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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 that is the case, will they soon be taxing player earnings from board games as well?
Undetectable Steganography? Yep, there's an app fo
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?
Not only that. Government has to support virtual people just the same as real people. Citizens pay taxes to the state, but on the other hand, the state protects its citizens (yes, I know that is an ideal situation, but it's written in the constitution of every legal state). So, if someone kills me in the WOW, or steals something from me in Second Life, will he be sanctioned by the state, and in what way? What about other laws? Prostitution, drugs, pedophilia...? And also, what about us that are not citizens of the USA? To whom and in what way will we have to pay, and what will we get in the return?
Eric: "What're quantum mechanics?"
Rincewind: "I don't know. People who repair quantums, I suppose."
Why do governments tax anything in the first place?
The same reason a dogs licks their balls. Because they can.
As to your comment about the guns, taxes usually increase in a fairly consistent matter through a nation's history up until enough people with guns have had enough.
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?
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 difference is real world value.
If you find a handkercheif on the ground that you're going to claim was used by William Shatner should you be taxed for the supposed real world value? No, but if you sell said item on ebay, suddenly it has value, value that you should be taxed on if you're honest when filling out your forms.
Finding the phatest l00t ever in WoW isn't worth anything, the items not really yours, the character who found it isn't really yours, the server it exists upon definitely isn't yours. The second you sell it for real world money though, that is income and it should be taxed.
Most people are not asking to have it both ways, a line should be drawn. Virtual assets are virtual assets, real money is real money, you can tax the real money that someone gets for selling access to virtual items, you can't tax virtual items which in an of themselves have no real value.
Excellent. I can't wait to start submitting all my virtual businesses expenses to them. I'm making a massive loss in my Second Life business, which I shall enjoy using to offset my real life business profits.
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
The thing is, in the real world those things are taxed--when they are converted to actual cash. It's called "Capital Gains". The whole point is to take into account the variable nature of value in price fluxuating commodity goods.
If you buy 1,000 shares of stock for one penny each, and those 1,000 shares zip up to 5,000 dollars a piece, you don't owe a dime of tax (unless you receive dividends). If they drop back down to 1 cent each, and you sell, you owe tax based on the amount of money you made when converting the shares back to cash, which, in this case, would be 10.00.
You do NOT owe money based on how much that stock was worth at it's peak, because you didn't sell it at that value, and it would be grossly unfair to tax you based on the 5,000 dollar a share value, when you sold at 1 penny a share...That'd be on the order of a million dollars tax owed on a ten dollar sale.
Since WoW gold, etc, is valued at different values on different servers, and since that value fluxuates on a daily basis, it would seem to be impossible for the IRS to tax "gains" of WoW gold/items that have not been converted to actual currency...At what value would they fix those assets? It's be like taxing your penny stock at the 5,000 dollar mark...You don't have that money, and there is no guarantee that you'll ever have that money, so how can they tax it?
Now, if you sold gold/items/characters, that would be completely taxable, but I wouldn't think it would even fall under capital gains, but rather unreported non-work income, just like any other money gained from where people don't do your tax witholding for you.
Just stupid.
ad logicam Claiming a proposition is false because it was presented as the conclusion of a fallacious argument.
However, MMORPG items have no enforced scarcity, which makes them about as valuable from an investment point of view as cereal decoder rings, or stock in a company where new stock is issued by simply running the photocopier (as much as possible, and buying more photocopiers from the issued stock...).
For any kind of real economic recognition, unless the IRS and the state department feels it's a good idea to essentially hand a money printing permit to the MMORPG companies, with the associated real-world currency inflation, the virtual worlds economy engines would need to be under SEC and/or central bank control.
How many dupe bugs, run-amok sysadmins, random item rarity changes, and outright company _sales_ of the virtual items would it take before we'd get Sarbanes-Oxley for MMORPG's? New profession coming in the new expansion; Accountant. No players may loot items without an Accountant in the group...
"it's not as though dollars actually represent any stable tangible assets anymore."
A particular dollar in your bank account does, however, represent a physical dollar payable to you. If the bank allowed a teller to multiply your account balance with a billion, that bank would have a problem, as they themselves, unlike the MMORPG vendor, cannot simply print more to give you.
In some games users can set up stores to sell items. Some people use very deceptive tactics to trick others and bilk money from them. Would this now become a crime, punishable in court? Would you need a business license to set up a store in a virtual realm where your store can end up right next to someone form another country?
I think what you would ultimately see is a drop in the number of casual MMO players like myself, and the constant complaining from the hard core MMO crowd.
If you must!