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When Tax Day Comes to Azeroth

Zonk posted more than 7 years ago | from the i'm-a-level-30-taxman dept.

Role Playing (Games) 141

1up is running a short piece originally from Games For Windows: The Official Magazine. It discusses the inevitability of taxation coming to virtual worlds, and a little bit about what that might mean in the indeterminate future: "Taxable income includes everything from tangibles like cookies to more ephemeral and subjective things like works of art, concert tickets, or advice. Those big, scary books that most sane people pay accountants to understand for them don't really narrow down what counts as taxable income so much as meticulously define it as damn near any piece of matter, energy, or information that should happen to pass into your possession over the course of the year. That goofy World of WarCraft gnome that GFW editor-in-chief Jeff Green's been leveling isn't any more intangible than, say, stocks."

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Frist Psot (0, Redundant)

Corwn of Amber (802933) | more than 7 years ago | (#18785159)

Well that is SO stupid. It boggles my mind to think that you can't even have a marginal source of income, that's calculated precisely so that you end up working for $1.50 an hour - if that - without getting taxed.

Re:Frist Psot (4, Informative)

m0rph3us0 (549631) | more than 7 years ago | (#18785233)

Just show them your EULA.

Blizz claims ownership of the items, thus it would be illegal for them to tax you on something you don't own.

Remember, you licensed it, you don't own it.

Tax time in WOW is stupid and will never happen. OTOH, Tax time in second life is a possibility.

Re:Frist Psot (3, Insightful)

nuzak (959558) | more than 7 years ago | (#18786627)

> it would be illegal for them to tax you on something you don't own.

They are taxing the income, not the asset. If I sublet my apartment, I can be damn sure the government will tax that income.

Re:Frist Psot (4, Funny)

Sir_Dill (218371) | more than 7 years ago | (#18787291)

Sure, but my epic gear is on my character and soul bound, I can't sublet it. I draw no income from owning said gear(which as we have established via the EULA, I do not actually own). In fact, if they really wanted to tax me on it, they would end up owing me since my Wow habit is a total loss. In which case I would deduct my monthly fees for my account, the electricity to run my machine for the hours I played that year(statistics which are easily obtainable), then theres the matter of the costs of my internet connection. How about depreciation? The gear I got a year ago is not worth the same as the gear you can get today. Do I get to claim deprecation losses? They can't have it both ways. If you want to tax my virtual possessions, make sure that I am actually gaining income otherwise I get to claim it as a loss.

Re:Frist Psot (2)

nuzak (959558) | more than 7 years ago | (#18787373)

> If you want to tax my virtual possessions

I just got through saying that that's precisely what they're not taxing. Pay attention, son.

Doesn't matter. (2, Interesting)

pavon (30274) | more than 7 years ago | (#18787107)

It doesn't matter if you own it or not - this is income tax, not property tax. If you receive a good or service in exchange for another good or service, then it is possible that it could be taxed as income. But I really don't think that is going to happen. The motivation for the complex definition of income is to prevent people from sheltering *large* increases in wealth by receiving the payment in a form that does not fit the regular definition of salary or capital gain. The IRS and congress couldn't care less about the piddling trade that is taking place with-in virtual worlds, because it isn't being used as a tax shelter. All they care about are the people that are receiving real world income providing a service to gamers (gold farmers, item crafting, etc).

Re:Frist Psot (2, Interesting)

tibike77 (611880) | more than 7 years ago | (#18785323)

As soon as in-game wealth CAN be used as an actual source of income in the real world, I have no problem with it being taxed.
But as long as that "wealth" stays online and never gets exchanged for real money coming into my pocket, stay the fuck away from my ISK and T2 blueprint copies :P

Re:Frist Psot (1)

Xzzy (111297) | more than 7 years ago | (#18785423)

There do exist people who have made a living off selling in-game items and money. Most people who have been able to maintain a living off this sort of "work" aren't really playing the game anymore, it turns into a job for them and they work at it just as hard as anyone else with more traditional employment.

They're the exception however, but I would imagine the beancounters don't care. They see money slipping past them, and will cast as wide a net as possible to try and halt it.

Re:Frist Psot (1)

tibike77 (611880) | more than 7 years ago | (#18785551)

I don't have a problem with virtual jobs for real money, and I don't have a problem with the government taxing that.
But then again, if that happends, I do expect the governments to FORCE the MMOG companies to acknowledge in-game property as actual, personal user property, and allow in-game assets "conversion" to real money at any given time (as per supply and demand from other customers, not from the game company).
However, the actual value of the goods should be set as "zero" for ownership taxes only, so that simply owning a piece of virtual wealth does NOT mean you have to pay something simply for owning it... just if you try to sell it.

Re:Frist Psot (1)

jdigriz (676802) | more than 7 years ago | (#18785527)

I already pay Sales Tax on every item I sell in Eve in the in-game market. It's not my fault they don't forward the ISK to the appropriate authorities, any more than it would be if Mcdonald's didn't forward the tax on a cheeseburger.

Re:Frist Psot (1)

tibike77 (611880) | more than 7 years ago | (#18785619)

Heh, good one. Next thing you know, they'll increase sales tax to around 2% minimum and even 10% max without skills, and file tax returns for you. But then again, this would mean the EVE economy must first become a realistically modeled economy (bye bye sinks and faucets) before that even has a chance to fly.
I'm looking forward to tax-deductible charitable ISK donations to newbies, and anti-monopoly real-life lawsuits for T2 BPO owners ;)

Re:Frist Psot (1)

SatanicPuppy (611928) | more than 7 years ago | (#18785677)

That's exactly how it works with stocks (except in the case of stock dividends), and that's pretty much what they're talking about.

You can't assess a value on an item in a game without that item having been converted into actual currency...The markets fluxuate too rapidly.

Re:Frist Psot (1)

UbuntuDupe (970646) | more than 7 years ago | (#18786105)

Hey, look on the bright side, at least you can sue WoW for paying you below minimum wage. Oh, and look at the state of your home: ~*~OSHA violation~*~! Ca-ching!

Good luck finding me IRS (4, Interesting)

wakingrufus (904726) | more than 7 years ago | (#18785175)

Suppose i pay for my mmorpgs with game cards and use proxies to connect tot he game servers. how then can anyone be expected to track how much gold i have accumulated on my virtual d00d? I can see taxing the sale of virtual goods for real money (not that i agree with it), but it seems silly to expect purely in-game assets to be taxed.

Re:Good luck finding me IRS (2, Informative)

commisaro (1007549) | more than 7 years ago | (#18785207)

Hmm, yes... scamming the IRS... ALWAYS a good plan.

Re:Good luck finding me IRS (1)

wakingrufus (904726) | more than 7 years ago | (#18785343)

My point is more that there is absolutely no documentation to prove how much "money" I had or had not made. IRS doesn't know I have an account, and the game company doesn't know who I am. It is like me running down a random street and throwing a pack of collectors baseball cards at the first pedestrian I see, and then saying the government is going to tax that guy for that income.

