IRS urged to tax virtual worlds, economies

[J.S.]

Saw this and said meh, but worth a mention


Published: January 12, 2009 - 01:04PM CT

The Internal Revenue Service should start taxing the fledgling virtual economy in Second Life, World of Warcraft, MMORPG's and other virtual worlds according to Taxpayer Advocate Nina Olson. In her annual report published on the IRS website, Olsen said that there are still a number of issues that the IRS should "proactively address" before they get out of control. And now that it's on the IRS' radar, it's likely only a matter of time before Uncle Sam tries to figure out some way to get a cut of your gold.

As most of our readers know, a number of virtual worlds involve the trade of real money for various virtual products and services inside of the game(s). And wherever people are spending money, someone is making it. Entrepreneurs are making fat cash off the sale of virtual land, clothing, sex toys, and everything in between in Second Life and other games, and now Olson wants the IRS to go after them.

"Economic activities associated with virtual worlds may present an emerging area of noncompliance, in part, because the IRS has not issued guidance about whether and how taxpayers should report such activities," Olson wrote in her report. She points out that almost all income is subject to tax—even prizes, winnings, and barter exchange. She also acknowledges, however, that tracking and reconstructing so many tiny transactions would be a huge burden, and that attempting to place a value on virtual transaction could present serious challenges.

She urges the IRS, however, to establish guidelines on whether (and how) taxpayers should report their activities even if only to help taxpayers better understand what's going on. "IRS guidance could improve taxpayer compliance even if it simply clarified that in-world transactions are not taxable," Olson wrote. "To its credit, the IRS has recently identified a number of issues presented by Internet auctions of virtual property and other aspects of virtual worlds. However, the IRS should consider doing more to help taxpayers comply with their tax obligations by quickly issuing guidance addressing how to report economic activities in virtual worlds, as well as in other emerging areas of economic activity."

This isn't the first time the concept of taxing virtual worlds has come up. Since at least 2003, people both on- and offline started looking at the tax implications of virtual economies, and Dan Miller, senior economist for the congressional Joint Economic Committee, started entertaining the idea of taxing MMORPGs in 2006 after diving into the world of online gaming himself. As noted by Silicon Alley Insider, however, collecting taxes from virtual world activities could very well put a serious hamper on the virtual economy. No one likes to jump through bureaucratic hoops just to play an online game, after all.

[Noobert]

No.

[cloak]

No.

agreed, like we dont already pay enough income tax/vat and living tax...pft

[Juliette]

Idiots.

[Solus]

bah. taxes on MMORPGs? rofl.

No.

~soul

[Cole]

They should go back taxing cigarettes more and let us play in peace! >_<

[Hansbrough]

o0

can't tax what is free. now if you're not claiming the income from sales made ingame... that's already breaking the tax law.

[SmokeJaguar]

Taxpayer Advocate Nina Olson

what is it this twit does exactly? sits around thinking of new ways for people to pay even more taxes? there are people who think we dont pay enough and we should pay more?

ARE YOU SERIOUS?

get a life woman, seriously. 10 bucks says in some years down the road she'll get busted for tax evasion.

[buck]

Upon what authority would they have to tax a "virtual" world?

You cant tax a load of people from different countries, via one countries tax system. The legalities! Oh the Sueing that would occur!! Madness i tell you, comes right from the top level's in society and politics, dont let anyone tell you any different.

[J.S.]

I can honestly see them bringing it in.. The problem is people talk about it, its a black market, people aren't supposed to know about it, but hey..

If they brought it into SGW tho, I wonder would they count back tax???

And, more importantly, which countries have dual tax? It's a legal minefield, the same as prosecuting someone for downloading on the same IP as you.. There was a program on BBC there last year sometime, where a legal company was suing over 500 people for "illegally" downloading a game that nobody in their right mind would download.. But meh.. That's what the world is coming to..

THE MACHINES ARE TAKING OVER!!!

[buck]

Might i suggest we give form to our virtual world.

Its limits are not that of land, And it does not sit within the confines of any country. It is in cyber space...I would argue that case, whereby, how does one tax something, that one has no authority over, Nor can they.

Unless they claim that the tax system to use is , for example, our server...Canada. There is no way the Canadians could make me pay tax, because i am not a citizen. Now if they claim by stepping foot on that land/cyberspace, i was therefor tradeing on there borders, I would turn my PC off, and quite simply, Win.

[Juliette]

zomg.. I declare my section of CyberSpace independent territory from the rest of the world, and apply for UN membership.

Oh, and I declare war on Nicaragua.
Yes.



Though on a more serious note; there's no jurisdiction, except where jurisdiction is given, and extradition treaties are signed.
If we all move to Iran, we'll be safe.
Or Israel. I prefer that.

[Cole]

Oh I'll move nowhere, and if it comes out, I'll simply stop for ever to buy any SS/USS whatever being similar.

My bank account will not object on that one -^!

[J.S.]

Might i suggest we give form to our virtual world.

Its limits are not that of land, And it does not sit within the confines of any country. It is in cyber space...I would argue that case, whereby, how does one tax something, that one has no authority over, Nor can they.

Unless they claim that the tax system to use is , for example, our server...Canada. There is no way the Canadians could make me pay tax, because i am not a citizen. Now if they claim by stepping foot on that land/cyberspace, i was therefor tradeing on there borders, I would turn my PC off, and quite simply, Win.

Actually they can get you from paypal or someother CC processor

And, it's not paying the game, its buying resources from some other player..

[Mr Nice Guy]

could we build a non virtual MS and destroy IRS ?