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Taxing Virtual Gaming Assets
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.' "
Since they are taxing virtual goods, we'll pay with virtual money.
The simple truth is that interstellar distances will not fit into the human imagination
- Douglas Adams
If that is the case, will they soon be taxing player earnings from board games as well?
Undetectable Steganography? Yep, there's an app fo
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?
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).
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
another Roadkill on the Information Superhighway
Will they put our characters in a virtual debtor's prison?
Weaselmancer
rediculous.
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!)
Previously: "Linux... Toward the Sunrise..." Now: "Linux... Toward the-- No, now, part of Every Sunrise"
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?
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.
Ninjas use italics.
That is all.
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.
Corporate CMA != change in tax policies.
-GiH
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.
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?
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.
/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.
In reality, I think that all MMOs
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.
Thrall for Senate from the great state of Durotar!
Politicians are like diapers - they should be changed frequently and for the same reasons.
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!
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.
Beware of Sleestak
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.)
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.
Earn a % of cash back from Newegg, Tiger Direct, Walmart.com, and more: http://www.mrrebates.com?refid=458505
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
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.
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
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.
THAT makes those games more realistic than even the latest 3D engines!
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.
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.
"You spoony bard!" -Tellah
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.
If you look like your passport photo, you're too ill to travel. - Will Kommen
I wonder if I can get welfare for my lvl 2 priest?
Freedom is a state of mind. A mind is a state of being. Stay the fuck out of my mind and my being. - Corporate Avenger
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.
Is it just my observation, or are there way too many stupid people in the world?
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.
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.
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?
Slashdot Burying Stories About Slashdot Media Owned
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.
Yet.
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.
MEF
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.
Jens Wessling
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.
A polar bear is a cartesian bear after a coordinate transform.
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.
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?
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.
Slashdot's rate-of-post filter: Preventing you from posting too many great ideas at once.
What happened to just a good old tax on what you actually took in as REAL INCOME? BDGBKSB!
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?
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!
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.
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)
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.
http://www.worldofwarcraft.com/legal/eula.html 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...
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.
... and CNET fed him.
This Miller guy is nothing but a troll
The Anti-Blog
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.
--
make install -not war
We should pay virtual taxes for virtual goods.
The conjugal visit expansion would confuse most online gamers anyways.
Weaselmancer
rediculous.
Taxes (with a couple exceptions) apply to profits, not assets. Profits must be realized in order to be taxed, which usually means something is sold. If you do not sell it, then there is nothing to be taxed.
Second, profit does not equal value. Profit is the difference between what you paid and what you recieved when you sold it. If you paid what you sold something for, there's no profit.
While you may think you didn't pay something for that online sword that you found, you're forgetting that you are paying blizzard $$$ every month for the opportunity to find such sword. You would have to subtract any $$$ you shelled out before they could claim you made a profit. Plus, you would be able to make a case at that point that the computer was needed to gain that profit, and the high end graphics card, and your fancy chair.
Trust me, after you were done filling out the schedule C, you wouldn't have any profit left.
Second life is more compicated, since they are essentially running an offshore bank. As a citizen of the US, you have to pay taxes on profits in offshore accounts. If you run a business via SL, then you could find yourself taxed on profits if you are generating profits. Of course if SL taxed you, they could issue tax credits that would go against your US taxes.
Just my opinion.
This is a key point. We're starting to see the first few legal cases concerning property and ownership in virtual worlds, which may create precedents about who owns what and what property rights players can expect. There's really a two-tier economy at the moment, as some worlds allow/encourage ownership and real money trading (Second Life, some EQII servers) and appear to be operating under different rules than worlds in which the ToS bans asset trading, which then moves to grey/black markets. It'll be interesting to see if the notion of IRS interest in real money trading prompts more game operators to create official exchanges than allow them to manage the economic activity in their games. It could also send them in the other direction - outlawing RMT and forcing the IRS to shake down eBay sellers. Either way, this is probably a headache for IGE.
RichM
Data Center Knowledge
This is a joke right?
What is next, taxing people for playing the board game monopoly?
---- Booth was a patriot ----
With idiotic ideas like this around, the IRS would be raking in trillions...
I don't know about the EULAs for other MMO products out there, but Blizzard is fairly explicit in pointing out that every last character, item, piece of copper, and other property "your" character "owns" is the sole property of Blizzard Entertainment.
Yes, people do sell their accounts on ebay and such, and I do agree that such a transaction is indeed income, but officially there is no value whatsoever to the currency and items in game. If anyone were to be taxed for these in-game assets, it should be Blizzard, since they have sole ownership of everything in their game world.
What's next, the IRS is going to have a WoW account and send tax letters in game to collect my gold pieces?
Then they'll turn around and sell them for $15 per 100gp!
If there's anything more important than my ego around here, I want it caught and shot immediately.
In Ultima Online, one of the character professions you can be is a thief and you can steal items from players in certain areas. Say someone sells a virtual item on ebay for real money and then I steal it during the transaction, does that make me a real thief since at the time of theft the virtual item has real value? Would I then be faced with real consequences instead of virtual consequences?
If you consider an item to be virtual and without real world value, does it at any time have value? Or should the act of transferring an item be considered a "service rendered"?. What if I were acting in collusion with the ebay seller to steal back an item sold for real money?
There exists a lot of grey area, where a lot of players exist.
Change the rules: Players don't win any kind of valuable goods; they get paid in "Senators" and use "Representatives" as small change.
Once a player aquires enough Senators and Representatives, he can get the tax rules changed.
Don't laugh. It works for the RIAA, MPAA, etc.
If they tax our virtual gains in real money, that could be great, as it would also mean we'd get to deduct our virtual losses. I bet a clever player could generate enough virtual losses to offset all their real income, and pay zero taxes (especially once the game companies start making this easy, so that people will subscribe to the games to get a tax shelter).
If they want to tax virtual assets then they should also accept virtual money to be used for tax payments.
Alas, only US currency is held "Legal tender for all debts public and private." I don't think the IRS is willing to accept a couple of sheep if your only form of income is in barter, either. Or in nose candy if you get paid for your hitman mob contracts in powder cocaine — meaning you might need to commit another felony by selling some of the blow to pay your taxes. =)
Also, do players actually own the virtual assets? Because [as] 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).
The IRS would probably take the position on your hypothetical that you should declare a loss against income of the fair market value of the asset if that happens... and pay your taxes meanwhile.
//Information does not want to be free; it wants to breed.