Re:Good luck finding me IRS (1)

cortana (588495) | more than 7 years ago | (#18785409)

Hm. Wouldn't they only have to pay on the profit they made if/when they sold them?

Re:Good luck finding me IRS (1)

wakingrufus (904726) | more than 7 years ago | (#18785481)

If he sold them, it would be like selling your online stuff, which in my GP post I said i could see happening, however in TFA, they mention the possibility of taxing your online assets even if you don't sell them for RL money. In my analogy, this would mean he gets taxed just for having the cards, which is why I find the whole notion silly.

Re:Good luck finding me IRS (1)

ivan256 (17499) | more than 7 years ago | (#18785877)

Technically, their cash value counts as income. Realistically, they'll be overlooked until sold because there's no way to track them.

If I gave you a brand new car, however, you'd be forced to pay income tax on the value or reject the gift, because there would be a simple, practical way for the government to realized you received it.

If this weren't the case, people would probably push to be paid part of their salary in food and clothing.

Re:Good luck finding me IRS (1)

cswiger (63672) | more than 7 years ago | (#18788947)

At least in most states, you have to pay a "vehicle excise tax" in order to register it and get a license plate-- but that's not an income tax, though. If you don't drive the vehicle on public roads, perhaps because it needs a lot of repair, you don't need to pay....

Bingo -- it's the sale. (2, Insightful)

Kadin2048 (468275) | more than 7 years ago | (#18787423)

Hm. Wouldn't they only have to pay on the profit they made if/when they sold them?

I think this is really how the 'taxation' in online games is going to end up working. It's like stocks right now. If I go and buy stocks (with my post-tax income), I don't pay any taxes on the appreciated value of those stocks until I go to sell them. Then, the year I sell them, I have to go back and figure out what I paid for them, to establish the cost basis, and compute the capital gain.

I don't see why a +20 "Sword of Toestubbing" would be any different. Assuming you pay for it using a virtual currency that you bought using post-tax income, it's just like a stock. When you go and sell that, the income that you derive from the sale is taxable as capital gains, and if you want to avoid having 100% of the sale price taxed, then you need to go back and establish what the cost basis was of the investment.

IMO, the IRS doesn't seem to care too much about non-cash investments until you go to sell them. You can buy a stock, and that stock can split, reverse-split, do all sorts of stuff. It only becomes an issue (setting aside dividends) when you turn it back into greenbacks.

Re:Good luck finding me IRS (1)

tibike77 (611880) | more than 7 years ago | (#18785431)

Parazphrasing from TFA, "they're not doing it any time soon, and only because it would be a monumental pain in the ass right now".
In other words, it would cost them more to try and enforce it as it would possibly bring them.

Just wait until we all use (almost) exclusively electronic currencies and "paper money" becomes a collector's item, and you WILL see governments taxing everything imaginable... that's what they TRY to do anyway.

Nah, precedent has already been set (1)

marcus (1916) | more than 7 years ago | (#18786315)

There already several "virtual worlds" that exist, and have existed for decades, that have not been taxed and will not be taxed in the future.

Number One(and most obvious): The Game of Monopoly. It too has a purely virtual currency, people have made millions playing it, yet there is so far, and there will always be, ZERO taxation.

Number Two: Any casino. You convert your money to chips, play with chips, make millions, lose millions, and don't generate a cent in tax liability until you convert back to "real" money.

There's also plenty of argument about whether or not "real" paper money is actually money, but that is another arg...

Re:Nah, precedent has already been set (1)

nickname225 (840560) | more than 7 years ago | (#18787351)

Your thinking about casinos is incorrect. If you were to go into a casino, play and win - you would definitely be subject to tax on your winnings, regardless of whether or not you converted your chips into cash. The chips are a cash equivalent, and are convertible to cash at a determinable rate. All the income tax laws require - if for you to receive something of value and for that value to be reasonably determinable. Think about your pay check. If your employer issues you checks, and you just never get around to cashing them, at the end of the year, you will receive a w-2 and be taxed on the value of the checks - because they are convertible into cash at a reasonably determinable rate.

Re:Nah, precedent has already been set (1)

nickname225 (840560) | more than 7 years ago | (#18787499)

The issue with Monopoly, is there is no secondary market for monopoly money - thus it's value is not reasonably determinable and so - no tax. If a secondary market were to develop for monopoly money, then it would, arguably, have a determinable value and as such, any that you earned would be potentially subject to tax. Of course, WOW gold and monopoly money differ in other important ways as well. Monopoly is a time limited game, and there is a fairly small, finite amount of money. Now - if the games are successful in closing down the gold farmers, then the secondary market for gold disappears, and the value of gold becomes indeterminable. Since tax cases are clear that to be taxable, a thing must have a reasonably determinable value, then the gold becomes nontaxable, until someone figures out a way to convert it into cash...

Re:Good luck finding me IRS (1)

everphilski (877346) | more than 7 years ago | (#18786899)

My point is more that there is absolutely no documentation to prove how much "money" I had or had not made. IRS doesn't know I have an account,

All they have to do is ask SOE / Blizzard / Turbine / etc. to get a list of active accounts.

and the game company doesn't know who I am.

Sure they do. Even if you pay in game cards they still require personal information to set up the initial account (be it an email address or a physical address and phone number). Sure, you can put in misleading information just like you can lie on your 1040, but the error is in your court, not the IRS's.

It is like me running down a random street and throwing a pack of collectors baseball cards at the first pedestrian I see, and then saying the government is going to tax that guy for that income.

No, because it is a gift. He gave nothing to you. You, however, might need to file a gift tax form if it was in excess of $12,000. You probably won't owe anything, though...

Re:Good luck finding me IRS (1)

JamesTRexx (675890) | more than 7 years ago | (#18785251)

Not to mention which tax office is going to do the hunting? I live in Europe, the servers are in the US, and I trade with Japanese people. Who's going to get the tax?

Re:Good luck finding me IRS (5, Insightful)

zippthorne (748122) | more than 7 years ago | (#18786445)

If they tax it, you can claim the subscription fee as a business expense.

Mod Parent UP!! (1)

PixieDust (971386) | more than 7 years ago | (#18786585)

OMG I hadn't thought of that. Why stop at the subscription though? Write off your internet connection, electric bill, even rent since you have to have a place to "work". I'm sure there's a few more I'm overlooking but yea. Great idea. On second thought, yes, DO tax these things, my tax refund will be larger than ever, as since I don't make real money playing these games (not often anyway, occasionally a friend might slip me a $20 to go hunting with them), I'll always have a capital loss. That would make my tax refund even larger every year, since I'm spending soooo much on this "Business" and not making any money. I LIKE IT!

Never pay taxes again! Just play MMOs a lot! And collect EVERYTHING you can find.

Re:Mod Parent UP!! (2, Informative)

nickname225 (840560) | more than 7 years ago | (#18787553)

Actually - the tax hobby loss rules, would not allow that. You need to show the IRS that you are engaged in a business for profit and not just a hobby to claim losses in excess of revenue. As a hobby - you can only claim expenses to the extent of revenue and any excess loss, cannot be carried forward. Sorry.

