Virtual Economies Attract Real-World Tax Attention

doug141 writes to point out a Reuters story on the attention tax authorities are beginning to focus on virtual economies. From the article: "Users of online worlds such as Second Life and World of Warcraft transact millions of dollars worth of virtual goods and services every day... People who cash out of virtual economies by converting their assets into real-world currencies are required to report their incomes to the U.S. Internal Revenue Service or the tax authority where they live in the real world... 'Right now we're at the preliminary stages of looking at the issue and what kind of public policy questions virtual economies raise — taxes, barter exchanges, property and wealth,' said Dan Miller, senior economist for the Joint Economic Committee of the U.S. Congress."

Comments

Re:Finally.

[SatanicPuppy]

What would the tax be, exactly? For the most part, most states don't require sales tax on internet purchases. And if you sell accounts for more than $400 bucks, then you should be reporting that income to the IRS anyway, same as with any other income.

I don't see any need for a special case. You make money off it, you're supposed to declare that money and pay taxes on it. Goes without saying that most people don't, but that's just an enforcement issue.

Yeah, but

[Lord Kano]

Is it considered earned income or a capital gain?

From a tax perspective, there's a huge difference.

LK