from the great state of Durotar!

Re:No Taxation without Representation! (1)

TheHornedOne (50252) | more than 7 years ago | (#17099154)

Rogalian of Undercity for President! (He's dead sexxy)

Re:No Taxation without Representation! (2, Insightful)

zotz (3951) | more than 7 years ago | (#17099496)

"No Taxation without Representation!"

That ideal is already so far gone it is not funny. Think of all the taxes now that people who can't vote have to pay.

all the best,


Virtual Representation... (1)

creimer (824291) | more than 7 years ago | (#17099062)

Let the politician show up in the game world so we can virtually do the one thing we can't do in real life: Hang 'em high!

How can Game Currency be taxable? (5, Insightful)

Gonarat (177568) | more than 7 years ago | (#17099066)

If I understand the article correctly, assets gained in a game would be taxable, even if they are never converted into "real" money. If I had a Second Life business that made 1 million Linden Dollars in a year, then I would be taxed at whatever the U.S. Dollar to Linden Dollar rate is, even if I never take the "money" out of Second Life. To me this is ridiculous -- that would be like me being required to pay taxes on properties won in a Monopoly Game. I may own the whole board, but that does not translate to any wealth in real life.

A better example might be the stock market. Stock in XYZ company that I bought for $10,000 may be worth $100,000 today, but I am only taxed on those "gains" if I sell the stock. After all, who is to say that the stock won't be worth $5,000, or even nothing if the company goes belly up. I think the same should apply with game worlds -- as long as the "money" stays in the game world it should not be taxable, but once the "money" is converted to real money or "real" goods and services, then tax is due. After all, if I have a million Linden dollars in Second Life and the Linden would go out of business (not saying that this is likely, but just as an example), then my million Linden dollars would be a valuable as Enron stock.

I can understand taxing businesses in these worlds that make "real" money, but I think it is a real slippery slope taxing "game" money made in an online world unless the profits are taken outside of the game world.

U.S.? (2, Interesting)

EMeta (860558) | more than 7 years ago | (#17099070)

The biggest hurdle I see is that (of course) individuall countries can only tax people residing there or making sales there. And the game companies have no business (and certainly needn't) find out where people are playing from. (Ignoring for the moment region-centric consoles.) If servers in some said country are being taxed internally through the system, then such transactions will move to international servers--really, what big games have only servers in one country?

The problem boils down to this: Game companies are not enforcing anything about their players' locations. Therefore, their location cannot be proved taxable. (Unless somehow you give all your real contact information to them, which I find unlikely, as they don't want to require citizenship to any one country to be a player.)

...err...WTF? (1)

Donniedarkness (895066) | more than 7 years ago | (#17099074)

I can see them taxing the monthly fees...something players actually PAY for, but taxing in-game assets? Not many people I know would be willing to do that. Also, how would they determine what something is worth? It'll never pass.

A game is a game (0)

Anonymous Coward | more than 7 years ago | (#17099076)

I've been evading paying taxes on my monopoly earnings everytime I pass go, theres just something about holding $200 fake dollars instead of $133.33

Is ... Is not (0, Troll)

Oligonicella (659917) | more than 7 years ago | (#17099086)

For a while, I've read posters whining that the virtual world they frequent is just as real as the world outside. Now that the outside wants to intrude, they're whining it isn't. Rich and delightful.

That isn't what they are saying (0)

Anonymous Coward | more than 7 years ago | (#17099252)

They are saying that online life is *as satisfying* as real life.

However, though in the US you are free to persue happiness, they don't tax you for it.


Re:Is ... Is not (1)

Snotman (767894) | more than 7 years ago | (#17099254)

Really? I have never talked with anyone that says the virtual world is as real as the world outside and I have been playing MMORPGs for several years now with many friends that also play. This assertion can easily be proved false. So, if you want to hang onto your own assertion based on a false premise, go ahead. But maybe you are just trolling which is rich and delightful.

Is it really worthless? (1)

Madman (84403) | more than 7 years ago | (#17099092)

The value of anything, including "real" currencies is the sum total of a shared perception. Online currencies _have_ value because they are perceived to have value by the users, like any other currency used. Anything that has value can be taxed. Why don't the online companies take a different tack and instead of charging straight fees charge a percentage of the value of a character's online worth? If you own nothing you don't pay much, if you own a lot you pay more

Other Laws (1)

Joe The Dragon (967727) | more than 7 years ago | (#17099100)

I don't play these games right now but I do see one good thing coming form this is a big blow to ELUA's as this will likely give in game items cash value and give gamers property rights.
But this can also lead to real world jail time and other legal cases and fines for doing things in game like killing a player and taking his things, land, property, gold, cash, and so on.