Re:Good luck finding me IRS (3, Insightful)

Jaeph (710098) | more than 7 years ago | (#18788135)

You are a fool. They will ask blizzard who you are.

Feel free to follow the logic train...you won't be allowed to play anonymously if they tax.

-Jeff

Re:Good luck finding me IRS (1)

gebbeth (720597) | more than 7 years ago | (#18788417)

Suppose i pay for my mmorpgs with game cards and use proxies to connect tot he game servers. how then can anyone be expected to track how much gold i have accumulated on my virtual d00d? I can see taxing the sale of virtual goods for real money (not that i agree with it), but it seems silly to expect purely in-game assets to be taxed.

The only time that this sort of thing should be taxable is when there is real income. IE someone farms up a horde of gold and then sells it for real money. That is income and should be reported as income (which consequently is taxable). The onus of reporting should be on the individual earning the income. The problem of someone not claiming said income should not be solved by legislating that the game administrators track these transactions, but by going to a tax collection scheme like the fair tax [fairtax.org] that collects tax from everyone at the cash register.

What's the problem... (4, Funny)

creimer (824291) | more than 7 years ago | (#18785199)

With having tax collectors in the game that players can beat up and rob?

Re:What's the problem... (1)

UbuntuDupe (970646) | more than 7 years ago | (#18785261)

They'll allow the IRS avatars be like Everquest's umpteenth-level in-game guards.

Re:What's the problem... (4, Funny)

superwiz (655733) | more than 7 years ago | (#18785565)

Ooooh... Can they be all called "Smith"?

I see no problem with taxing online games (4, Interesting)

simm1701 (835424) | more than 7 years ago | (#18785269)

As long as its one of 2 ways

1) VAT/sales tax on the subscription and game purchase - oh they already do this don't they? :) (not to mention tax on electricity usage, network connections staff wages and all the other costs the company incurs, oh and on their profits if any)

2) On in game items that are bought and sold for real money - ie a commission on in game to real life transfers.

Anything else is just pure nonsense!!

Re:I see no problem with taxing online games (1)

ADRA (37398) | more than 7 years ago | (#18786165)

Agreed. The game crosses from entertainment to asset when you sell something for real money.

Re:I see no problem with taxing online games (1)

cybermage (112274) | more than 7 years ago | (#18788091)

network connections

Tiny nitpick about your otherwise astute observation, but I believe fees for Internet Access are not subject to sales tax in the U.S.

Ahem. (-1, Flamebait)

Anonymous Coward | more than 7 years ago | (#18785293)

Oh no! Taxation in our favourite game world! Neeeeeeeeeeeeerrrrrrrrrddddddds!

Cashing out (4, Insightful)

Metaphorically (841874) | more than 7 years ago | (#18785295)

The intangible gnome may be something ephemeral that comes in to my possession (in the sense that it is under my control) but if the analogy is to stocks, then wouldn't it make sense to be taxed when I cash out? I mean gains in the stock market aren't taxed until the stocks are exchanged for money and a capital gain is realized. The funny part really comes later in the discussion when people agree with the concept seemingly based on the idea that anything which causes joy should result in negative consequences.

Re:Cashing out (1)

TBone (5692) | more than 7 years ago | (#18785577)

If this was the case, you could account for them like Capital Gains...

  • Cost = (SubCost * MonthsOwned) + (HoursPlayed * MinWage * PercentMultiplier)
  • Value = (EbayProfit)
  • Gain = (Cost - Value)

Make money, pay tax.
Lose money, get tax break

Looks like everyone wins!

Re:Cashing out (1)

ivan256 (17499) | more than 7 years ago | (#18785697)

It'll end up being more like gambling...

You get taxed when you cash out, but you can't deduct more than your winnings as losses.

Also, the (HoursPlayed*MinWage*PercentMultiplier) is a bit of a stretch.... Unless you propose day traders start paying themselves minimum wage?

Re:Cashing out (1)

Retric (704075) | more than 7 years ago | (#18786063)

As a self employed person you can't deduct the value of your time from your gain otherwise you could work for someone at 25$ an hour say your worth 25$ an hour and pay no tax.

However, if you paid someone else 5.25$ an hour then you could deduct that from your profit but you would need to pay payroll taxes on that.

Re:Cashing out (2, Funny)

edittard (805475) | more than 7 years ago | (#18785979)

Isn't it time we had a separate /. section for all this virtual taxation nonesense? They could run a competition to design for the logo for it! I propose a piggy bank with acne.

Tax real world income, like with stocks. (0)

Anonymous Coward | more than 7 years ago | (#18785335)

That goofy World of WarCraft gnome that GFW editor-in-chief Jeff Green's been leveling isn't any more intangible than, say, stocks.

Right, but you don't have to pay tax on income from stock until you sell it and it actually becomes income. Taxing virtual goods that are never sold for real world goods is ridiculous.

I don't own the gold (0, Redundant)

Anonymous Coward | more than 7 years ago | (#18785365)

Is it legal to tax me on things I don't own? According to the EULA for WoW, I don't own the character, the items, the gold, or anything at all. Blizzard owns all of it.

So if I don't own it, how can I be taxed on it?

Re:I don't own the gold (1)

superwiz (655733) | more than 7 years ago | (#18785625)

The government can... you know... make laws. Some could make certain contracts illegal. So they can make laws invalidating those parts of the contract.... Especially since there might be money in it for the government.

Ridiculous on several counts (4, Interesting)

MeanderingMind (884641) | more than 7 years ago | (#18785379)

1) WoW players pay Blizzard for service and access to data on their servers. The ownership of said data never leaves Blizzard.

2) There is no clear market value for any individual item or character in WoW until such time as it is "cashed out" or sold.

Taxation will come to virtual worlds, but it would be supremely idiotic to think that it would be worth anyone's time or effort to tax anything but money making transactions.

Any other scenario would see incredible resistance from companies like Blizzard. It's a programming hassle to keep track of everything as is, and now they have to maintain financial records on every denizen of Azeroth?

Majordomo: Behold Ragnaros, March has come! Perhaps we should do our taxes?
Ragnaros: TOOOOOO SOOOOOOOON!!!!!

Blizzard's already covered. (4, Informative)

oneiros27 (46144) | more than 7 years ago | (#18785839)

Many people forget this, but when WoW first came out, people were up in arms about their Terms of Service [worldofwarcraft.com] . Specifically, the ownership clauses:

2. Ownership

All rights and title in and to the Program and the Service (including without limitation any user accounts, titles, computer code, themes, objects, characters, character names, stories, dialogue, catch phrases, locations, concepts, artwork, animations, sounds, musical compositions, audio-visual effects, methods of operation, moral rights, any related documentation, "applets" incorporated into the Program, transcripts of the chat rooms, character profile information, recordings of games played on the Program, and the Program client and server software) are owned by Blizzard or its licensors. The Program and the Service are protected by United States and international laws. The Program and the Service may contain certain licensed materials, and Blizzard's licensors may enforce their rights in the event of any violation of this Agreement.