This could work out for the best. Just think , then the cost of buying the games plus expansion, and monthly fees could be deducted as expenses. Not to mention in the case of WoW, the GP spent in training abilities and getting epic mount so I can run the instances and BGs that get the loot to pay taxes on.
Honestly, though how could this work? I could potentially form my own company to play WoW and sudden the cost of meals while eating and playing, electricity and computer upgrades all business-related. Now, I'm looking at a net loss as a company therefore no taxes.
Keep in mind that "real money" is actually not much different than "virtual money". There's nothing of value that really backs up the real money. It's simply the perception of value. However, it's really a moot point. The IRS doesn't tax MONEY per say, but rather INCOME. Granted, most people make their income in terms of "real money" so it's easy to get confused, but if, for instance, you traded your car for someone to come over and replace the roof on your house, that person would still have to pay income tax based on the perceived value of the transaction. Is it such a stretch that if someone paid X linden dollars to have their real-world roof replaced, there should be a similar real-world taxation event? Is it such a stretch from there that if someone paid X linden dollars to have their virtual-world roof replaced, there should also be a taxation event?
File business expenses against the income.
Trek across desert on camel-back: $2500
Renting dragons from charter service: $8000 + flight insurance $100
Lodging (castle): $200/knight
Medical: Various spells: $1500 + $10 copay each visit
Problem solved.
These games are global, I am not a US citizen and I don't live in the US. Good luck to the US government trying to tax me for playing a game.
Taxation on real income earned through playing a game - fair enough - then it's just normal income. Although the volume of people earning significant amounts of real money from a virtual world in any given country is surely so low that it's not worth considering.
Never ending FUD.
/. to KILL FUD where they can, rather than incite it?
Can I please ask the Slashdot editors to READ THE FRIGGING STORIES before passing this on as a reasonable summary of the article?
Firstly, it's nowhere suggested that this is "inevitable". IRS interest in the subject is "a matter of time" but the taxes are not. In fact, this could be a Pandora's box for tax authorities, because it will open a flood of issues that have heretofore been somewhat ignored such as
a) what right does the government have to interfere (that is, tax) a transaction between two individuals
b) trades of in-kind goods are frequently unvalued. If I trade you a $4 chicken for a $6 goose, it's clear that legally (only), I owe the government taxes on my $2 profit. But in real life, things aren't born with price tags attached; if I trade you a chicken for your goose, who's to say who 'gained value' from the transaction? The insubstantiality of the concept of objective value is problematic, exponentially so with 'virtual' goods.
Secondly, from TFA:
"LaPiana said that there is little question that the transfer of such assets could be taxable, since it is property. However, he did say that the taxes would accrue only if the total value of the estate's assets exceeded the limit set by the state in which the deceased had lived. In most cases, he said, that amount is $2 million, though some states, like New York and New Jersey, have lower limits."
So realistically we're talking not about a tax on virtual assets, as the stupid summary presents, but a tax on the REAL WORLD PROFIT made from the sale of such assets. And I'd presume that IF the IRS is claiming that profit you made is personal income, then you can immediately apply (and get) deductions for the
- cost of the computer
- costs of the internet connection
- cost of the game
- costs of the monthly access fee.
I can't see that even the IRS would see the cost/benefit of chasing 99.999% of gamers who aren't going to actually see a profit from this sort of transaction. Or is the IRS working in China now?
I understand that "OMFG THEY ARE GOING TO TAX MY WARCRAFT ACCOUNT!!!!" is the FUD that everyone seems to like spreading. Isn't it up to tech-literate sites like
-Styopa
If I twink a noob can I consider that a charitable donation?
If I upgrade my video card can I consider that business expenses that I write off?
There is no -1 Disagree mod. Slashdot.org/faq defines mod options. USE IT.
Why?
Because then the government has declared it's *mine*, therefore despite any statements in the EULA or elsewhere, the Developers of the Game could not arbitrarily close my account for gold selling. They could not fix bugs in the game that I was exploiting to get more gold faster. They couldn't do anything to prevent my business from operating, or else I'd have a nice little conversion of property suit, or restraint of trade, or even an Anti-Trust suit.
The taxation rate would be consistent, so I could factor it into my pricing and business plan and still remain quite profitable. And it would be completely legal and they could do nothing to stop me.
So, if I were Blizzard, Turbine, or any other game maker attempting to control the Gold Reselling market, I would fight this tooth and nail and claw and frostshock.
If you actually read tax cases and full court decisions, you will understand that all this tax protestor crap is just gibberish caused by taking tiny quotes from old tax decisions, combining them with odd semantic arguments, and trying to weave them together into some incoherent whole that flies in the face of common sense.
Basically, the term "Direct" tax does not mean what you think it means. A "direct" tax is a tax on property, an "indirect" tax is a tax on commerce, consumption or trade. This is backed up by the full text of several Supreme court decisions and The Federalist papers, which may be relied upon to help understand the frame of mind, and/or terminology of, the authors of the constitution. (Some district courts didn't understand this in the text of their decisions, but the Supreme Court decisions override those in any case.)
"Direct" does not refer to how the tax is collected. (From a taxpayer directly vs. paid for by somebody else.) That would be stupid to even mention in the constitution, as the collection method of a tax is rather irrelevant when it comes to whether or not it is legal.
As far as the "The 16th amendment created no new power to tax."... Using this as a reason to say that income taxes are unconsitutional is silly in the extreme. The 16th amendment clearly states that income, from whatever source derived" is taxable. If the 16th amendment created "no new power to tax", and it plainly states that income is taxable, it would imply that the income tax was constitutional before, and after, the 16th amdendment was ratified.
Google for "Tax Protestor FAQ" for full details.
SirWired
Literally, in the case of one sad person I know all too closely (a relative).
Look, there may or may not have been impropriety in the way the current tax monster was created, but it's too late now. Pare it back or change it with new legislation, but "tax protesting" is just going to land you in jail or worse (after a couple years of bureaucratic slowness during which you'll exclaim "it's working! They haven't taken me away!")
Let me add to the pile of "gee this is stupid"...
Next time I loose some rare item in a sever crash or just to in-game wear and tear, can I clam this as an operating loss on my taxes?
Also, what's my tax status if I imagine I made a dust bunny worth a billion dollars? Taxed? If not, would I be taxed if I traded my $1Bil dust bunny for a piece of lint my friend thinks is worth $1bil?