Second Life lets people make and run gambling machines with no central authority verifying the workings of the games and that may end up making the game baned in many parts of the us.

Also this likely will help with Marc Bragg's case against Second Life.

Real taxes for online gaming... (4, Funny)

roscocoltran (1014187) | more than 7 years ago | (#17099124)

THAT makes those games more realistic than even the latest 3D engines!

Way to kill an industry... (1)

Maul (83993) | more than 7 years ago | (#17099166)

Having to pay taxes on every platinum (or whatever the currency is in your game) a virtual character earns? That is going to destroy the MMORPG industry. Or are MMOs going to have to replace anything that resembles currency with a barter system or something else that won't look like money to the morons in the government?

I guess we'll just have to stick to single player games, though I wouldn't be surprised if I get a tax assessment for all of the rupees that I've gotten in Twilight Princess soon, at the rate the government is going.

Re:Way to kill an industry... (1)

Joe The Dragon (967727) | more than 7 years ago | (#17099182)

single player games should be ok as people don't sell in game stuff form them like they do with MMO games.

We knew it was coming (3, Insightful)

Programmer_In_Traini (566499) | more than 7 years ago | (#17099188)

It was pretty obvious it was coming, where there's money to be made, there are taxes to be paid (so others can reap some of your benefits too).

There's no such things as free money.

Re:We knew it was coming (1)

mr_mischief (456295) | more than 7 years ago | (#17099432)

There's no such thing as a Linden Dollar in the real world, either. It's a game. The Matrix may have you, but I do not believe that Monopoly money is taxable in U.S. currency.

hmmm... (2, Funny)

aliendisaster (1001260) | more than 7 years ago | (#17099194)

I wonder if I can get welfare for my lvl 2 priest?

Sales Tax (0)

Anonymous Coward | more than 7 years ago | (#17099208)

The only taxation I would agree to is on people who actually make money from virtual goods i.e. a sales tax but everything else should be included in the price of the game.

How else to pay for less fortunate players (0)

Anonymous Coward | more than 7 years ago | (#17099222)

It is a proven fact that many minority players have a disadvantage when playing vitual games due to their circumstances. We need to tax the more privileged and talented players to level the playing field. Anyone who is a minority should start out with 6 to 10 times the assets of the very best players and should be subsidized if they lose any of their virtual wealth. This is why we have voted democrat in the last election. It is the only fair thing to do.

Crap! (1)

Rob T Firefly (844560) | more than 7 years ago | (#17099234)

It's only a matter of time before they find out about the millions I made in "Wall Street Kid" for the NES [] all those years ago. When's the next virtual flight to virtual Brazil?

Taxation (2, Insightful)

MEForeman (930504) | more than 7 years ago | (#17099294)

The government can tax any "accession to wealth." If they tax your gains from playing, I would imagine any monies spent in order to make the money would be deductible (as a business expense, sort of like the costs of purchasing an asset). Congress could say no to this, but I am speculating on something the IRS will act on (and pass regulations) before Congress will do anything.

The real problem here is I doubt the government will be able to tax this unless it is converted to real money. There are two major road blocks in the way. First, they need a set exchange rate. It as if the currency is the money of another country, so even if the value fluctuates, the key will be the value on the end of the tax year (calendar year for people). Second, I doubt they will tax it until it is actually exchanged into real currency. Frankly, it would be like a stock in that you don't pay for any gains until you sell it.

That's all I got.

What about deducting the cost of gaming (2, Interesting)

StarkII (29864) | more than 7 years ago | (#17099318)

I would have to assume that if they can tax you for virtual earning, you should be able to deduct virtual expenses. If this is considered a viable economy, your monthly subscription fee should be deductable. I would assume that if this moves forward, there is far more money spent on the game than is ever earned in it. It seems like it would be an overall loss for the government.

Yuo faWil it? (-1, Offtopic)

Anonymous Coward | more than 7 years ago | (#17099338)

Let me get this straight (3, Interesting)

Reapman (740286) | more than 7 years ago | (#17099352)

Little 8 year old Johnny, who plays a game, who's virtual assets are in fact owned by the company that runs the MMO, has to pay tax, on stuff he doesn't own? With no physical attributes?

Last I remember, most MMO's it's against the ToS to trade for real money, so doesn't this law go against the ToS?

Fine tax me, and watch the mmo market burn. I ain't payin tax on stuff I don't own.