8. Ownership/Selling of the Account or Virtual Items.

Blizzard does not recognize the transfer of Accounts. You may not purchase, sell, gift or trade any Account, or offer to purchase, sell, gift or trade any Account, and any such attempt shall be null and void. Blizzard owns, has licensed, or otherwise has rights to all of the content that appears in the Program. You agree that you have no right or title in or to any such content, including the virtual goods or currency appearing or originating in the Game, or any other attributes associated with the Account or stored on the Service. Blizzard does not recognize any virtual property transfers executed outside of the Game or the purported sale, gift or trade in the "real world" of anything related to the Game. Accordingly, you may not sell items for "real" money or otherwise exchange items for value outside of the Game.

So, Blizzard owns your account. You own nothing, therefore, they'd have no reason to track sales. Now, a company like Linden, on the other hand, wouldn't have that loophole.

Re:Ridiculous on several counts (1)

steveo777 (183629) | more than 7 years ago | (#18787685)

Speculation:
3) Players would actively reject having to pay out for in Game transactions as no definitive model seems liable for the 'real market' value of in Game items and taxation thereof. The hassle will be too much for subscribers. Thus dropping subscription rates drastically and possibly crippling the industry. (which, with how things appear to be going in China's government, may seem like a good thing)


also
4.???
5. Profit

Take a deep breath. (5, Insightful)

EveryNickIsTaken (1054794) | more than 7 years ago | (#18785389)

Despite that fact that every gamer site & mag likes to get all fud-tastic in regards to MMO taxes, let's use our brains for a second. The only time that a tax would be applicable would be if real-world money changes hands. Selling gold / items / characters for money? You'd get hit with a sales tax or have to report this as taxable income. It might "suxxors," but if you can make a living by gold farming, then I'd certainly expect you to have to pay your taxes, too.

Re:Take a deep breath. (1)

lostboy2 (194153) | more than 7 years ago | (#18787087)

The only time that a tax would be applicable would be if real-world money changes hands.
That's how it should be (if they tax it at all, that is), but that's not necessarily how it could be, or will be.

In RL, when you exercise incentive stock options, for example, you typically purchase stock worth X dollars for some amount less than X. In the US, due to the Alternative Minimum Tax (AMT) rules, you owe tax on the difference between what you paid and what it's worth at the time you bought them, even though you haven't sold the stock yet. I know this because I'm one of the idiots who didn't dump my stock during the dot-com crash and now have a huge tax debt.

So, if they (gov, IRS, whoever) do the same to WoW, if you buy 1000 gold from someone for $10 and it's market value is $100, you will owe tax (based on AMT) on $90. Alternatively, if your friend mails your character 1000 gold (with a street value of $100) for free, under the same rules, you could owe tax on all of the $100 value.

In addition, when you die in RL, if your estate is worth more than 2 million dollars [wikipedia.org] , your inheritors will owe a federal estate tax (and some states have a state tax to go along with it). If you've farmed/hoarded 1 million gold in your WoW account and it has a market value (say $10,000), that amount could be included in the total value of your estate and contribute to how much tax is owed, if anything.

Now, hopefully, legislators will see the silliness in trying to tax something that has no legal market value (as I understand it, you are not supposed to purchase stuff in WoW for real money) and is at the whim of a single corporation (Blizzard could arbitrarily affect the market value of gold, for example, by making it more or less available in the game).

Untapped Markets (4, Interesting)

Clever7Devil (985356) | more than 7 years ago | (#18785511)

I'm going to repost what I said the last time this came up (Two weeks ago):

Taxing people on real dollars earned is nothing new. It doesn't matter how the money is earned. According to US law, anyone who "ebaY's" their WoW wealth owes taxes on the money received. If you try to cross the line between real and virtual "value", you open up a Pandora's box that would be hard to close.

First of all, Blizzard would be in court the day any such ruling came down.
Second of all, if you legitimize the transfer of access to virtual property by assigning it real world value, you open it up to all the issues our money faces today.

Would you need some sort of FDIC-type entity to protect the guild bank? Guild leader gets keylogged, don't worry, your Epics are insured.

Repair bill insurance? Arguably your character is your main tool for earning. If he dies or takes damage while performing his function, the repair bills begin to stack up. Since insuring this guaranteed expense is unfeasible, can we write it off? What about the other built-in money-sinks? Arguably my epic mount is a sound investment towards future earnings. It will allow me to grind and gather more efficiently. Can I write off this 5200g expense? Can I write it off even if I've never sold virtual goods for real currency?

Credit? If I take out a loan from a guildie, and then I stall on paying him back, can he report me to a real world collector? Will it affect my credit score? I'm sorry sir, we regret to inform you that we cannot finance your home at this time. Apparently you have a large outstanding debt with xlegolasx. Would this spawn lenders and credit-issuers in game? "Mastercard, accepted at Auction Houses everywhere. Yes, even Gadgetzan."

I'm just saying. Tax people if they earn money from anything. That's fair, it's the law. But taxing people who don't have any intention on making money from their hobby would cause more problems than it's worth.
Yeah, that still sums up the issues in my mind.

No more tangible? (3, Insightful)

Chris Burke (6130) | more than 7 years ago | (#18785521)

Please! A share of stock is ownership of a piece of the company. It gives you the right to vote on decisions made by the board of directors, and it may entitle you to receive dividends based on the company's profits. There are limitations on a company's ability to issue new stock. These are the reasons why stocks are tangible and have value. Yes, your stock is probably just bits on server that keeps track of how many you own, but those bits represent actual ownership of an actual company. When someone buys my stock, they are paying for that ownership, not for the bits that represent that ownership. This is quite tangible.

Your gnome is bits on a server, and that's it. Those bits don't even represent anything in the real world; the bits are the entirety of the thing's existence. The server owners could delete those bits at no cost except your annoyance, or they could duplicate those bits so everyone on the server has three dozen exact copies of everything you own. If you can get someone to buy those bits from you, they are still buying nothing but bits. There is no connection to anything outside the world of bits, and hence the gnome is truly intangible.

I mean that's just silly. My bank account is just data on a server -- except that data represents very real, very tangible currency. Cash is no more tangible than your WoW character -- yeah right!

All this means is the same thing that it has always meant regarding taxation: The second my in-tangible, non-existent thing (my online gaming bits) is turned into something tangible (like a stock or wad of cash) then you tax it. How much do you value the bits at for tax purposes? The amount they were sold for. Simple. And we're done. We don't need a whole new section of tax code about the value of things that don't exist or even represent things that exist.

Re:No more tangible? (1)

Scarblac (122480) | more than 7 years ago | (#18786303)

Well, the actual tangibles of a company (money in the bank, perhaps ownership of a building, sometimes an inventory, some office furniture) is usually a small part of the company's value. That value is in job contracts with employees, intellectual property, contracts with customers, expected future earnings, brand recognition, et cetera. All totally intangible.

Of course you have a point, but if WoW stuff is tradeable for real cash on some more or less permanent market, then it has real value. Period.

