Do you agree with me about the bizarre nature of this? Is this just “the press” building hype around something that can never happen? Or is it a warning about government possibly sticking an intrusive snout into our own private (fantasy) business? (Yes, like that doggy over there sniffing around in the grass looking for the small of you-know-what.)
In an article entitled IRS taxation of online game virtual assets inevitable CNet news’ Daniel Terdiman suggests that publishers of online games like World of Warcraft and SecondLife may soon be forced to report in-game (“fake money”) transfers of value to the IRS so they can be taxed. All of this discussion triggered by talks at the State of Play/Terra Nova Symposium taking place at the New York Law School.
You know, in Civilization III the tax man is not well-liked. How unlike real life, eh? (Heh heh.)
My take, of course, is “it’ll never happen” but I wonder what you think about it all. The premise is that wherever there is an exchange of value, be it real dollars or fantasy dollars, the taxman could be there.
By the way, the Terra Nova portion of the symposium name comes from the Terra Nova blog, where there’s a lot of thinking going on about online gaming. It might be worth an RSS subscription to you.
But, of course, if you watch a movie there’s an exchange of value, and the tax man only taxes you once when you buy the DVD, not every time you watch it. And if you like one movie better than another movie, you don’t pay more for it the second time you watch it – you just pay once when you buy the DVD. And computer programs where you play on your own computer and build up assets, are creating huge “virtual value” for you, but you’re not taxed (at least not taxed by the IRS).
What they’re thinking about here is that based on the value of in-game currency that you exchange, the real-world IRS might tax you at the end of the year.
It does seem likely to me that transactions that involve real-world dollars could be taxed – for instance, you pay someone real money to design you an avatar (or to design virtual-world clothing for your avatar) and they then make that available to you in-world. This type of transaction looks totally taxable to me – sales tax, of course. But in-world transactions involving virtual money are another issue, aren’t they?