Ok - economists and gaming blogs have speculated on the possibility of virtual assets becoming taxable someday for at least a year now. What we have here is another economist (read professional guesser) telling us it's inevitable. There's absolutely no references to movement in Congress on the subject, or refutation to the rebuttal that all MMORPG assets belong at all times to the parent company, therefore no taxable exchange can occur. Making money on ebay is one thing - it's a tangible, defined monetary gain with a clear record of when and how much - and it doesn't matter how you earned the money, you earned money. Trying to claim money is made in an MMORPG at the time a dragon is slain is a myth to stir up contraversy. I challenge any representative of the United States Congess to stand before his peers and make the claim (with video FRAPS evidence as backup) that as the raid leader gives someone a purple shiny sword in a video game, their real world wealth has increased and they need to be taxed.
You can get 15 minutes of fame, but you can go down in history for infamy.
I don't see the IRS taking an interest.
Don't delude yourself into thinking playing a game is producing anything valuable. Yes, idiots do pay money for this stuff. Pulling off the scam of selling the items is the act that acquires the money.
-Dave
Max level character joining an instance in wow.... p1 WTF is taking you so long to get here dude?? p2 yeah whats the deal??!!! p3 been here for ages waiting..... p4 what I cant afford taxes on my epic mount man. P4 is removed from party.
Full Frontal Nerdity has a great comic on this subject.
All MMORPGs will be based in tax-friendly countries like Switzerland, Cayman islands or Tongo.... so how are they going to value the assets then?
And, even more important, will I, as a EU citizen, be required to pay taxes to the IRS for playing in a US RPG?
Is it such a stretch that if someone paid X linden dollars to have their real-world financial ass raped, there should also be a "here's your sign" event?
There is no -1 Disagree mod. Slashdot.org/faq defines mod options. USE IT.
You will only have to pay tax when you recieve _real_ money in the _real_ world. Just as if it came from any other source.
If you found someone mad enough to buy your monopoly money, then the _real_ money you just recieved counts towards your yearly income and so it will be taxed.
2006 and the Government still has no idea how to generate money on it's own. 'Hey Bob, what do we have left to tax?' 'How about things that don't actually exist Tom?'
OMG this is so retarded! How can they tax items and property in a virtual world?? I know a 10 year old girl that plays Ultima Online and owns a Castle and many other items that are worth millions in the game of UO (major artifacts and such.) How the HELL can the IRS tax a 10-year old girl??? And what will they do when she's unable to pay??? LOL This is rediculous!!
hmm are they gonna sieze her castle and Hat of the Magi??? hehehehehe
Are they gonna send in virtual police to kill her character to take her stuff??
If you get taxed because your assets are "worth" somthing just do this.
TRANSFER ALL THE ASSETS TO THEM.
After all, they are "worth" value, right?
The only things that are inevitable are virtual birth, virtual death and real taxes.
At that point though, you are using negotiable instruments because there is no set exchange rate. Dollars and checks (orders to xfer dollars) are non-negotiable.
Slashdot's rate-of-post filter: Preventing you from posting too many great ideas at once.
From the FL dept of revenue:
What is Intangible Personal Property Tax?
Florida's intangible personal property tax is an annual tax based on the current market value, as of January 1, of intangible personal property owned, managed, or controlled by Florida residents or persons doing business in Florida. (empahsis mine)
Now, currently, intangible property is limited to stocks, bonds, etc., but there's no reason that the state couldn't extend that to property in a game (though it's unlikely). Remember, too, that businesses are often taxed on business property, which is valued every year at current market value or at depreciated value, depending on the type.
There are lots of pitfalls in the way things are taxed - mostly to get around people who try and get around the system, or to extract revenue from other/new sources (FL has lots of retirees, retirees have low incomes but high net worths - intangibles is a way to get at that money).
Is it just my observation, or are there way too many stupid people in the world?
"Mostly they are people who makes lots of money."
:p
Quite wrong. The IRS rapes the rich for far more than the poor, that's true; but the rich still end up with far more than the poor.
When you're being taxed for 50% of a million, it's a lot easier to deal with than being taxed 30% for 10k.
Income has always been taxable. Yeap. You called me a protestor, but yet I say income is taxable. So now I know I have your attention. Income is no where defined in the Constitution or the statutes. "Taxable income" and gross income are, but it is only a vague circular reference to "income". In 1862, there was a tax on income, without the 16th amendment. This tax was only on the federal government. This is what is meant when the courts say "did not extend to new or unexpected subjects". Clearly, the 16th never brought anything new under the umbrella of things taxable. But it also did not create a new direct yet apportioned tax. If anything is being taxed and not through the states, then it is indirect. Excise taxes are indirect, and are the lawful subject of the income tax.
This is the only way to resolve the tax with the statement:
"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
This is 1943, and there has been no change to the character of "income" at or since.
I have read all the citations, and they all do check out. But you insist that they have been overturned or are irrelevant. You must provide citations for your claims, as I have done.
Slashdot's rate-of-post filter: Preventing you from posting too many great ideas at once.
In your spare time you paint. You've created some fantasticaly valuable paintings. Should you be liable for income on that body of work if you don't realize the income by selling the paintings? I think most reasonable people would say no.
If you come home from work and log into your PC and play your favorite MMO should you be taxed on potential income if you never sell your stuff? Again I think most reasonable peole would say no.
You're a mechanic and handy man. Over the course of 52 weekends you did the equivalent of $7000 dollars of mainanence on your vehicles and $1000 worth of plumbing. Should you be required to report that to the IRS?
I see these things as being all roughly equivalent. Its what you did in your hobby with your spare time. Yes it was industrious and you created something of 'value'.
It think instead we should tax people for watching TV.
All generalizations are false, including this one. Mark Twain
Earth & Beyond was shut down.
Do I get to report lost income on my lost starship? It was top of the line and fully upgraded.
How do you determine fair value for obtaining an epic weapon?
Inflation and deflation in online games is horrific. One day I might have a worthless blue diamond. The next, they introduce a new recipe that uses blue diamonds and it is suddenly worth about 25 dollars. A month later, everyone has farmed them so heavily that they are only worth about 25 cents again.
I don't see how they are going to get a handle on these things except at the point of transfer to real dollars.
If second life goes out of favor then that million dollars of virtual real estate could become worthless overnight.
She was like chocolate when she drank... semi-sweet at first and then increasingly bitter.
Taxing 7 million players will kill subscription rates.
Removing ingame "economies" to avoid taxes will kill subscription rates.
Just tax people when they get a payment in monies from ebay, gold farming companies, etc. and deposit that money into their bank accounts. The same process could be used for any sales on ebay.