Re:No more tangible? (1)

UbuntuDupe (970646) | more than 7 years ago | (#18786769)

I don't follow. You repeatedly refer to stock as being tangible. It's not. Tangible means you can touch it [reference.com] . (None of the other definitions fits what you mean here either.) You can't touch stock. You can touch stock *certificates*, but the "stock" itself is "ownership of a company". When you buy stock, you're buying a certain kind of (intangible) relationship with others about control of a commercial venture. That is tangled up with all sorts of expectations about whether the board must listen to you, whether courts will smack them up if they don't, etc.

You then describe cash as tangible. Well, cash has different meanings. Financial planners refer to money market mutual fund shares and bank account money, even when it's electronically stored, as "cash". That again is just bits, which through certain relationships, entitles you to conversion to the *tangible*, paper money.

Your gnome is bits on a server, and that's it. Those bits don't even represent anything in the real world; the bits are the entirety of the thing's existence. The server owners could delete those bits at no cost except your annoyance, or they could duplicate those bits so everyone on the server has three dozen exact copies of everything you own. If you can get someone to buy those bits from you, they are still buying nothing but bits. There is no connection to anything outside the world of bits, and hence the gnome is truly intangible.

I'd have to disagree. Like the stock (that you classify as tangible), your gnome is a claim to a certain kind of performance (from Blizzard). Yes, Blizzard could "inflate" your gnome into worthlessness, or delete it, for the heck of it. Just like the board of directors could tell you they're not sharing dividends with shareholders anymore. What creates value for the gnome and the shares is the (well-founded) expectation that that won't happen.

Now, I ultimately agree with your suggestion: for a number of reasons, it's best to just say, "when real-world currencies change hands, *then* count it as income, but not until". But I don't understand the distinction you tried to make between a gnome and stock.

Re:No more tangible? (1)

jgoemat (565882) | more than 7 years ago | (#18788007)

I don't follow. You repeatedly refer to stock as being tangible. It's not. Tangible means you can touch it [reference.com]. (None of the other definitions fits what you mean here either.) You can't touch stock. You can touch stock *certificates*, but the "stock" itself is "ownership of a company". When you buy stock, you're buying a certain kind of (intangible) relationship with others about control of a commercial venture. That is tangled up with all sorts of expectations about whether the board must listen to you, whether courts will smack them up if they don't, etc.

Being able to touch something isn't the only definition:

  1. capable of being touched; discernible by the touch; material or substantial.
  2. real or actual, rather than imaginary or visionary: the tangible benefits of sunshine.
  3. definite; not vague or elusive: no tangible grounds for suspicion.
  4. (of an asset) having actual physical existence, as real estate or chattels, and therefore capable of being assigned a value in monetary terms.

A company only has a certain number of shares of stock. Each share of stock has a definite owner. There are people waiting to buy stock at a certain price and people willing to sell stock for another price. When the sale takes place, money changes hands. You pay for the increase in value of the stock from when you bought it to when you sold it, the actual difference in money you paid and money you received.

I'd have to disagree. Like the stock (that you classify as tangible), your gnome is a claim to a certain kind of performance (from Blizzard). Yes, Blizzard could "inflate" your gnome into worthlessness, or delete it, for the heck of it. Just like the board of directors could tell you they're not sharing dividends with shareholders anymore. What creates value for the gnome and the shares is the (well-founded) expectation that that won't happen.

That's not true at all. Blizzard makes it clear in their terms of service that they own any rights to your online characters. They could be deleted tomorrow. They specifically forbid you from attempting to sell your character or gold. If you are on either end of such a transaction you face losing your account with no legal recourse. You can create new characters whenever you want, up to eight per server. It's nothing like stocks. The board of directors deciding not to pay dividends might make your shares of stock worth less, but you still own exactly the same number of shares. This would be the same as the company deleting your shares of stock because you bought them from someone.

Re:No more tangible? (1)

UbuntuDupe (970646) | more than 7 years ago | (#18788251)

Being able to touch something isn't the only definition:

Yes, I noted that, and noted that none of the others apply, and this reasoning:

A company only has a certain number of shares of stock. Each share of stock has a definite owner. There are people waiting to buy stock at a certain price and people willing to sell stock for another price. When the sale takes place, money changes hands. You pay for the increase in value of the stock from when you bought it to when you sold it, the actual difference in money you paid and money you received.

Does not support a claim that it meets any of the other definitions.

That's not true at all. Blizzard makes it clear in their terms of service that they own any rights to your online characters. They could be deleted tomorrow. They specifically forbid you from attempting to sell your character or gold. If you are on either end of such a transaction you face losing your account with no legal recourse.

Again, none of that contradicts my claim that: "What creates value for the gnome and the shares is the (well-founded) expectation that [expropriation] won't happen."

Just because they *could* do these things, doesn't mean they will. The U.S. government *could* default on treasuries; it its widely expected not to for the forseeable future. My point was that the value comes from the *expectation*, not any legal rights Blizzard has, and so far, they have been respectful *enough* of virtual property rights, for them to be valuable, just like the U.S. government has been responsible *enough* honoring treasuries for their promise to have market value.

It's nothing like stocks. The board of directors deciding not to pay dividends might make your shares of stock worth less, but you still own exactly the same number of shares. This would be the same as the company deleting your shares of stock because you bought them from someone.

See sig. I wasn't referring to a board not paying dividends; I was referring to a board paying dividends, *but only to the shares they hold and not yours*. They certainly could attempt to do this; the value of the shares comes from your expectation that they won't do this, and that someone else (the government) will rectify it if you do.

The underlying point is that the value of these relationships, whether they be ownership of a gnome or a government bond or a business venture, depends on the trust people have that the relationships will be honored. Legal recourse is one way to establish trust, but it is not the *only* way, and legal remedies are themselves dependent on trust of the government to do what it said it will. Simple tradition by Blizzard of honoring these transactions can create substantial expectation that they will be honored, as that is exactly why US treasuries have value.

Re:No more tangible? (1)

sean_r69 (621600) | more than 7 years ago | (#18789869)

Now, I ultimately agree with your suggestion: for a number of reasons, it's best to just say, "when real-world currencies change hands, *then* count it as income, but not until". But I don't understand the distinction you tried to make between a gnome and stock

You are the owner of the stock and may sell it. You do not own the gnome and hence may not sell it. Blizzard owns the gnome, and the money you give them allows you to play the gnome but at all times they retain ownership. If you were to attempt to sell the gnome you would be in breach of contract and surely guilty of fraud? (for attempting to sell something you do not own?)

Re:No more tangible? (1)

UbuntuDupe (970646) | more than 7 years ago | (#18790111)

You are the owner of the stock and may sell it. You do not own the gnome and hence may not sell it. Blizzard owns the gnome, and the money you give them allows you to play the gnome but at all times they retain ownership. If you were to attempt to sell the gnome you would be in breach of contract and surely guilty of fraud? (for attempting to sell something you do not own?)

This is all true, but doesn't develop a fundamental distinction. What makes "my gnome" (or anything) valuable is not the ownership per se, but the fact that people widely and predictably respect my usage rights (and transfer of those usage rights) in the gnome. So far, Blizzard has respected users usage/transfer rights in their characters to the point that people treat them as proprety, making the origin of the value of the stock and the gnome are really the same thing. So I can't see what "tangible/intangible" distinction Chris_Burke was trying to draw. Again, it's true that Blizzard can reneg on recognition of those rights ... but so can the government or corporations on any of various rights. Why do people think they won't? Why do people think Blizzard won't?

