Taxing Virtual Income
Properties and items in online worlds can be sold for thousands of dollars, could they be taxed?
With some property and items gained in online games being sold for thousands of dollars in real money, could the tax man be coming to collect on your virtual aquisitions?
Independent filmmaker Jon Jacobs made headlines a year ago when he paid $100,000 U.S. for a space resort in the online world Entropia.
Sounds crazy, but he now makes a monthly income of $12,000 from renting our portions of the resort and having hunting grounds.
Then at the end of June, Julian Dibbell released his book, Play Money: Or How I Quit My Day Job and Made Millions Trading Virtual Loot, examining the culture of business in MMORPGs.
Clearly non-existent posessions have real-world values, so shouldn't the tax man be looking for their share?
Not according to the head of the U.S. Joint Economic Committee.
"There is a concern that the IRS might step forward with regulations that start taxing transactions that occur within virtual economies," Republican Jim Saxton said in a statement released last week. "This, I believe, would be a mistake."
But since U.S. law says if an individual gains U.S. dollars from a transaction, tax is due. The fact that any transcation made in an online world has some real-world cash value has prompted fear that even just getting new armour in a game could result in an audit.
Saxton's press release, however, says "if a transaction takes place entirely within a virtual economy, then it seems there is no taxable event."
"Such distinctions should be address and resolved in a common sense manner," the release continues.
So it seems MMORPG players are safe the tax man for now.