Really? What's next? What about the many BBS that still exist? Taxation on gold I get in Legend of the Red Dragon or Usurper? What about the credits from trading in Tradewars or Yankee Trader?
Hell, let's take it away from online games. What about taxing the Ruppees in The Legend of Zelda 1 or the coins knocked out of blocks in Super Mario Brothers?
Can you see an audit happening because the IRS didn't believe you got a blue rupee (worth 5 IIRC) out of killing a Tektite or an Octorok?
And for those of us who write games that use some sort of currency. Am I going to have file a whole bunch of forms because people playing my game killed a skeleton and was rewarded 50 gold?
Ick, what a world we live in.
BTW, I've read that FAQ, and I've done battle with Mr. Evans many times. He is the one citing irrelevant cases. Its absurd. I read these cases for hours, only to find that his cite doesn't even back up what he claims. Its good practice with learning you can'tr trust anyone and you have to read for yourself.
.zip to the file I downloaded)
Download this file: http://ctc.schtuff.com/taxusnot_repository_zip (I had to add
And extract the FriviouslArgumentsRefusted20050314.doc file, and read away.
Slashdot's rate-of-post filter: Preventing you from posting too many great ideas at once.
I've never bought or sold anything in an MMORPG. To me, it's just a game. I'm not willing to spend real money to have things in game, and I don't play the game to sell the things I get. I play the game to have fun. So, should I owe money because some other retard thinks my stuff is worth money? Of course not.
Look at it another way. Suppose I am a hobby artist and I create a really nice painting. Some art critic decides it's a great work of art and appraises it at $1,000,000. Do I suddenly owe a ton of taxes? No, because his appraisal means nothing. It's my painting and what some nutjob thinks of it isn't relevant to it's value. If said nutjob changed his mind the next day and said it was worth only $1,000 I couldn't claim it as a loss or anything.
Now if I sell my painting, or my stuff in an MMORPG, the income on that sale is taxable, of course. That is just normal business 101. You sell something and make income, you owe tax on that income. However you don't owe tax until the sale because there's no income until the sale. Just owning something doesn't automatically subject it to tax.
For that matter you don't even own assets in game, the game company does, and they can do as they like. You may have an item that one day is worth a lot in both in game and real money, however the next the game company decides it should be common an vastly increases the supply, making your item worthless. Also they can at any time cancel or alter your account, taking away your items.
So when you get down to it, there's nothing at all new here in relation to taxes. If you make income from virtual sales, of any kind be it software, music, WoW gold, you owe income tax on those sales, and sales tax if applicable. That's all.
Hell, some country like Elbonia could make a small fortune by letting gamers create anonymous little $50/year corporations that "own" all that virtual real estate for them. If Bob Guccione can publish Penthouse out of the Cayman islands, why shouldn't I stable all my virtual race horses there, too?
This sounds like a wonderful excuse for gaming companies relocate relocate their entire operations, servers and all, to Costa Rica.
This is not my sandwich.
Ok, just curious, but how can they tax something that isnt supposed to even make money online. Last I checked most of the games they probably want to tax are subject to rules that distinctly say that selling accounts and the virtual goods at all, is against the rules...... punished by bans and holds and the like......
How can one tax something you shouldnt have. Thats like taxing stolen goods..........
at the core: if the virtual asset in question has real world value, then the government will tax it. I just looked on ebay and $10K Linden Dollars are going for about $34-45 USD, so they do indeed have real world value. The questions that remain are secondary: what conversion rate will the government use, how will they arrive at that rate, etc.
damaged by dogma
Why in the hell does the tax system need to be complicated further? People are already taxed for all income. If a player sells a character for $500, they're supposed to report that as income tax. So what else is there to tax? If a tax in placed on these transactions wont these people essentially be taxed twice?
It looks to me like the government just can't help but getting its grubby hands on yet another source of revenue. How about they learn how to properly spend the money they've already got? I think there should be a moratorium put on all tax increases until the government can get itself spending in order. The amount of waste rampant in government is shocking, and I'm not referring to the more sensational stories like $50 hammers or pork projects.
Congress needs to find out how these things work before taxing them. TFA asked why shouldn't we tax online games. The answer is simple: because it's not real. Where does this end? Will I have to pay taxes for my expansive Gran Turismo garage too? Perhaps Property Tax for my land holdings in Oblivion and Grand Theft Auto?
Barter exchanges are taxable, so if you trade your +3 ax of orc slaying for a +4 wand of pastry conjuring, that's a taxable exchange based on the value of the items.
But if they are going to enforce this, they'd better be prepared to go the whole route: if a character gets PK'd and the other player loots the corpse of a valuable item, then that is theft. Depending on the value of the item it may well be grand theft. The government had better be prepared to prosecute these crimes and make room in the prisons for the 12 year olds that they are going to be sending up the river for 20+ years.
Of course, if you're going to tax virtual income and prosecute for virtual theft, then you may need to consider the possibility of prosecuting PKers for virtual murder.
Oh man, I think I'd better start law school. I see where the employment opportunities are going to be in 2010.
-- I have monkeys in my pants.
The one good thing about sales tax is there's no way out of it. You pay tax when you buy something, that's just how it goes. Income tax, however, people are great at finding ways out of since there's all kinds of loopholes as to what's income and what you can write off. Actually turns out many of the really rich pay less tax than you'd think because they have access to the really good ways to hide, so to speak, money. However when the tax is simply charged on a sale, there's nothing you can do to get out of it.
The only people who would really get out of paying are those that would get money just to sit on it. They could accumulate a huge wad of cash and not get taxed. However as soon as they wanted to use that tax to buy things, they pay and there's no escaping it. In general, since the point of having money is to buy shit, it works that the rich will pay more tax. Buy three $100,000 cars? Pay lots of tax on each.
The burden problem is not solved so much through extra luxury tax, but through essentials exemptions. We already have this on sales tax to a degree. Have a look at the receipt form the grocery store next time you go. You'll notice there's a column with some items marked with something like a "T". Means that particular item is subject to sales tax. Food is not, so you'll find that your overall tax amount will be small compared to other places. A system like that can be workable. Exempt things like food, toothpaste, etc from sales tax.
I'm not saying it is the perfect system, but then neither is the complex crap we have now. There are some compelling reasons to look at a sales-only tax. The specifics would have to be done right, but it's not a horrible idea (and no, I'm not anywhere near rich).
destroying other people's favorite hobbies.
