Coming soon to an MMORPG near you: taxes

[Ace Pace]

I'll stick with single player..

Coming soon to an MMORPG near you: taxes

10/16/2006 2:28:26 PM, by Eric Bangeman


Governments may start paying more attention to MMORPGs for one simple reason: money. The boom in virtual economies has one congressional committee looking at whether there is an opportunity for the IRS to get involved, making sure Uncle Sam gets a cut of whatever real-world money is generated from online gaming activities.

Dan Miller, senior economist for the congressional Joint Economic Committee became interested in the issue after getting into MMORPGs in his free time. His personal gaming activities will form part of the basis for a report on the issue that will submitted to the full committee early next year.

"We are starting with a blank slate and going through the various dimensions of virtual economies, and seeing where they might intersect with public policy," Miller told Reuters. "Right now we're at the preliminary stages of looking at the issue and what kind of public policy questions virtual economies raise—taxes, barter exchanges, property and wealth."

Of particular interest are games such as Second Life, which has its own, thriving in-game economy. Linden Dollars, the official currency of the game, are easily convertible to real dollars. As a result, online activities can ultimately be monetized, enabling users to cash in on their virtual activities. And if a Second Lifer can make money off of playing the game, chances are good that the IRS will want a piece of the action.

One game designer thinks that taxation is inevitable. Sam Lewis, who was on the team that designed Star Wars Galaxies, says that the real world has yet to catch up to virtual economies. "Ownership, property rights, all that stuff needs to be decided. There's just too much money floating around," Lewis told Reuters. "The tax laws don't know how to behave because these are virtual items: ones and zeros on a database we're allowing you to play in."

When the ones and zeros turn into sufficient quantities of tens and twenties, color the IRS interested. Current US tax law requires people who leave a game and convert their virtual holdings into real-world money to report any earnings to the IRS, and the same is true in many other countries. Once Congress and the IRS gain a better understanding about how virtual economies work, the tax code will likely change to reflect that.

[Uraniun235]

Congress needs to fucking fund the IRS adequately before they throw even more tax codes at the Service to enforce. What a bunch of do-nothing bullshit.

[Keevan_Colton]

Oh for fucks sake.

[Stormin]

making sure Uncle Sam gets a cut of whatever real-world money is generated from online gaming activities.

For most cases (games like Second Life, some EQ2 servers plus some others excepted) selling items, money and characters is a violation of the contract you agreed to by playing. Other than this little legal bit, wouldn't it be just like taxing any other profits from any other business?

[Ghost Rider]

LMAO...given that how many fucking Tax laws Congress passes and has no fucking clue what it does(Child tax laws are my fave, given the sheer fucking fluctuation), I live in some doubt this will ever come to pass. The sheer wording of this thing will make most cover it for a year, and past that ignore.

So let's see...let's say possibly as high as 1-2% of the total population play MMOs and this is even pushing it given that most MMOs track by worldwide account number, but what the hell...humor. So this tax will affect this on the basis of what? A single game that can be converted back into real dollars? Second Life.

Tracking and getting at that wealth is essentially having him claim something that is virtual dollars...but what he's converted to liquid. And just how many players make anything? So what does the company have to do...give everyone who makes capital a 1099-MISC and claim they are a small business? Hell, tracking this thing would be an abomination for anyone doing the fucking taxes(in an era where getting a person to pony up their $8000 yearly donation to their church is like pulling hen's teeth, I won't even imagine the sheer inanity behind this).

Literally it goes down as pure bullshit, and while Congress may pass something around...oh 2020...it'll be just another pointless dot on the federal 1040 that 99.6% of America will ignore and the IRS will lose in the fucking shuffle.

[Archaic`]

It'll be interesting to see how this plays out. For many, their incomes from MMORPG's could be said to be incomes earned in a foreign country (based on the location of the server they played on), which just complicates things. There's also the arguement that trade online isn't the exchange of currency for goods or services, but rather the exchange of (virtual) goods for (virtual) goods in barter. Is that even taxable? As for when you change something like Linden Dollars into US Dollars...are Linden Dollars counted as a currency, or as a virtual good (in which case, technically, you're selling your Linden Dollars to someone for money, not purchasing money with Linden Dollars, which one would imagine would matter for tax purposes).

[phongn]

I read about this some time ago in the WSJ. The issue arises not when you acquire in-game currency or goods but if you cash out at any point via eBay or other means. Does this then count as income tax? If so, then how should it be reported, and should the game developer/maintainer have to go through various legal hoops?

[bilateralrope]

For the MMO's that don't allow you to exchange virtual goods for real cash, would the people running it be able to use this as an additional threat to those people who still do (only those in the US or course) ?

Since banning them from the game doesn't seem that effictive.