The Internal Revenue Service, the American tax authority, is looking into the possibility of taxing transactions that take place in virtual worlds, such as World of Warcraft and Second Life, based on the claim that revenue generated within these environments is nearly equivalent to the GNP of Russia and significantly greater than the GNPs of many more countries.The National Taxpayer Advocate: 2008 Annual Report to Congress, Volume One, states: "Where there is economic income, there is likely to be tax due from someone." (p. 217)
Certainly it is true that monetary conversions from many such virtual world currencies into real-world currencies are both possible and fairly common. For example, the going rate in early 2008 for 1000 World of Warcraft gold pieces was between US$12 and US$22. Second Life in particular is proving problematic for the taxman. This is because that virtual world's terms of service allow users to generate virtual goods for which they retain copyright and to sell those virtual goods for "Linden Dollars", which are then not uncommonly converted into real-world currencies (at a rate in early 2008 of about 266 Linden Dollars to one US dollar).
In both cases, there is real-world money being made (and perhaps not being properly reported to the IRS). In the case of Second Life, one encounters novel creations being made by people who are then given intellectual property rights over them (as part of Second Life's terms of service)--intellectual property rights that can generate in-world and, hence, out-world income in a manner similar to, say, a published novel or piece of music.
But what about exchanges that take place entirely within virtual worlds? The National Taxpayer Advocate continues, "[I]s a person subject to tax each time he or she acquires virtual property? How about when the person exchanges one virtual property for another, or for virtual currency? [...] What, if any, information reporting, withholding, backup withholding, and recordkeeping requirements apply to these transactions?" (p. 218)
These are difficult questions, as the National Taxpayer Advocate readily admits, but the IRS is working on finding the answers.
Yes they werent evading tax, they totally abolished Income Tax! Thats because they instituted a good money system, without a central bank. Its no wonder Americans started paying income tax the same year the federal reserve bank was established...
That is correct.
most ppl dont deal with the chinese farmer gold, so why are htey being punished?
We have income taxes and like it or not, you have to pay them.
Technically if you make real money off WOW/SL then you should report it. But simply because virtual goods and virtual money are potentially convertible to real cash, this means they want to think about going for it tax-wise.
They are not currently thinking of taxing in-world cash/goods transactions. But the principle is there to do so, given that those things can be converted into real-world cash/goods. Hmmm... the way I read that section of that document is that it is the simple potential for conversion that interests them. But then they go on and on about just how they would do it, and if it would be worth the effort to make the companies that host the online worlds to keep track of all those things for tax purposes.
The comments to the original document suggest that "guidance" should be made available so people know where they stand.
Hmm maybe if the politicians didn't receive lifetime benefits and looked at their job as a service to our country and not a career to get easy benefits then maybe we can get somewhere.
Brilliant! Would be tough to pull off, though.
Got a source for this bad boy? Hard to believe.
I guess this is a move to start recollecting all that money that was lost in the failed auto industry bailout.
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We have that already, here in quebec. epic fail!
Level 60 tax-collector applying to join your raid - do you accept?
Decisions, decisions...
Seriously, one guy files it on his income tax almost three years ago, it becomes news 25 months ago...we're regurgitating this?
Well, congress will have to make a law before the prez signs anything into law.
That would also mean D2 is to be taxed. You know how many people still pay money for in game items.
therefore
Real money earned = tax payable with "Virtual" money
Result!
Sadly, that is not always the case. While Blizzard does not condone, nor allow, the exchange of in-game property for real world money or visa versa, it happens all the time. Blizzard does what it can to stop this, but there are companies all over the internet that advertise to sell WoW gold. They charge a price to your debit card, and then I guess they mail it to you (in-game) or give you a character name to go trade with in the game to redeem your purchase. This therefore, gives real-world value to virtual property, and therefore gives the IRS something tangible to try and squeeze a dollar out of.
If they plan on taxing me for selling an item on the AH and no REAL money changes hands, they can kiss my ass.
The US Gov't would have to adopt an actual exchange rate, which would be pretty impossible considering Blizzards stance against gold selling.
They are grabbing at straws, this was attempted before and shot down. I don't have supporting links, but a decent Google search should find it.
What's next? Are we going to be charged with murder if we kill someone in an online game?
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