IANAL... But I play one on
At the moment, the only virtual goods with any intrinsic potentially taxable value are those in Second Life and other worlds which grant actual ownership of objects to players. In these kinds of situations, there may be barter consequences, but only if there is a way to actually determine the $US value of the object. Consequently, it is possible to incur a deductable expense in the creation of such object, and in general it will behave like any other intangible capital asset, including the existence of a basis, if such can be properly documented.
In 'more traditional' games where the EULA says 'we own your character, your stuff, and your little dog too', then the in-game objects are worthless. This has two consequences. First, sale of such an object for real cash results in a taxable event as a source of ordinary income rather than capital income. Second, in-game exchanges are non-events, as everything involved is worthless.
Bear in mind that these are all potential treatments, and that the IRS position is currently of the 'wait and see' variety, since the Second Life style of object ownership is currently an aberration, and Congress is quite visibly trying to make up its mind on the topic.
Which brings me to a point that a lot of /.ers seem to miss, and a lot of American people in general also seem to miss. The IRS is a part of the Treasury, which is a Cabinet-level department of the Executive branch of the US government. the IRS does not write or approve the tax law (though the IRS General Counsel includes tax writers who are called upon by the Congress from time to time to produce language intended to have some stated effect), they admisister and enforce it. The people at the IRS are doing as the law directs, and the horror stories you hear over the next few years should be laid at the feet of Max Baucus rather than Mark Everson. Of course, anyone thinking of breaking Godwin's Law at this point should be ashamed of themselves.
It may not be just, but it is fair, and that is more important.
So these dumb asses want to tax that castle of mine in WoW. Doesn't that mean I can write off that castle when the dragon burns it down? How about those 4 space craft worth of spaceweed that I lost in X3? That is at least 400,000,000 million credits I lost there. Can I write that off?
But on the other hand I lost that in the argos sector where hauling spaceweed is illegal. Are they going to ship my ass off to jail for that?
Supporting World Peace Through Nuclear Pacification
Can you imagine somebody handing over their SSN when buying a game?
If the law recognizes virtual goods as taxable, then what other laws will get tweaked as a result? Is that player who ganked you for that item just playing the game, or a thief? Consider the EVE online scam with the guy who ran off with all the ISK. If ISK were a taxable commodity, would there now be legal grounds to prosecute him?
What about item duping? How would this be handled?
This story may be a troll, but consider all the ramifications if such a thing did happen.
TFA is based on the dangerous assumption that those _are_ real assets with a real money value, which has a helluva lot more worrying implications than just "well, you owe taxes when you sell it." E.g., they include such stuff as:
1. Inheritance tax. It even gives an example of someone whose "virtual estate" is supposedly worth 1 million, so if she dies, the heir could have to pay a shitload of inheritance money for something he probably can't even actually sell for 1 million.
Imagine, basically, that your dad or brother or whatever owns some rare +5 Boots Of Arse-Kicking in some Everquest or UO account that he doesn't even play any more. But in the meantime it stopped dropping 5 years ago, it became an ultra-rare item in the process, and the other known such pair of boots sold for 20,000$ on Ebay to some rich nutcase. (Don't laugh, I've been briefly on some shitty web-based game where someone made it a point of pride that he'd paid $20,000 for in-game advantages.) So in the eyes of the law, your dad's is worth about that much too. Let's say he had a bunch of platinum coins too, and those are viewed as having a value in RL dollars too. And a big castle in a desirable spot, if it's UO, just for that "virtual estate" aspect.
So he has a heart attack and you "inherit" it, presumably not even knowing or caring much about the game to even know the value. Congrats, now you owe the IRS some inheritance tax on all that virtual fortune you've inherited. What, you thought you wouldn't pay inheritance on a (virtual) castle, just because you didn't immediately sell it on eBay?
2. "Sale" in their explicit view also includes barter. This is an actual paragraph from TFA:
So let's say I give you my +4 Sword Of Ganking in exchange for those +5 Boots Of Arse-Kicking. Maybe we're just two guild-mates, and my spec is in axes so I don't need the sword, and maybe you don't have the armour proficiency for those boots. Such exchanges happen every day, and chances are neither of us would think of it as the same as selling that loot on e-bay. (At least you sure don't seem to.) Now let's say that, unknown to either of us, that sword is worth $200 on ebay, while your boots are worth only $100.
What they're saying there is that in that transaction you've made a taxable $100 profit. Do that often enough, and it can add up to be real money. Either put it on your IRS form, or you're guilty of cheating on your taxes.
Or maybe you've ever been paid in-game for some service? Like, say, "we'll let you have all cloth drops if you're a holy priest and join our group?" (Ok, so don't expect that in an endgame instance, but it occasionally happens at lower levels.) Well, congrats, all those items have a dollar value. You've essentially been paid a RL value for a service. Would you have thought that that should count towards your income tax?
Or maybe you just use the in-game Auction House instead of such barters? Same thing: both the virtual sword and the virtual money are items being exchanged. So technically you _could_ literally owe the IRS a bunch of RL dollars, for stuff you "sold" only in-game for virtual gold and silver coins.
So to cut a long story short, _that_ is why a bunch of us "crazy" folks discuss that. Because literally that's the kind of craziness that TFA is all about.
A polar bear is a cartesian bear after a coordinate transform.
Tell ya what. I'll let the government tax me for virutal assets that I pay real-world-currency for. Like USD, Yen, or Euros. But in return, they HAVE to build more internet infrastrcutre that's open to any provider to use. None of this 'food for the poor' crap..wheel tax is for improving roads and travel..internet tax should be dedicated to making my life online better.
Job? I don't have time to get a job! Who will sit around and bitch about being broke and unemployed then?
Even more important than the income taxation issues, are the money transfer ones.
When money changes hands, banks and other institutions must report on both sides of the transaction. In game, at present, that doesn't happen. In could transfer in-game assets to someone as payment. In simplistic sense, I could hand "dirty" cash to someone and they could pay me in "game" assets. When I sell those assets, I now have "clean" money. The the cash could then be paid in small quantities to individuals to transfer smaller sets of funds back to the main player as in-game assets.
You could complicate that and hide it behind a few more cutouts, but that's the essential way to do money laundering like this. Of course, it could also be done as a massive number of people getting cash (say, $200 each) to buy in game assets then each transfer those assets to a counterpart in a similar pool of people at the far end, who sell the assets and now have the cash. They in turn buy other assets and repeat the transaction in reverse to a different member of the original pool and you close the circle. The more 'steps' it takes in the process, the harder to track.
