Comments on: Are virtual assets taxable?

The weapons, armor and gold pieces from online games are worth millions in real dollars. How much of a share will the IRS want?

[qazwiz]

Neopets bypasses this

by freezing anyone who gives or recieves real money for virtual items

Personally I think any real money realized by such sales are already covered by taxes on income but there was talk of the trade/exchange sites(I do this you do that) being taxed on their credits which were usually called dollars or if called points it was stated you could buy points for so many real dollars

this created real value for the otherwise virtual credits and such value was being taxed

where here you don't have any value until it is actually sold on eBay (or where ever) makine this a lot of smoke and mirrors that we have to waste time on to be sure the liberals don't screw us again!

[bustaballs]

Only possible in certain games

In most online games, Real Money Trade (RMT) goes against the user agreement and is therefore against the rules of the game. There are some exceptions to this like "Secondlife" where tons of people make a living off of this.

If RMT is against the user agreement then the IRS can't do anything but punish them or get the people/s to stop making money off of it.

[Richard G.]

EULA are meaningless

It doesn't matter what terms a player is forced to agree to, any form of agreement between a citizen and a company is meaningless until a judge officially says a contact can be binding and upheld.

Companies are NOT government bodies. Their EULAs do NOT carry the weight of law (until a judge says they do.)

[caskhyron]

IRS Taxing Virtual assets ROFL!

Um, this is where big Government should keep it's mits off. First of all, most games explicitly say it is illegal to sell in game items for real money, but people do it anyway. If the IRS is going to do this, they would also have to apply it to companies holding bits of code that they parse out and sell to people who need that particular module for their program. People selling things on ebay are not taxed for the set of 2 lamps they have at home that are trying to sell on ebay and that's the way it should stay in order for Ebay and online games to stay in business. The IRS will have to decide if getting the taxable income from online game and auction site companies is worth losing if they try to tax the virtual "warehouses" players create. The best fix for this is to stop the real world sales of a virtual company's intellectual property rights by the players.

[firebate]

Simple solution

This isn't a problem. The IRS or whoever your local tax people are have no right to tax anything inside the game world because the gameworld is outside their juristiction. While the servers that host the game world may be physically located in a specific country, the game world exists outside it as an autonomous entity. Since your Characters are citizens of the game world and not the real world, transactions within the game world can only be taxed by the local authority within the game world. Only transactions that move into the real world can be taxed in the real world. Technically with a real world transaction of virtual world materials you are acting as your character's agent. The property is owned by your character, not by you. This is an important distinction.

[kieranmullen]

Virtual Pets= License ?

When will it end? Go away government.

[mcclurec]

What about tax credits

So, if a government could tax virtual assets, could I then right off buying a game like World of Warcraft and the monthly fee for logging into it?

[Lolo Gecko]

just be thankful that they don't tax hype ...

virtual representation warrants virtual taxation; so cough up that virtual fortune generated through vaporware sales.

[System Tyrant]

Their Fair Share.

I work hard for my money. I also use services provide by our government (roads and such). What I'm curious about is exactly what is the government fair share? I mean after all I am taxed out of my pay check, then again when I buy something, and then again for owning something of value. So exactly how much of my earning go toward their fair share?

I realize this is the wrong place to ask this, but I'm sure I'm not the only one who ask this question.

[gparshal]

Virtual Barter - The Answer

Everyone agrees that if you sell virtual goods for real money that should be taxable. In tax terms it's a "realization" event.

Everyone also agrees (although some persons are not ahppy with it) that barter of real-world goods is taxable as well. IRS even has a form (1099-B, I believe) for this, and regularly monitors the actions and transactions at the larger barter exchanges.

Now, as to barter of virtual goods within the virtual world, I believe the analysis should go something like this: It's a like-kind exchange. IRS currently allows for tax deferral of real-world exchanges of real estate, with very technical rules about how to accomplished the exchange. As an example, a friend of mine recently sold a condo in DC and "exchanged" the proceeds for a vacation home in DE. Because the swap was done accoding to IRS rules and she took no profit out of the deal in the form of cash, there was no tax. Actually, there will eventually BE tax, but only when she ultimately turns the Delaware property into cash.

I would argue that the bartering of virtual goods within the virtual world is a similar dea - a like-kind exchange. It is taxable, but not currently, being tax-deferred until there's a real-world cash/value exchange.

Jerry Parshall

[LordWolfx]

It isn?t yours, and it is illegal.