Re:Let me get this straight, WoW specifically (1)

TXFRATBoy (954419) | more than 7 years ago | (#17099522) [] Section 3.A excerpt All title, ownership rights and intellectual property rights in and to the Game and all copies thereof (including without limitation any titles, computer code, themes, objects, characters, character names, stories, dialog, catch phrases, locations, concepts, artwork, character inventories, structural or landscape designs, animations, sounds, musical compositions and recordings, audio-visual effects, storylines, character likenesses, methods of operation, moral rights, and any related documentation) are owned or licensed by Blizzard. So, I would be paying taxes on items owned by Blizzard? So, next time I get my property taxes, I'm sending them to my neighbor since they came over for that BBQ a while back...

Re:Let me get this straight (1)

zotz (3951) | more than 7 years ago | (#17099554)

"Let me get this straight"

1. Put the lime in the ____
2. Drink em both ___
3. ???
4. Profit
5. Pay virtual tax.

all the best,


Couldnt (1)

SoulRider (148285) | more than 7 years ago | (#17099370)

the virtual players stage a virtual coup and overtake the virtual government? I dont get it, are they going to start taxing the money in monopoly now? If you cant buy real things with it, ITS NOT REAL MONEY, how can they tax it? This would be one more step in seeing our forefathers dream destroyed, this is like the definition of taxaton without representation. Or is there real money exchanging hands for these online assets?

There is no DIRECT UNAPPORTIONED TAX!! (0, Troll)

scorp1us (235526) | more than 7 years ago | (#17099424)

Article 1 section 2:
Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons

Article 1 section 8:
8. The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

16th amendment:
The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

If you keep flipping back and forth, between article 1 section 2 and the 16th amendment, you see that the 16 amendment conferred no new power or created no new tax!!

"The income tax is, therefore, not a tax on income [earnings] as such. It is an excise tax with respect to certain activities and privileges which is measured by reference to the income which they produce. The income is not the subject of the tax: it is the basis for determining the amount of tax."
F. Morse Hubbard, Treasury Department legislative draftsman. House Congressional Record March 27th 1943, page 2580

"...the requirement to pay [excise] taxes involves the exercise of privilege."
United States Supreme Court, Flint vs. Stone Tracy Co. 220 U.S. 107 (1911)

"We are of opinion, however, that the confusion is not inherent, but rather arises from the conclusion that the 16th Amendment provides for a hitherto unknown power of taxation; that is, a power to levy an income tax which, although direct, should not be subject to the regulation of apportionment applicable to all other direct taxes. And the far-reaching effect of this erroneous assumption will be made clear by generalizing the many contentions advanced in argument to support it..."
"[Taxation of "income" is] in its nature an excise entitled to be enforced as such unless and until it was concluded that to enforce it would amount to accomplishing the result which the requirement as to apportionment of direct taxation was adopted to prevent, in which case the duty would arise to disregard form and consider substance alone, and hence subject the tax to the regulation as to apportionment which otherwise as an excise would not apply to it" (That is, if the "income" tax ever comes to be administered as something other than an excise, or on something unsuited to an excise, the rule of apportionment must be applied.)
United States Supreme Court, Brushaber v. Union Pacific R. Co., 240 U.S. 1 (1916)

"The provisions of the Sixteenth Amendment conferred no new power of taxation . . ."
United States Supreme Court, Stanton v. Baltic Mining Co., 240 U.S. 103 (1916)

"The Sixteenth Amendment, although referred to in argument, has no real bearing and may be put out of view. As pointed out in recent decisions, it does not extend the taxing power to new or excepted subjects..." United States Supreme Court, Peck v. Lowe, 247 U.S. 165 (1918)

Learn more, better than I can explain it myself. []

Hurumph (0)

Anonymous Coward | more than 7 years ago | (#17099430)

What happened to just a good old tax on what you actually took in as REAL INCOME? BDGBKSB!

Expenses (2, Funny)

Anonymous Coward | more than 7 years ago | (#17099464)

Can I claim expenses on potions and weapons and things I require to play the game?
Also, if I slay an opponent and claim his belongings, will I have to pay inheritance tax?

Wait a second... (1)

Mr.Scamp (974300) | more than 7 years ago | (#17099468)

If I can be taxed real dollars on virtual goods, then it only stands to reason that I can declare a loss on goods that I have lost. New motto: Play online, get raped robbed and pillaged, profit!

uh, constitution? (1)

djasbestos (1035410) | more than 7 years ago | (#17099478)

No taxation without representation...isn't that sort of a caveat for inventing new taxes? And since many people using US systems are from outside the country (or can spoof it), it seems like this should get smacked down if SCOTUS knows its head from it's posterior.