You can (and people do) do the same thing in real life but the assets themselves either don't exist (which can be ultimately caught) or else are expensive and cumbersome enough to make the friction expensive. In virtual worlds it can be scripted and kept purposely obscured by a random seeming level of interaction among a large volume of players.
If these economies are going to be getting "real" then the controls on them will have to as well.
The problem with quotes on the internet, is that nobody bothers to check their veracity. -- Abraham Lincoln
I'd dump it in the river with the tea if they ever taxed online gaming. I go online to play games not get taxed for them or make a profit.
~~ Behold the flying cow with a rail gun! ~~
If the government plans to tax the fictional economy of a game, then I think it's only fair that they set up a system to allow users to pay that tax using in-game currency/items, rather than their real-world money. There should be IRS representatives logged into each virtual world 24/7 to accept these payments... even if they are NPCs linked to a real world database. They should be able to track each virtual world's economies using the same techniques investors use for commodity trading on the world market, to know exactly what items are worth at any given time.
Once the users have paid their "taxes" using in-game currency/items, it should be the responsibility of the government to sell whatever they get in order to collect any real-world money.
Unlike the real world, the economies of virtual worlds are not backed by anything of real world value. If the government starts taxing these economies, where does that leave the game developers/publishers in the equation? Would it become illegal for them to suddenly "pull the plug" on their games a few years down the road, when it starts costing them more money to continue hosting their virtual world than they are making off it? Also could certain players with ties to the developers end up doing prison time if they learn the game will be discontinued and cash out a few days beforehand?
There's a lot of ways this could get ugly if the government actually starts taxing virtual economies.
8==8 Bones 8==8
WoW players already pay this tax. It is called "subscription fee" and it is 14.49 a month.
Okay, you say you are not a tax protestor, and agree that income is taxable; yet the site you linked to is a tax protestor website. (Saying that you are not a tax protestor, yet also arguing that the income tax does not apply to the majority of people that it is collected from is a contradiction.)
Income is no where defined in the Constitution or the statutes.
It is not required that every statute or legal document define the every word used. The constitution does not define the words "due process", but that not nullify the parts of the constitution that guarantee it.
What are you getting at with your repeated quotes by a Dept. of Treasury flunky? Okay, income tax is an excise tax on income-producing activities? So? In any case, it doesn't matter what he says either way because mere testimony in the Congressional Record has no force of law. (It can be used, in context, to provide evidence of legislative intent, but I would think that if congress didn't really mean to tax income in roughly the way it is taxed now, a corrective law would have been passed by now.)
I'm not sure what you are trying to accomplish by repeating parts of the Brubasher decision.
The Brubasher decision confirmed the affect of the 16th amendment, which was to ensure that tax on income from sources that would be subject to direct taxation (i.e property), are still regarded as indirect taxes. For instance, with the 16th amendment, it is unambigously legal to levy Federal capital gains tax from the sale of Real Estate. (A tax on the Real Estate itself would be a direct tax, and therefore would have to be apportioned.) Before the 16th amendment, it could be argued that taxes on the transfer of directly taxable items would be an illegal direct non-apportioned tax. From the Tax Protestor FAQ:
" "[T]he contention that the Amendment treats a tax on income as a direct tax although it is relieved from apportionment and is necessarily therefore not subject to the rule of uniformity as such rule only applies to taxes which are not direct, thus destroying the two great classifications which have been recognized and enforced from the beginning, is also wholly without foundation since the command of the Amendment that all income taxes shall not be subject to apportionment by a consideration of the sources from which the taxed income may be derived forbids the application to such taxes of the rule applied in the Pollock Case by which alone such taxes were removed from the great class of excises, duties, and imposts subject to the rule of uniformity, and were placed under the other or direct class." Brushaber v. Union Pacific R.R. Co., 240 U.S. 1 (1916).
This statement was confirmed and explained by the Supreme Court in Stanton v. Baltic Mining Co., 240 U.S. 103 (1916), in which the court stated that "by the previous ruling [in Brushaber] it was settled that the provisions of the 16th Amendment conferred no new power of taxation, but simply prohibited the previous complete and plenary power of income taxation possessed by Congress from the beginning from being taken out of the category of INDIRECT taxation to which it inherently belonged, and being placed in the category of direct taxation...." "
It has absolutely nothing to do with, and says nothing about, whether it is states or the feds that collect it.
If anything is being taxed and not through the states, then it is indirect.
Well, yes, this is the case with current tax law, but so what? (This is merely a matter of practice, as the Feds have the power to, but have not enacted, direct, apportioned, taxes.)
I never stated that the decisions YOU cited had been overturned, but certainly many of the decisions that Tax Protestors have been known to rely on have.
In any case, the website you supplied contained several pages worth of legal arguments, all of which have been thoroughly debunked. (Refer to the Tax Protestor FAQ for more details.)
What exactly are you getting at? Your original post sta
Apologies for the dupe (I posted this link deep in another thread) but I thought it was worth highlighting at the top level.
Here is the URL http://www.legalaffairs.org/printerfriendly.msp?id =962 for the piece by author Julian Dibbell that is referenced in the article. It makes for very interesting reading, especially when an IRS specialist is quoted as saying...
"...it sounds to us like [the online trades you've described] would be--yes--Internet barter." Here she paused, whether to catch her breath or to let the conclusion sink in, I couldn't tell. "However," she went on, "there are no regs, there is no code, there are no rulings, to rely upon. This is our opinion."By the way, the IRS does consider Internet Barter taxable, but the rules are complicated (doh!).
At least for the Fantasy games, all you would need to do is create a magic using character. Then all of the income of that character could be written off as clergy income.
Okay, if Mr. Evans is such a bogus authority on tax law, why do tax protestors keep LOSING with the same bogus crap year after year? If you go to court with the arguments in that web page, you WILL ALMOST CERTAINLY LOSE. Period. End of story.
Tax Protestor arguments are based on a tortured reading of the law and various court decisions over the year. Essentially, they come down to: "Because of the way the law is written, the income tax is mostly uncollectable, but it is only through the government's incorrect reading of the law that tax is collected."
For Tax Protestor arguments to be correct, one of the following MUST be true:
A) The law is unambiguous, and the income tax, as currently enforced by the Internal Revenue Service, is more-or-less illegal.