Re:No more tangible? (1)

Chris Burke (6130) | more than 7 years ago | (#18790243)

I'd have to disagree. Like the stock (that you classify as tangible), your gnome is a claim to a certain kind of performance (from Blizzard). Yes, Blizzard could "inflate" your gnome into worthlessness, or delete it, for the heck of it. Just like the board of directors could tell you they're not sharing dividends with shareholders anymore. What creates value for the gnome and the shares is the (well-founded) expectation that that won't happen.

The only "performance" I get from Blizzard involves pushing those self-same bits around on the server they already exist on. That gnome represents nothing in the real world; it's existence is completely self-contained in its virtual world.

The share of stock, however, represents something in the real world: Partial ownership of the company that issued the stock, and a proportionate amount of voting power. If I own enough of these shares, I could demand that the board start sharing dividends or I would replace them. That is the real world connection that turns bits into something tangible, because it is designed to create tangible effects in the real world.

That's the difference, and it is plain and real. It is that ownership that forms the fundamental value of a stock, and is why investors trade stocks and not gnomes.

Re:No more tangible? (1)

vertinox (846076) | more than 7 years ago | (#18789471)

Please! A share of stock is ownership of a piece of the company.

Actually, it is still intangible that it is still bits on a server somewhere and it is worth as much as the market allows.

In a sense if Blizzard erases your account or the company you purchased stock in goes belly up, then you are left exactly with the same exact thing... Nothing.

Tangibles include real estate, precious metals, and various other real world items that remain the same in a physical sense regardless of how the market values them.

As in... Even if I bought a house and housing market collapses tomorrow, I still have a house. If I buy 10,000 shares of Google and tomorrow they go bankrupt and no one buys them out... Well... I technically don't even have the paper since I use an electronic brokerage.

(but in the business world intangible assets are actually things like copyrights and patents)

Can't tax illegal sales (0)

Anonymous Coward | more than 7 years ago | (#18785561)

Sale of in-game items and characters is a violation of the EULA, and therefor is contract violation and illegal under contract law. You cannot tax an illegal sale(well, i suppose you COULD, but it would be like trying to tax the sale of illegal drugs).

All characters, in-game items, and in-game money are property of Vivendi through their subsidiary Blizzard Entertainment Inc. Therefor any taxes levied on in-game objects would have to be paid by Vivendi, not the player.

Re:Can't tax illegal sales (1)

superwiz (655733) | more than 7 years ago | (#18785779)

First of all, in the US illegal for-profit activities are taxable. Al Capon is the example that people usually use to prove that point. And don't forget that most illegal imigrants who work here illegally pay taxes (they don't have a choice but to sneak around INS, but they wouldn't mess around with the IRS). Second of all, violating a contract is not illegal. It simply exposes you to a lawsuit for the damages the other party has suffered due to nonperformance. So Blizzard can sue you... but mostly it just doesn't have to honor its contract and keep your character around anymore... so they erase characters that do this. Oh, and drug dealers are often wiped out just so... through tax codes. I am not a lawyer.... but I read the paper.

Re:Can't tax illegal sales (1)

srmalloy (263556) | more than 7 years ago | (#18788931)

However, I can see that the game companies would want to lobby very heavily for the distinction to be drawn between income from selling virtual property (albeit against the game's EULA, therefore reportable on your return in the box for 'embezzled or other illegal income') and the virtual property itself as a capital gain. If Congress goes for the quick but ill-considered solution, they will pass a law that makes the acquisition of this virtual property taxable on the premise that it is something of value that can be sold for profit. However, by the game's EULA, all of this virtual property belongs to the game company, which means that your acquisition of virtual property would represent a taxable capital gain on the part of the game company, not you. Consider what it would mean for Blizzard to get hit with a capital-gains tax on the grey-market value of every item that all of its subscribers managed to acquire in a year.

Same shit, different day (0, Troll)

Anonymous Coward | more than 7 years ago | (#18785573)

I'm waiting for the day when there isn't a stupid WoW story on /.

What is the point of taxation? (1)

Jah-Wren Ryel (80510) | more than 7 years ago | (#18785627)

Why do we have taxes in the real world?

I would say that we have taxes to pay for the public infrastructure and the continuing operation of said infrastructure.

In such "virtual worlds" the infrastructure is all provided and operated by the company selling access to the "virtual world." In effect, your usage/subscription fees fill the same role as taxes do in the real world.

To the extent that the company that owns the "virtual world" also exists in the real world and makes use of public infrastructure, they must pay tax on their revenue, just like any other business.

So, if all of the above is true, just why is it inevitable for "virtual worlds" to be taxed by real-world governments?

Re:What is the point of taxation? (1)

exp(pi*sqrt(163)) (613870) | more than 7 years ago | (#18785919)

> I would say that we have taxes to pay for the public infrastructure and the continuing operation of said infrastructure.

By your argument, someone could form a market, charge people for entering that market, and claim that the government has no right to tax sales made in that market, after all, its users have already paid the owners for the infrastructure of the market.

There are plenty of reasons not to tax income and sales in virtual worlds, but this isn't of of them.

Enough? (5, Funny)

djones101 (1021277) | more than 7 years ago | (#18785631)

Haven't [slashdot.org] we [slashdot.org] discussed [slashdot.org] this [slashdot.org] enough [slashdot.org] ?

Re:Enough? (0)

Anonymous Coward | more than 7 years ago | (#18789061)

Fuck you Troll

Blizzard owns the characters (1)

sanjacguy (908392) | more than 7 years ago | (#18785753)

Oh you did read the EULA, right? Blizzard owns the characters, money, likenesses of items, etc etc. We'll never have to pay taxes on things we don't own. We pay sales tax for the game, and the time cards if you use them. If you make a living selling gold/characters on ebay, aside from being against the EULA, that's a different story. Do enough of them and you probably qualify for a business. In which case, your might list your WoW accounts as assets.

Simply put, the average John Q Public WoW player has nothing to worry about. When you play for a while and sell your account, you have nothing to worry about Tax-wise (aside from being against EULA).

The Second Life players, that might be a different story.

Re:Blizzard owns the characters (3, Informative)

SydShamino (547793) | more than 7 years ago | (#18786917)

Regarding real-world sales of in-game items only:

We'll never have to pay taxes on things we don't own.

If you sell something you don't own, and you pocket the profit, you still owe taxes on it. If you steal car, and then sell that car, you can be convicted of tax evasion unless you pay taxes on the profit, with your "cost basis" correctly set to $0. Yes, this is true even if you are separately convicted of the theft.

If I go to the library and rent a really popular book, and the next person on the waiting list offers me $250 to give the book to him, I would need to pay tax on that income. The book never belonged to either of us; he'll still have to return it to the library when he's finished with it.

In short, it's not "We'll never have to", it's "We already have to".

