Taxation of virtual assets

The article is just speculation really, but it's kind of interesting.

 

http://news.com.com/2100-1043_3-6140298.ht...3-0-5&subj=news

they r gonna tax me for looting vancleef?

 

I wonder what the IRS would say to me if i refused to pay that...

kalimdor is tax free looting

that is pretty rediculous, I doubt it would happen but if it did save a jail cell for me.

 

 

/eyes Democrats in power now...

I don't understand...

I hope they're joking, for their sake.

Think of it in a context outside of the video game itself. The line between virtual and real is becoming more blurred every day. With people buying in game currency for real currency, people selling virtual items and characters for substantial amounts of $, and companies being formed to offer servicies for leveling etc. How is it such a big leap to tax it this new economy?

 

You pay sales tax on a car when you buy it, or on other online purchases if the company you're buying from is the same state you live in (assumed US). This isn't that big a leap.

 

Shad, don't you go eyeing the democrats, the republican's made a fine mess, partly the reason they're no longer in power. Or simply leave out the politics.

this has been misreported a lot. Im fairly certain this began as a "tax on people making money off of the selling of virtual goods" and got turned into "tax on people earning virtual money online".

this has been misreported a lot. Im fairly certain this began as a "tax on people making money off of the selling of virtual goods" and got turned into "tax on people earning virtual money online".

Aye, I think if anyones toon had to pay "income tax" on loot then the masses would rise as one and slay the government. Or anyone that thougt it was a good idea.

I WANT EPICS

*shudders* I've put significant work into my character, and I really do farm like crazy. However, I don't sell what I farm/earn. That still adds up to a significant amount of virtual wealth. If I never sell mine and this bill gets passed, would I still have to pay taxes on its 'assumed' value? ... god... greedy damn politicians... always looking for any way they can to pad their wallets. Just because they're too old to get into the online gaming world, doesnt mean that they have to spoil it for those who aren't. If this does get approved, you guys are right, there WILL be a huge uprising because millions of people turn to this for rest and relaxation away from the real world. If it starts getting taxxed, what are we supposed to do!?

There's no "asset" in terms of actual, transferable, real world economic's in video games. They'd have to tax every instance of monopoly too. Plus, the threshold for these kinds of taxes is quite high. I'm pretty sure NASDAQ isn't listing the conversion rate of WoW gold to USD. (although if they did, they'd probably see that WoW economy > US Dollar atm.) If people are selling characters, that IS 1099 income. Hykos is right. That's probably where all of this stems from.

hehe yeah . Well if that's the case, they will probably take a heavy look at Ebay and other auction sites as well, I know 90% of the people on there don't post their profits from sales as they should. It is essentially the same principal. Its just stuipd in my eyes, I know why they have to do it, but, hehe it just really seems to me that its anything and everything for the government to take its own share of everything you do. My main arguement I guess was, we're already paying $15 a month to 'earn' these profits. Does that mean we can use it as a tax deduction if they decide to let this pass? .. 15x12 = $180 deductable a month, hehehe...

There's no "asset" in terms of actual, transferable, real world economic's in video games. They'd have to tax every instance of monopoly too. Plus, the threshold for these kinds of taxes is quite high. I'm pretty sure NASDAQ isn't listing the conversion rate of WoW gold to USD. (although if they did, they'd probably see that WoW economy > US Dollar atm.) If people are selling characters, that IS 1099 income. Hykos is right. That's probably where all of this stems from.

 

While I agree that the issue here is the taxable income earned from the sale of a character or any virtual item in exchange for "real" US currency, I actually do think that you could come up with an estimated asset value for your characters.

 

The only way that any of this is taxable (and it is currently taxable) is by exchanging your character or item or gold for US currency. When the item is exchanged you are recieving income from the sale, and thus should list this as income for tax purposes. However, you can't be taxed for just having a character worth X amount of US dollars, or can you?

 

Now the interesting thing is, if you want to look at your character as an asset or investment, you probably could come up with a fairly accurate "market value" for the asset. WoW gold would be very easy to determine a US dollar exchange rate for. You could simply check what the going rate is for 1 gold in US dollars and multiply that by your current gold. There are plenty of people who sell gold over the internet, so you could use their average price to determine the value of WoW gold. Even for characters, you could probably search ebay to see what an average price is for your character. You put the two together and you have yourself the actually US dollar value of your WoW character or your asset. To go along with this, if the IRS can prove that this asset the "characters" is being used to provide income, then there might actually be a way were taxes could be charged on your characters value. If you are using your character to play WoW and have fun then there should be no tax implications. But if someone is using a character to farm gold and sell for US dollars, then hell that character could be taxable if the IRS can prove it. Interesting debate, but I seriously doubt that much will come of it.

Even then, you'd have to argue that the character is "property" rather than "intellectual property." The distinction is somewhat pedantic, but an important one. It's the difference between paying taxes on physical property such as a house or a car, or intellectual property such as an idea or a concept (or even the NUMBER of files on your computer.) While intellectual property IS to some degree taxable (and certainly covered by a LARGE stack of legislation) it's only taxable once it is utilized to make a concrete sale or transaction. Company's aren't assessed a special tax for having a logo, which I *think* is part of their intellectual property assets. Even Microsoft isn't taxed for having programs. They're only taxed once they sell them.

 

The sale of a character is essentially the sale of a service, so that income IS taxable and (yes miro) the subscription fee that you pay would be tax-deductable (although 180 for the year, not the month). As would the computer that you play on, the depreciation of that computer, the desk that you sit in, your internet service, a portion of your electricity, the sales tax that you paid to buy the game, the snacks that you eat (within reason) while you play, and any fees that you pay to Ebay or Paypal to accept the funds, not to mention your repair bills from raids to get those items as well as any in-game consumables you use to secure them. You also only need to claim it as income if you sell it for more than $599, I think.

 

While it's certainly an interesting idea and DEFINITELY fodder for conspiracy theorists, in practicality, it's not feasible. Something as large and inefficient as the IRS has no reliable way to assess the real world value of something like a [item]Stormrage Cover[/item]. Tracking the existance of these items, which in fiscal terms is brief at best, would cost more money than they'd ever make off taxing the property itself.

 

I KNOW that we have some guildies that work in an accounting office. They may be able to speak to the specifics of this a little more accurately. The only reason I know this is through business dealings I've had with software and publishing companies and setting up companies in order to shelter assets vs. sellable items.

After thinking about this, ALL of our characters are technically "Blizzard's Property"....

 

So Blizzard would be the one getting the huge tax bill, not us, since we don't technically own our toons.

 

Just my thought on it