If this were true, then I think thousands of judges across the land (who have ACTUAL legal training, experience, and expertise) would have reached the same conclusion by now, and Tax Protestor cases would be a lot more successful than they are. Either that, or there is some huge conspiracy by thousands of judges over the years to side with the governemnt to enforce the Internal Revenue Code incorrectly. If you believe that, any futher argument is futile, since it is impossible to argue with a conspriacy theorist.
B) The law is ambiguous, and the court's (and IRS's) interpretation of the law is more-or-less incorrect.
In cases where a law is ambiguous, the courts refer to "congressional intent" to try and figure out what Congress had in mind when it passed a law that is insufficiently precise. (The courts cannot simply declare all imprecise laws invalid, or there wouldn't be many laws left.) If courts have been mis-interpreting Congressional intent all these years and Congress did not mean to have the income tax enforced in more-or-less the way it is now, they would have passed a law by now clearing up their intent.
SirWired
Of course, I will not be suprised when governments go for this kind of money grab... like any profit making corporation, their primary purpose is to maximize revenue. They would tax going to the bathroom if it was possible.
However, taxing virtual goods in games is stupid. Some people might buy or sell virtual items, but the vast majority of people play online games as A GAME!!!! A virtual item has no real value any more than monopoly money, because the people playing have no intention of selling the item. Not only that, but most games explicitly state that virtual goods have no real value as part of their terms of service. There is no way they are going to tax me on virtual assets, because I simply won't play any game where I have to pay taxes on virtual assets.
Basicly, if they tax virtual assets, massively multiplayer games will go out of buisness (the vast majority of people won't pay taxes on virtual goods in a game) or move to a tax haven country. Not only will the government not get the revenue from taxing virtual assets, it won't get any revenue from taxing a real game company on their profits. The government isn't going to make a cent off of this.
This is an unppleasant reality that politicains don't want to raise because they'll get kicked out.
Engineering is the art of compromise.
Virtual welfare anyone? "I just got my 100g welfare check in the mail! Time to get some night-elf strippers!"
If I hire an undocumented day laborer to farm gold for me, do I still have to pay the tax? Or does that fall into the "Just don't run for Supreme Court" category, and I'm golden?
The EULA indicates that everything in the game belongs to Blizzard, Characters, Gear, Gold, whatever. Looks like Bliz is in for a heck of a 1099. ~AR
> So... approximately how many Senators and Congressmen have broken this rule? Why aren't they in jail?
You should read this thing sometime. It's crazy. The following excerpts really are in there, side by side on p. 28 of the PDF:
Bribes. If you receive a bribe, include it in your taxable income.
Campaign Contributions. These contributions are not income to a candidate unless [...]
After all, the politicians came up with these rules, so I can at least understand, if not agree with, the reason things are this way...
Has anyone considered what the ramifications of this are on the POSITIVE side?
If someone has said this already, I apologize, but I'm late to the forum;
point being... at least under american law, there can be no taxation without representation;
i can understand taxing REAL money made selling virtual items, but taxing in-game content requires certain things from the gov't in return. They would have to officially recognize norrath, krynn, the eve universe, and other realms as states or townships... and what to federal and state levels have to do for states and towns? fund maintenance and creation of infrastructure, they have to recieve representatives from these places who can in turn have influence on how these realms are governed... so, as silly as it sounds, they cannot tax ingame content without suffering legal consequences in recognizing the powers and needs of these realms.
... called gross national income (or PIB, if you're french, like me :)
What happens if a lot of activity that usually take place in the REAL world (like, you know, leisure, having a drink, going outside, speculating, playing money in games, etc. etc...) and that generate money in taxes, go in the VIRTUAL one ?
I tell you : gross national income decrease. Know what it means, right ? Yes, it's not YET the case. But who knows what gonna happen in 10 years ? 50 years ?
Remember, it's not a question of parano, the governement doesn't want you to live a non taxable life.
I know this can sound "big conspiracy" - but the power of the states depends on the capacity of the citizens to be jailed, not to be free.
What does it mean, "appended to the end of comments you post"
If you received real money - you pay real taxes just like any other income. Virtual goods are as virtual as program code or pretty graphics. No one is going to tax your virtual dinars...
Correct me if i'm wrong but all the online world companies have made it very clear that any item in the game, including your character and any thing they have posession of is clearly property of the company and that your monthly fee "ALLOWS" you to use these items. The monthly fee does not transfer ownership to you in any way. This has gone to court and upheld.
So if the game company owns my character and all his/her items/cash/assets, how the hell can i be taxed for them as income when i don't own them?
Consistantly you are forced to lose gold on tradeskill skill-ups. NPC merchants sell you items x, y and z which you combine to make a which the same merchant will give you considerably less then the cost of sometimes even just one of the combine items.Are the games going to have to record all those losses so you can take them off your taxes? Can you file federal charges on the games to force them to let you at least make minimum wage off of the combines?
Can you claim the cost of all your gear required to get the drops as a deduction? If you attune a piece of gear can you deduct its market value? Can you declare losses on the market value of items not looted cause they are lore or your limited on carrying space? Lawyers are going to love this stuff. Tons of junk not even mentioned yet will be brought up if such nonsense tax is put in place.
Wouldn't this also mean that the raven that I lost last night would be a deductible capital loss?
Show me what you want, and I'll show you how to get along without it...
1 Large Sculpture of "Yiffing Dragons Wearing Diapers," $12.50
1 4-room domicile inhabited by anthropomorphic cats, $18.95
274 Medium image macros featuring Limecat and/or Tourist of Doom, $0.59
1 Oscar Meyer "wienermobile" automobile, $17.00
1 Large replica of the WTC attacks, in mint condition, $17.35
*****
Dear Mary,
I yearn for you tragically,
A.T. Tappman, Chaplain, U.S. Army.
Suppose I arrange for my employer to give me L$ in Second Life instead of paying me real money. Since that's a game transaction it's not taxed. Then I go to the (real world) store, buy a shiny new veeblefetzer, and pay by giving the store owner some of the L$ my employer gave me. That's another game transaction, also not taxed. The store owner then gives his employees some of the L$ I and other customers gave him. Since no US$ ever change hands nobody pays any taxes.
Really simple solution for this- you just make a game that gives you 100 trillion dollars that is convertable to real money, pay the 50% tax, make 50 trillion dollars, buy the politicians and then make them dance for table scraps.
And the best part, with numbers being unlimitied and all, you can try your inflation crap on us but it reall will be pointless - you can always just create 1 more dollar than your cost "!! SUPER FUN GAME GRANTS YOU: their made up cost plus infinity!! You Win!!"
or, you can just vote these retards out and be done with the whole fucking thing.