Which of course makes this "Not real news because existing laws apply" .

who the hell posted this garbage? (1)

An0maly (448481) | more than 7 years ago | (#18785785)

why was this worthy of being posted to /.? there's no way in hell we would ever be taxed for looting 50 silver off of a dead zombie or whatever...unless i can claim my characters as dependents i think people would give the gov't a big fat middle finger. hell i'd buy multiple accounts and fill the character slots just to get the deductions.

Look on the bright side? (2, Interesting)

JimXugle (921609) | more than 7 years ago | (#18785861)

If an asset is important enough to be taxed, than it must be of enough value to be considered an item of value in the civil and criminal courts.

But seriously... Hands off my gold!

What if... (0)

Anonymous Coward | more than 7 years ago | (#18786135)

What if the government begins taxing me, in game (not likely, but hey, anything is possible).

Can I pay to have my character(s) moved to a European, or Oceanic, server and not have to meddle with tax collectors?

my 2 cents (1)

beef623 (998368) | more than 7 years ago | (#18786237)

I skimmed throught the comments and saw a lot of "Blizzard owns the data not me" and "they can't trace my character to me" replies. I'm pretty sure that when this finally goes through the license agreements will be changed and accounts will be tracked differently to compensate for the new laws.

I hope as much as the next gamer that something like this never goes through, but when I sit back and try to think realistically... it's really only a matter of time. Maybe enough money hasn't changed hands yet, or the right guy hasn't seen the potential yet, but sooner or later it/he will.

Maybe a better response from the gamers would be, not, what can we do to prevent this, but what could we get the government to do with a portion of that money once they have it. It's only realistic and fair(I'm trying to be optimistic) that if part of the National fund comes from gaming that part of it be returned to gaming.

When the day comes that they can tax my wow goods (1)

EvilPoster (1090123) | more than 7 years ago | (#18786317)

..does that mean that I can write-off the subscription fees? and computer power consumption? It's no longer a game, it's a small business!

What about one time gifts or bartering? (1)

willie_nelsons_pigta (1006979) | more than 7 years ago | (#18786331)

If you give someone gold as a one-time gift in a lump sum is that sheltered from taxes?

If you give up sex for gold is that considered bartering or prostitution?

Is there a 401k retirement plan or a AzerothIRA that I can deposit my gold into to be untouched until my character reach level 65?

If I am being taxed for items in game does that mean that I can then remove them to an of-site storage device (USB) for later purposes (Sword of a Thousand Truths, you know just in case on of these level 70 Draeni Shamans running around grows too powerful)?

I plan on moving to Southshore though for retirement anyway. That chick who works in the bar there is hotttt and she always says "hi" to me! I think there is some chemistry.

Oh Noes! Your Game is Going to be Taxed! (4, Insightful)

Greyfox (87712) | more than 7 years ago | (#18786367)

Honestly, the only thing that's being taxed here is my patience. Taxing in-game assets at any time other than when you cash them out would be retarded, and if you're a US citizen you're supposed to pay taxes on that transaction when you cash out anyway.

Nothing to see here, move along...

What i THINK they should and shouldnt tax (1)

bigalexe (985543) | more than 7 years ago | (#18786381)

Taxes apply to real world currency. So they can tax the software purchase (at the store) and the subscription fees (since they are real $$) but there would never be taxes applied to in game transactions unless real world currency is connected (like the Gold-Farming and Power-leveling services). If a user happens to sell an account that would be taxed to but the question is whether violating the TOS by using one of these services (For WoW its a violation of the TOS to use a bot, Powerleveling service, or sell accounts) would become punishable in a real court as its a "secret" transaction. That would create a whole new virtual black market.

IRS Rep? (1)

StephenW (972389) | more than 7 years ago | (#18786449)

Great, as if I needed another group to grind rep with, now I'll have to get full Exalted with the IRS to get a tax break.

I agree, not enough taxes. (1)

PixieDust (971386) | more than 7 years ago | (#18786457)

As i said in my earlier post to a similar story here [slashdot.org] there just aren't enough taxes. After all, I only pay taxes on normal stuff like things i buy, income, electricity, entertainment, food, water, shelter, work, gas, and even, as I realized, death. I mean that leaves things like sunshine, air, thoughts, fingernails, dead skin, and a plethora of other things that are not taxed. These are all just billions of dollars in potential income that no one is going after. Why, just imagine all the cool things we could have if they taxed those. And while they're at it, let's institute a gravity tax too. That can't be easy to maintain.

/sarcasm off

Idiotic (1)

argStyopa (232550) | more than 7 years ago | (#18786647)

Stop already. The "scare the geek" thing with taxes is a horse that's been beaten long past hamburger.

Yes, it's probable that eventually if you are earning a REAL-WORLD INCOME from selling things in a virtual game world, you'll be taxed on it, like you will eventually be taxed when selling crap on ebay.

But of course the "teaser" text never says that, they make it sound like there's going to be a lvl 100 Elite Auditor in every game watching how many coppers you make selling rabbit corpses.

Is onling gaming a business expense? (1)

jhfry (829244) | more than 7 years ago | (#18786651)

If the government were to consider my income generated by gaming as taxable income... then I must be allowed to consider the monthly fees as a business expense as it was an expense incurred in pursuit of that income.

Of course, that would mean that I must start a business in order to game online... and of course my computer then becomes business equipment... oh and I'm a horrible gamer, so I'll never be profitable... so eventually my gaming business will file bankruptcy... they will take my old gaming rig in the settlement, pay off my overdue internet bills, and I'll do it all over again!

There are only two things in this world (2, Funny)

Programmer_In_Traini (566499) | more than 7 years ago | (#18786665)

There are only two things in this world that you cannot escape: taxes and the wow graveyard

Tax it at 100% (1)

readin (838620) | more than 7 years ago | (#18786667)

Tax all the out of game transactions for real money at %100. That way the government will have a good reason to help Blizzard catch the gold farmers other similar troublemakers.

Here's a Thought . . . (2, Interesting)

Dausha (546002) | more than 7 years ago | (#18786669)

You've heard the likes of Steve Forbes say that a flat tax would work wonders for the U.S. Why not use a virtual world setting to test it out? That is, have a virtual world where there is progressive taxation, and another where there is flat tax. Then, measure the effects. I mean, why not use virtual worlds to test out various economic theories?

It is only taxable when it impacts the Real World (1)

WillAffleckUW (858324) | more than 7 years ago | (#18786785)

So long as you just gift gold to n00bs with level 2 characters and never accept Real World cash for it, you have not created a taxable event.

Now, on the other hand, gold farmers and others who sell MMORPG assets for Real World money and goods are creating and participating in taxable events.

Here endeth the lesson ...

This isn't that ambiguous in most situations. (2, Insightful)

sirwired (27582) | more than 7 years ago | (#18787049)

If you receive "real-world" income for your MMO loot (i.e. eBay), than of COURSE that is taxable income, just as much as tips for juggling on a street corner are taxable income. If you never get money for the loot, and the trading of loot for eventual real-world income is not a business of yours, then it is not taxable.