This is the stupidest thing I have ever heard. Not everyone is greedy enough to sell ?online goods?, some of us actually use for what they were designed for.. ENTERTAINMENT! We already pay a monthly charge, forcing taxes on everything that drops Will be a disaster. Regardless what the developers need to do, the player base will take a nose dive. Who wants to have to pay for everything that drops after they already have to pay to play the game in the first place? That is like paying for a hotel room, then getting charged a utility bill for all the power and water you consume while using that room.

Not to mention the fact that most MMO game developers have made it against policy (illegal) to sell virtual goods or cash for real world money. Read their agreement Jerk, you are exposing yourself as breaking the rules by trying to get a tax on it. Games are for entertainment, why don't you get a life Mr. Julian Dibbell

[Methuss]

Illegal? Says you, not the law.

You're missing a major point. People who do "sell" on-line items are not selling the item itself as that remains on the game publisher's server. It never leaves the publisher's control so the player isn't selling the item. They are selling their time-effort in obtaining the item for someone else. It is no different than a home realtor who gets paid for matching up items with the people who want them.

So before you spew incorrect legal advice...get a law degree.

[Light Rhino]

Whats the point?

Why should they charge Tax on games?
Its just a lame way to make money if you ask me...

[emucompboy]

Taxes already withheld

I've noticed something with those Arctic Ogre Lords (Ultima Online). They are yielding only 1000 gold pieces instead of the 1200 gp I'd expected. My guess is that Electronic Arts is automatically withholding 20% of my actual virtual gross income, and depositing it with the federal government as required.

However, come April 15, I should be able to file a virtual income tax form, and get a well-deserved virtual refund.

[zaznet]

Demand your W-2's

You need to contact EA and get them to send your W2's so you can file properly.

[Cory Ray]

Are you serious?

This is outrageous!
I've never seen such a thing before posted on MMORPG's like this.

a Virtual game that MOST of the people play for entertainment, and your talking about taxing it. That's just out of the question.

As I have read, not only have some games, like Tibia (http://tibia.com), outlawed and forbiddened the sell of ingame items for Real Life cash, and items,y our account can be bannished, or deleted for such thing.

There is really no reasonto go to such an extent to enjoy some fun on the internet and make people pay Taxes, its senseless.

[Drakonas]

They already are!

ANY income derived from selling something is taxed. It doesn't matter if you're selling a dvd, telephone, George Bush's left sock,a rusty bucket, or a "magical wand on world of warcraft". You, as the seller of the item, are responsible for reporting it as sale of personal property on line 21 of the United states federal 1040 (i think that's the right line anyhow)It's included as "other income".
However, until you sell the item, it is considered just a common every day thing,virtual or not. You don't get taxed on your toaster, do you? ^_^

[Carsona]

It's stupid

They are just greedy, there is no point in taxing MMORPG games.

[boba10109]

You Can't

I play an online game Tibia. (www.tibia.com)

This game is hosted in Germany. I play from Canada. I have friends online that play from the US, Denmark, Sweden, Brazil, etc.

Only one of these countries is answerable to the IRS. There are tons of international players who play Ultima, WoW, CoH, Tibia, etc.

These people can sell their equipment online non-taxable.

So it's not possible - unless you call it a buisness earning and tax it that way...

[blackdtibia]

How they are supposed to know...?

How they are supposed to know who is performing a virtual good <-> real money sale? As I programmer I find that hard to know. For any method I can think I also can think about a method do trick it and avoid the tax.

[blackdtibia]

How they are supposed to know...?

How they are supposed to know who is performing a virtual good <-> real money sale? As I programmer I find that hard to know. For any method I can think I also can think about a method do trick it and avoid the tax.

[steeevo]

Mental Masturbation

c'mon....

[AmarantOrunitia]

Lol... I can just imagine...

Ok, so I play an online game called Tibia. You may have heard of it, maybe you haven't. In this game, trading items for real-life money is illegal. What I can imagine... George W. Bush starting a character and getting killed by a player-killer and wanting to sue :P But taxing online games... sheesh, that's friggen' retarded. I mean, it's a GAME. We pay the company to play, why in the world should we pay the U.S. government for pixilated items? It's a German based game, run on a German server so I dunno how it would affect it, but I still can't help but laugh. I mean, I'm from the USA and I still think that if the U.S. government has enough money to spare to give out to other nations, then they shouldn't be needing to take money from online game players. What's next? And what would happen if you didn't pay your "MMORPG taxes"? I just think that's a flat-out dumb idea. If this happened I wouldn't pay anyway, if they need the money so bad they can start playing online games for money if they're so desperate...