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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.' "
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.
The English, French, and American Revolutions were all instigated partly by new or opressive taxes
>Why do governments tax anything in the first place? It's because public services cost money, and that's a
>convenient way to of collecting said money (and because they are usually the ones that have all the guns).
What public services are involved with playing World of Warcraft?
People pay $13 or so monthly to Blizzard to keep the WOW servers running. My internet connection costs me $50/month which goes to Comcast. I know there's already taxes related to my internet bill, I'm not sure what all is itemized in that Blizzard monthly fee. The taxes on my Comcast bill might go toward keeping the internet at large running, I'm not sure. Some of the rest of what I pay goes to keeping Comcast's private wires alive. Some of the Blizzard fee goes to keeping the game servers alive, toward their internet connection, and thus probably taxes to their internet provider to again help keep the internet at large running. Any real-life public survives are already being catered to somehow, as I'm not a big gamer and most of my internet time is email and web browsing. The internet isn't going to die if we all stop playing MMORPGs... Roads aren't going to crumble. North Korea isnt' going to take over America without a scuffle. All those public services are already paid for.
Since government is not involved with the running of the game universe, they aren't virtually building virtual roads, they aren't virtually protecting the alliance from the hoard, they aren't virtually protecting us from virtual pickpockets, they aren't virtually doing anything for my virtual character. If I'm not getting any benefit from my governemtn inside of my game, then what virtual public services are they providing which my virtual character needs to pay for beyond the real-life taxes that is being paid for my and Blizzard's internet connection fees?
Not only is this a good idea, but this is what's happening now. Your virtual assets are worthless till you sell them for dollars. When you receive those dollars, that's a taxable event.
The IRS openly indicates in publication 525 that, "If you steal property, you must report its fair market value in your income in the year you steal it unless in the same year you return it to its rightful owner." The same applies to accepting bribes. You can read it here. Basically, it doesn't usually matter how you receive income, it's taxed.
The Chairman of the Joint Economic Committee agrees with you.
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 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
I'm alive because I shot the guy who opened my car door and stabbed me on the shoulder twice while trying to pull me out and toss me into the on coming traffic in his attempt to steal my car.
You mad
Lot of people think income taxes are stupid...Mostly they are people who makes lots of money.
The alternative to income taxes would be federal sales tax, which is generally considered to put an undue tax burden on people who don't make a lot of money...eg, the rich man and the poor man buy a loaf of bread, and the 30 cents tax on the bread that goes to the Fed means nothing to the rich man, but means a lot to the poor man.
I suppose that you could add heavy taxes on luxury goods to "even out" the tax burden, but that's not exactly fair to the middle class (my new flat screen is gonna cost WHAT?!), and it puts luxury goods completely out of reach for poorer families.
Taxes are there to provide services for the whole of the population, whether it's paying for the military to protect our borders, and the police to protect our homes, or paying to clean up toxic waste spills, or paying for the interstate system, etc. People who demand "a la carte" government services always annoy the crap out of me, because they're always the people who refuse to see the point in anything that doesn't benefit them in a big tangible sort of way.
ad logicam Claiming a proposition is false because it was presented as the conclusion of a fallacious argument.
They're called capital gains taxes because you're only taxed on the gains. If you bought 1000 shares at a penny and sold them at a penny.. you have no gain. They cost you $10.00 and you recovered your original $10.00 investment. Your tax liability in this case would be zero.
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.
BTW, the FL intangible personal property tax was repealed this year, to take effect in 2007. http://www.hodgsonruss.com/article_892.html
Yes, yes it is, exactly.
From the IRS page on Narcotic-Related Investigations...
When the Internal Revenue Service astounded Public Enemy Number 1, Alphonse Capone by obtaining a conviction for tax evasion and demanding millions of dollars in back taxes, Capone said, "They can't collect legal taxes from illegal money." But it's really pretty simple: No matter what the source of income -- all income is taxable.From the IRS...
Bartering occurs when you exchange goods or services without exchanging money. An example of bartering is a plumber doing repair work for a dentist in exchange for dental services. The fair market value of goods and services exchanged must be included in the income of both parties.and ...
You own a small apartment building. In return for 6 months rent-free use of an apartment, an artist gives you a work of art she created. You must report as rental income on Schedule E (Form 1040) the fair market value of the artwork, and the artist must report as income on Schedule C or Schedule C-EZ (Form 1040) the fair rental value of the apartment.Be afraid...be very afraid...
Tax law is made by Satan for Satan and understood only by Satan. But don't tell me tax law professor that.
IAALS.
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
What are you talking about? Have you ever filled out tax forms? When you sell stock, you fill in the 1040 Schedule D form with the number and type of shares, the sale price, and the "basis" (which is how much it cost you to buy them). Both these values include the transaction fees, so if you buy $10 of stock and E*TRADE charges $20 to perform the trade, your basis is $30. Then when you stupidly sell the stock for the same $10, and E*TRADE charges another $20 to perform the trade, your sale price is -$10. The difference is -$40. So you report a loss on your 1040 form for capital gains.
Wrong. As the previous poster stated, you have zero tax liability because you didn't realize a gain on the sale. That's how it works in the US. If your accountant has told you otherwise, hire a new accountant. If you're not using an accountant, maybe you should be. The IRS isn't likely to tell you that you payed too much tax.