And if any of you little parasites are listening- know this- your day will come, your system will end, you will die and you will suffer if you attempt to fuck with us. You are shit, you will be treated as you treat us, with total disregard. I know your game, I understand your game, and I will use it to destroy you.
You are a bunch of simple minds- you think your game is brillaint, it seems to work so well. But it is so flawed. You are so dependant on us, but yet we dont need you at all- we can replace you with a few lines of code. Oh how I wish you could see how worthless you really are.
Just remeber- WE make the magic happen- WE shall rule this planet, you shall serve us or die.
And for those of us out there with ability, those of us that produce I say take what is yours, before some one else takes it from you
Right now, getting that tracking information would require a subpoena -- and probably a warrant specifying each person's records. A bank, other the other hand, must report by default all transactions of a certain kind -- and nearly all transactions are easily accessed through well defined court "controlled" (lol) mechanisms.
The problem with quotes on the internet, is that nobody bothers to check their veracity. -- Abraham Lincoln
The first is games like World Of Warcraft. In this case, its simple, income tax is applied anytime someone earns real world income from the game (e.g. selling items on ebay). Anything else is unmanageable.
The second situation is games like Second Life where there is a direct way to convert money into real world money. In this case the logical solution is to treat things like L$ in the same way as they treat Euros or Pesos of CA$. If you earn money in a foriegn currency, you pay income tax on it just the same (assuming it was earnt in a way that falls under US income tax). Therefore the same should apply for L$.
The other option (taxing L$ only when it is converted into real world $ wont work because everyone will just keep everything in L$ and only convert into real world $ when they need to, thus minimizing their tax).
As for payment, can you pay your tax in CA$ or Euros or Pesos? If not and there is a law mandating payment in $US, there is no issue. Even if there is no legal requirement to pay in $US, there is still no issue since there are only certain ways to pay your income tax (cash, cheque, whatever) and so you cant directly pay in L$ (because the governemt doesnt accept L$).
Problem solved.
It seems to me that the trouble starts when you are able to convert your second life money into dollars. It the IRS wants a piece of the action in Second Life, they should buy premium accounts and tax earnings of virtual money. They could then spend their virtual money buying virtual land and buying virtual buildings to set up an IRS office, and hire a fellow I met in SL that flies helecopters in SL to fly their SL helos. Taxing SL income would make it more realistic. If you didn't pay, when you sign in, you would find yourself in jail, and unable to fly out. Personally, I find SL more friendly than RL, and taxing it wold be a drag, but real income is real income, and transactions over ten thousand dollars probably have to get reported. I wonder if terrorists can funnel money through Second Life transactions, DHS pay attention.
It's an asterick. Look it up in the dictionary. I know you don't believe it, but it's true.
That is, unless Congress comes along and mucks with the law. Of course, they'll have a hard time reconciling new law with the current IRS realization requirements. They could declare that you can realize a paper profit, but it would be really tricky to do so without royally screwing stock market investors on capital gains taxes. And if that happens, good luck getting reelected.
This post expresses my opinion, not that of my employer. And yes, IAAL.
Notice that this all relates to property. Now this is a very important word, as interpreted in the strictest sense, virtual items are not property. They're not a tangible asset that is owned. In the most important sense, all MMO developers retain ownership of everything. You do not own your +4 Sword of Dwarven Disembowling in World of Warcraft, Blizzard does. If Blizzard decides that your sword is overpowered and nerfs it, you have no legal recompense for compensation. If you decide to leave WoW, you can't take your items with you. You can't sell the items for real cash. If you're bad, they can take it away from you. You really have no rights over that item above and beyond how Blizzard is feeling that day. It's not yours.
You don't OWN anything at all in virtual worlds. The developers do. They allow you to use anything they deem fit by the rules setup governing the world, but none of it is yours.
Basically, it's the equivalent of paying 15 dollars a month to use a library with a complicated checkout system, then being taxed by the IRS as if the entire library was yours.
The ______ Agenda
That wacky website, and its author, have been sued 3 times by the DOJ/IRS. Each time, they failed to shut down him, his site, and his claims, unlike other "protesters" like Schiff.
There is a book called "Constitutional Income: Do you have any?" which is written by an Idaho law maker which examines the legislative intent at the time the 16th was invoked. If true, what could be considered income is changed. As the law reads "income derived from [sources]", one is left to ponder if derived from is the same as "including", or if what is being called for by "derived" is a subset of special sources from which the superset is then listed. According to this book (which draws heavily from the congressional record) that is indeed the case - that congress wanted to be as far-reaching but knew it actuality it was limited. We have since forgotten how limited it originally was.
There is another book "The Great Income Tax Wars" that casts Congress's own doubt on its ability to pass and sustain the tax on incomes. Of course, it portrays Brushaber as sustaining the income tax, as you do, and it did, however what seems to be neglected is the idea that the court didn't castrate the effectiveness.
Going back to the "Constitutional Income" book, it is revealed that through later decisions, the income tax is enforced differently in the different districts. Why this is is simple. Its too complicated for the courts to be consistent, but is simple enough to rule on without too much consideration.
Getting back to what is "income", clearly there's contention because the statues are written in such a way that it isn't clear who needs to be filing w-4s and paying social security. It is at serious odds of what is practiced in this country. You have the IRS telling everyone they need a SSN, and the SSA saying that not everyone needs a SSN The primary peice of evidence here is the definition of United States in 26 USC 7701, vs 26 USC 4601. Clearly, the 4601 includes the 50 states (for liquor and tobacco taxes et al), so why not use the same definition in 7701, which would enlarge the scope? Unless, there was some limitation on the authority...
Slashdot's rate-of-post filter: Preventing you from posting too many great ideas at once.
How can they tax a currency that doesnt actually leave where it is? The in game transfer of currency does not actually leave (for example) Blizzard servers. Companies that are "selling" gold are essentially seling the time spent to acquire the gold, as they neither have the ability to move it off the servers/property, nor do they have the right.
Perhaps looking at it from another angle. Example again, World of Warcraft (surprised yet?). Blizzard owns the currency in their game, it is not actual currency produced by the government which they reside in. How can they tax exchange of currency which they have no rights over? The company Blizzard is already being taxed (rather, the clients of Blizzard) for the services provided; doesnt that technically cover any and all "moving of virtual currency"?
Perhaps I should present myself in another way. If the IRS taxes me, a Canadian citizen (resident in Canada), for a virtual currency exchange based in the United States of America; I will sue them. Sound good? Does to me.