Real Taxes On Virtual Goods

[NovaXpress]

This piece is getting some attention: Game Daily: Taxed Out

 

It claims that we'll soon see taxes applied to MMO property ownership. It's bullshit. The writer makes many ignorant statements about law and the economy so he's quickly discredited. But it's easy to look at in a logical manner.

 

There is big tax money to be made from auctioning the real-world sale of virtual items. By applying ownership taxes, the IRS would kill the golden goose. The exchange of dollars to Lindens or whatever is determined solely by the players. Players could kill the tax just by dropping the exchange rate. There would be many lawsuits and legal challenges.

 

The IRS has things under control. They can make the most money by leaving things as they are.

[MCHufnagel]

I don't know how the IRS could keep track of these transactions. Does anyone keep track of them? If not then companies like Blizzard would have to create software that would do this for each and every transaction. What a nightmare! Of course this system could be bypassed via a combination of IM and Paypal. Or even some system that hasn't even been created yet.

[JB]

A virtual "property tax" is fairly silly.

 

But what you COULD see is sales tax.

Not on the gil, silver, latinum, or whatnot, but on the REAL monetary exchange, say at eBay. Putting a federal sales tax on online commerce would be quite within the realm of possibility.

 

This would also open a lot more avenues.

Got an XBox Live download? Upload 5 cents to the feds.

Want a Wii-volution game? Uncle Sam wants his dime.

 

A lot of states have tried to work out a way to drop a sales tax on online merchants, but since it's very easy to argue whether the purchase happened at the company server, the buyer's PC, or even a union of both locations, it gets very messy.

A federal sales tax avoids those issues to a large extent since the US as a whole is so much bigger than, say, Arizona.

A well-written law would even establish where the sale was considered to happen. The most rational approach is that the tax only applies if both ends are within the boundaries of the law. Business-side only is workable. Consumer-side only isn't really.

 

 

Personally, I think it's a bad idea. But it's a very lucrative one, which is why everyone's trying to figure out a way to get a piece of the action.

[+Cobra Kai]

Magic Online already charges tax on the sale of virtual card products.

[figgler]

This is a great big can of worms. Star treating virtual goods as real ones and other non-tax related issues come to light. For instance, what if I kill your character and steal your in-game items to sell them for real out-of-game money? Does that then make me criminally liable for theft?