WTB (1)

topside21 (1035404) | more than 7 years ago | (#17099488)

Dont see this happening but I can see the new class and guild developments online already by Sony and Blizzard I guess we would have to classify the IRS as the higher level Rogue or Thief class /who all Irsguy [100 Tax Collector (Rogue)] Irsguy (Dwarf)

Let them sell then (3, Funny)

Orange Crush (934731) | more than 7 years ago | (#17099492)

If the IRS really wants to tax these virtual goods, they should explicitly allow for their sale. i.e. have a Blizzard-sanctioned marketplace to trade virtual goods for real money, document the transaction, and send the necessary paperwork (1099, i'd guess). People who earn their own stuff don't have to worry about it, as only the real-currency sale is relevant.

The article is a Troll (5, Insightful)

Christianfreak (100697) | more than 7 years ago | (#17099534)

BS. Nowhere in the article does it say anything about the IRS actually trying to do this. No its this Miller guy (who we've heard from before) who insists that its going to happen "real soon now" (tm). Um no. If such a thing really did come to pass it would be held up in the courts for years because the game companies would fight it. Why? Because taxes already cost a lot of time and money. For something that is so overtly illegal for the government to do, they'd be stupid not to fight it.

This Miller guy is nothing but a troll ... and CNET fed him.

Death of Taxes (2, Insightful)

Doc Ruby (173196) | more than 7 years ago | (#17099536)

Taxes pay for the services we consume that the government provides. They of course pay for lots more services we don't consume, and lots of people consume services they underpay in taxes. But most of us consume lots of services, including military/security/justice services, infrastructure investment, education, that might directly serve our neighbors, but thereby serve us by stabilizing and improving the society in which we live.

So taxes on virtual goods are a way for the government to fund its operations that enable real players to spend time inline. While in the virtual world it might seem like we're not consuming the real world services, but of course we are, though we don't notice. Those have to be paid for.

Though taxing income is a terrible way to pay, compared to others. I prefer a sales tax on all sales transaction. Somewhat lower rates for wholesale (goods resold), to keep transaction costs low and the economy less frictiony. Total exemption for some subsidized goods to protect the poor (and ensure people aren't penalized for not being poor). Like no taxes on raw food, raw cloth, the lowest percentile expenses on public transportation, primary shelter and energy consumed there, and essential healthcare including nutrition and prevention. And a very low rate on pure minority equity transfers, like 1 or 0.01% the full rate on stock trades, unless transferring control of the corporation. That would encourage people to save rather than consume unnecessarily. Which offers more money for investment, by them or by their banks. And actually correlates taxation amounts to the amount of benefit people derive from the country, beyond the crudest basic protections that everyone should have. While making the tax collectable from a much smaller population of vendors, who already keep transaction records without increasing the costs of reporting, and who are much more controllable with the threat of interfering with their business than are the hundreds of millions of humans, many of whom cheat on income taxes. And without invading the privacy of every American, collecting from the aggregate without tying transactions to identites without a court order.

I'd say that since our $12T GDP currently spends about $4T annually on Federal, state and various local scopes of taxation, we could collect about 33% total tax, probably 25% Federal and 8% state/local. States/localities could of course change their own rates. The increased efficiency of the system, including shrinking the leviathan IRS while collecting more of what's due (on a monthly/quarterly basis, rather than annually), would probably afford lowered rates, maybe down to 15-20% Federal. Which extra money would be available for investment. While welfare and other social subsidy expenses could be shrunk, at least the administration which currently processes their income tax as a noncollectable exception, rather than just not bothering with them at all. And those rates balance the budget, without debt, while paying off the huge outstanding debt we've created the past 230 years. Though the vast majority of that debt has been spent the past 6 years, while (not ironically) cutting taxes on those most able to pay them, who benefit the most from our country's expenses.

Note that I'm talking about ripping out the income tax by its roots, and totally replacing it with a simple sales tax.

In virtual worlds, the taxes would be collected only on real money taken in exchange for services. The arbitrary (and impossibly complicated) basis for taxation today, "pay what we say approximates what we spend, or go to jail and/or surrender your property", cannot deal with anything like our modern economy. After military spending, we spend more on debt service than on any other government service, clear demonstration that our revenue system is totally disconnected from our economy and government, while remaining its most essential core.

The US economy has now changed to one unrecognizable to the economists who institued the income tax less than a century ago. It's time to revolutionize the government's income to free the rest of the economy to exploit the opportunities while solving the problems of this new age.

Virtual Taxes (1)

mike3k (574665) | more than 7 years ago | (#17099542)

We should pay virtual taxes for virtual goods.
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