Selling a magic wand? Don't forget to pay the IRS their share.
Here's an article from CNet about taxing virtual assets.
Posted by John at Tuesday January 17, 2006 - 8:00 AM | Category: Role Playing Games | © 2006 Gaming Signal
From the article, this is the part that is most relevant:
"From the standpoint of economic theory...there's no fundamental distinction between selling euros and buying magic wands," said Ted Castronova, an expert on virtual economies and an associate professor of telecommunications at the University of Indiana at Bloomington. "They carry value with them. If you're going to tax exchanges in the real world, you've got to tax exchanges in the virtual world, in economic theory."
The problem, said Castronova, is that it's not about economics.
"It's about common sense," he said. "Common sense says that when people are playing a game of Monopoly, you don't tax (the properties they buy and sell)."
Posted by Scott on Tuesday January 17, 2006 at 2:07 PM
Funny, I found that last quote to be irelevant and, in fact, the weakest argument against the taxation. Making a steady income from selling virtual property is most decidedly NOT like playing Monopoly. Monopoly money stays in-game and does not make a wallet greener - there's nothing to tax. How is that the same?
Posted by John on Tuesday January 17, 2006 at 9:24 PM
He's talking about taxing exchanges in-game - not taxing the real dollars made from selling it. These are too different concepts - both worth consideration but definately at different ends of the spectrum.
If you make money providing a service, you owe taxes on that income. It doesn't matter how you get it - whether you cut lawns, work at the Bunny Ranch or farm gold in WoW. To me this is clear - doesn't matter how you make it, if you make an income you owe the IRS.
The argument for in-game taxation though runs like this. If the free market has established that $1 = 16 gold in WoW, then selling items in-game for gold could be taxed using the 'providing a service' argument above. Selling some person a magic wand for 1600 gold would be the equivalent of that person giving me $100 - so I should owe taxes on that. The fact that you haven't realized the gain in US dollars is significant, but only so far as the currency (WoW gold) isn't recognized. Should the US recognize gold in WoW as foreign currency? Of course not - it's as absurd as recognizing Monopoly money.
Posted by Scott on Wednesday January 18, 2006 at 12:30 AM
It would also neccessitate the owners of WOW (blizzard??) to issue 1099's or require everyone that sells virtual items to record it on their own as taxable income...I'm SURE that would happen...(not!)
Can you imagine the great commercials that H&R Block would run though? heh...
Are you a gold miner? A dwarven warrior? A vicious Half-Elf Wizard? do you have tax problems as well? Let H&R Block file your taxes for you and let you get back to what's important...like finishing off that last krispy kreme and saving the virtual world one more time....
(grin)
Posted by doug on Wednesday January 18, 2006 at 11:33 AM
I think this is an evil plan by IRS Agents to get to play WoW for free. They will next attempt to force Blizzard to create the new 'Tax Assesor/Collector' class (Horde only, non-PvP) so they can levy and collect taxes online. Then turn around and buy all the phat l3wt in the AH...
Posted by jp on Wednesday January 18, 2006 at 4:06 PM