For example:

Not taxable: I kill a Super-Mega-Nasty-Dragon and loot the epic Item Sword-of-Greatest-Butt-Kicking. I use it to slay more vitual things, and eventually get bored and let my account lapse, I have no taxable income. Since the TOS doesn't actually allow the sale of virtual items on eBay, my item theoretically has no value, and I have received no money for the worthless item. This is no different from (from a tax perspective) from taking a $5.00 canvas, $1.00 of paint, and making a masterpiece worth millions, but hanging it up in your living room until it falls apart.

Taxable: I kill the aforementioned Dragon and sell the sword on eBay. I have now sold something and received money for it. It now has a value (because I sold it), and that income is taxable, but I could possibly deduct my monthly payment, bandwidth bills, etc., according to the normal (extremely complicated) rules for deducting business expenses. Even if though the item is not physically tangible, you have essentially performed a service for somebody (by obtaining the item so they didn't have to), and they have paid you real money for it. (Similar example: You sell 500 copies of "eBay loot-selling secrets" for $5 each. The item consists of nothing more than a .pdf file, but you have received money for it. The sale of the items are most certainly taxable.)

Maybe taxable: I buy the sword off of eBay, and trade the sword with somebody else for an item that goes for more money on eBay. Is that taxable? Maybe. If you make a business off of selling items on eBay, it just might be. Barter is just as taxable as cash transactions. (Although harder to compute.) If you are just a player executing a trade for something nicer, and don't sell stuff for cash, I'm going to have to say that it probably is not taxable. You are trading an intangible item with somebody else. You never receive cash money for it (or any other item), it isn't a tangible object, I don't see the income.

The IRS will eventually have to write rules on this for the "Maybe", but I don't think they will affect the vast majority of players. No cash money for items, no taxable income, and almost everybody lives happily ever after.

SirWired

The Solution... (1)

aicrules (819392) | more than 7 years ago | (#18787169)

nuke second life....get it fucking shutdown..it's nothing but a bane to our existence in every way. No one gives a fuck if some small group of people is trading gold for $$$ on WoW. The real problem is this stupid ass SecondLife thing that people pay INSANE amounts of money for completely virtual CRAP. WTF? Then all they really do is fuck around, literally...no socially redeeming value to SecondLife...its useless. Get rid of it before we get taxed because of it!

Taxing Toothpicks (0)

Anonymous Coward | more than 7 years ago | (#18787209)

What they're basically doing here is trying to tax a friendly poker game played with toothpicks.

There's no real money on the table, so they're trying to claim possession, and/or transfer, of said toothpicks constitutes a taxable situation. Yeah....

i hope this ruins virtual selling (0)

Anonymous Coward | more than 7 years ago | (#18787263)

I always found buying/selling virtual land and goods to be, to say the least, retarded.

If you get baned for sell stuffing is that clam? (1)

Joe The Dragon (967727) | more than 7 years ago | (#18787315)

as a big loss?

If not then this WILL KILL OFF WOW and other games like it as people will not want to pay taxes on stuff and they can't sell with out taking a risk of losing it all even if you are just sell what is needed to pay the tax bill.

Too many questions for it to work (1)

KevMar (471257) | more than 7 years ago | (#18787581)

I see 2 huge holes in this.

First, in games like wow buying and selling gold/items/characters for real cash is against the policies of Blizzard. So technicaly it has no value to the consumer. Its all property of Blizzard.

Second, if you are going to tax me on what I have earned in a virtual world, then you are going to give me tax credits for what I lost along the way. What if Im a bad player that plays alot, but at the end of the day have nothing to show for it? At the end of the year of fees, a person could spend $180.00 for a character thats non sellable. Is that a tax write off?

Third, Is a character worth $1000.00 a finiacial loss when it gets banned? or the subscription lapses? What if every november I cancel my account and then renew it in January? As of dec 31, I dont technicaly have that account.

There is no way this can be managed. what if my character is on a server outside the US? What if im outside the US?

why not start with board games and then go virtual (0)

Anonymous Coward | more than 7 years ago | (#18787651)

First they should tax every kind of board game player that deals with some form of money. Soon parents will be paying out of their behinds just so their kids can play monopoly. Seriously, if this ever does happen, they better expect virtual money as payment the virtual merchandise I acquire :)

It's not ours (0)

Anonymous Coward | more than 7 years ago | (#18787761)

Everything you do in most virtual worlds, and World of Warcraft in particular, is not yours. Your character, items, abilities, are not your property and do not belong to you. In essence, Blizzard is merely allowing you to play with their property. Therefore taxing the virtual property of a world of warcraft player means nothing, because no one who plays world of warcraft owns anything except for an account (even that is rented from Blizzard for a monthly fee), a transaction which is already taxed. This is the same reason why it is against the EULA to sell your character, sell gold, ect - you are selling something that does not belong to you. In Azeroth, you are the owner of nothing and are only allowed to manipulate things which belong to Blizzard.

I can't wait! (3, Funny)

jgoemat (565882) | more than 7 years ago | (#18788065)

I'm going to be the first one to level the new accounting profession to 375 so I can handle peoples' online tax forms! I'll be rich! I'll have to get some investors so that I can offer advances on expected refunds and I can charge huge interest rates! Look for my new office in Org...

Why in-game taxation has to remain an option (2, Informative)

TomRC (231027) | more than 7 years ago | (#18789469)

If the government decided and declared, once and for all, that it would not tax in-game virtual transactions, people could start using MMORPGs to hide real-world profits.

One might sell a million dollar house for $900K and $100K of in-game gold, where that $100K is the amount one would have otherwise taken as real-world profit. So no real-world taxes (or maybe even a loss), and one has in-game assets that can be used to pay other tax-cheats. Few of these tax cheats would take their real-world money out of the game - since they'd then have to pay taxes - but so long as there's a stable rate of exchange, and they can exchange in-game money for heavy real-world discounts on real goods, they don't care.

And of course, since the game isn't a bank, it doesn't have the reporting requirements that banks have, meaning that it'd quickly become the favored medium for black market transactions - financing drugs and terrorism and worse.

Which explains why we will keep getting these scare stories - the government wants to keep the whole mess from ever developing, so they don't have to actually engage in the messy practice of deciding how to tax virtual profits. But eventually - probably due to movement of drug money via MMORPGs - they will have to figure out a policy.

Probably it'll be fairly reasonable - most ordinary players won't ever be bothered. MMORPG companies will be required to report any people trading "gold" worth over some black-market amount, and some subset of those people will eventually find themselves being audited, and the dollar value of any real-world benefits gained in exchange for game gold will be taxed and fines assessed.

Damn! (1)

hurfy (735314) | more than 7 years ago | (#18789589)

I forgot to write off the 2 MMORPG accounts i closed last year :(

Yeah, and you're suppose to pay taxes on the net (1)

Atroxodisse (307053) | more than 7 years ago | (#18790331)

You are suppose to pay taxes on things that you buy on the internet. There's a little box on your California state tax return(if you live in California) where you put the amount of money that you spent on untaxed web purchases. How many people fill that box in? How many people are going to report their income from selling virtual items?
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