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April 9, 2007
Tax Treatment of Players in Second Life and World of Warcraft
Leandra Lederman (Indiana) blogs on Conglomerate about the tax consequences to players in Second Life and World of Warcraft, from her recent article, Taxing Virtual Worlds:
How should transactions within Second Life be taxed? My view is that, from a policy perspective, the right result is to tax commercial activity within virtual worlds but not game play. Thus, if Anna is a Second Life entrepreneur raking in the Lindens and Bert uses Second Life to build and furnish a virtual castle to hang out in with his friends, then, as a general matter, Anna should be taxed on her Second Life activities, but Bert shouldn’t be. The problem is how to reach that result.
Games like WoW raise income tax issues, in part because items in them, though part of a "game," have real market value. In [my] paper, ... I discuss two of the issues: the taxation of loot "drops" and the taxation of exchanges within the game, such as the exchange of a virtual sword for gold. From a policy perspective, my view is that drops and purely in-game trades should not bear income tax. One of the problems with taxing them would be the regressive nature of the tax because players who put in the most time and the least money would owe the most tax, although players who put in the most time (40-80 hours a week or more) tend not to be employed full-time (e.g., students). Players with higher incomes tend to be those putting in less time; they tend to spend money in the "real market" in lieu of hours of "grinding" to level up. Such a tax would also pose administrability issues because of its enforcement difficulties. For these reasons and others, I argue that players of games like WoW should be taxed if and when they cash out—that is, on real market trades. That approach would allow those playing for entertainment not be taxed on their game play (beyond the tax they already paid on the money spent on the game), while catching most profit-seeking activity.
April 9, 2007 in Scholarship | Permalink
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Comments
According to Blizzard's EULA, I do not own my character or any of my character's items. As such, how can you possibly justify my paying taxes on something I don't own?
Posted by: Diomedes | Apr 9, 2007 11:16:32 AM
You DO realize to 99.9% of the people, that this is a game and that these "drops" have no monetary value? I think you have little knowledge of the actual game and you should realize that the "selling" of such things for REAL money is against Blizzard's policy and the majority of people do not have a problem with this and abide by it. A virtual sword has ABSOLUTELY NO MONETARY VALUE in the game! I guess you'd better make online scrabble your next target since I am sure each letter could potentially have a monetary value if people were to gamble on it! You could technically attach a monetary value to me taking a nap if you wanted it but trying to collect on that 'tax' would be ridiculous, much like your idea of taxing virtual worlds.
Posted by: John Fahlman | Apr 9, 2007 11:17:16 AM
The only problem with WoW is....sale of in game commodities violates the EULA. Do you suggest we start taxing all the weed and cocaine that gets trafficked through America? It's a nice dream for the IRS.
Posted by: NealTse | Apr 9, 2007 11:28:29 AM
As a Wow player, and as someone who also played Everquest heavily, I think things like this are absolutely ludicrous. Nevermind that we're already taxed into poverty, now let's start taxing our virtual entertainment.
Apparently the tax I paid on the money I made at my job, then the tax I paid on the car that drove me to the store, the taxes I pay that (laff) "built" the road I drove on, the sales tax I paid on the game itself, the tax I paid on the fuel for my car, the tax that i pay on the electricity in my house, the tax I pay on my house, the tax I paid on my computer which I play the game on, then of course the tax for the internet connection also required to play the game, but now my play time gets taxed too?
WHen will it end? I know, how about a breathing tax. Gotta fund the planting of all those new trees somehow right? Gotta keep air to breathe!
Posted by: PixieDust | Apr 9, 2007 11:36:13 AM
The biggest problem I see with this is that it would be interstate commerce.
Many of these deals are brokered over the internet so it would be difficult to tax, if even legal.
Many are also brokered over online acutions like eBay, or over personal sites set up by oversees companies.
My final point is that according to the TOS of WoW trading Items outside the game is a bannable offense. By taxing these activities the violators would gain some level of legitimacy. As an MMO player (not WoW, but others)I would hate to see these people gain any suggestion that what they do is a real job.
p.s. Just because something can be taxed doesn't mean it should be.
Posted by: iceph03nix | Apr 9, 2007 11:50:21 AM
So in the WOW case, if I sell one item in the real world I need to claim that as income. Can I then claim all the money I have spent on the WOW game, subscription costs, and other offline purchases as items as business expenses? Can I now claim home office expenses? Cable modem fees?
Posted by: bill | Apr 9, 2007 11:53:56 AM
Taxing players "in game" after they have already been taxed to purchase the game, and on top of paying for the game monthly is rediculous. Dispite the "real world value" of in game gold an items, most of the items and gold that are purchased are done so out of the country. So good luck enforcing the Chinese Gold Farmers to pay US taxes.
Taxing players to PLAY the game is hands down absurd.
Posted by: Neiro | Apr 9, 2007 11:57:25 AM
How would this work with minors though? Could I simply register my account in my daughters name and become tax exempt?
Posted by: Martin Wallace | Apr 9, 2007 11:59:10 AM
You can in NO way tax the real world sale of World of Warcraft items. It is explicitly forbidden in the End User License Agreement to sell items in the game for real money outside of the game. You could tax the subscription to play the game. The standard month-to-month subscription is $14.99 so taxing 1% of that times 8 million subscribers would net nearly 1.2 Million per month. Kinda poetic to pay for the War in Iraq with a game called Warcraft.
Posted by: Sparky | Apr 9, 2007 12:02:07 PM
Mam?
With all due respect? You're out of your bloody skull if you think this is even a potential way of making money for our already corrupt government. What's next? Every time I log on to the internet, send an email, I have to pay the morons at the post office (already the worst delivery service in the world) .25 cents? You'll do well in Washington though.. with that kind of logic.
Posted by: MasterChief | Apr 9, 2007 12:03:31 PM
Exchanges of virtual items exchanged on internet networks should only be taxed by those that control the internet protocol and physical channels of communication, and of course by the controllers of those virtual items. Since the protocol (usually HTTP) is free, the only remaining possible taxing entity should be the internet providers, and if the internet could be free (as in beer, possibly via mesh networks), then there can be no tax!
I would appreciated it if you kept your favorite online fantasy games and the black force of taxation seperate, such that those less endowed in the membrane not get the wrong idea. Otherwise, you should be wise to disclaim that you don't know jack about the internet and what it is.
- Jae
Posted by: JackGardener | Apr 9, 2007 12:09:05 PM
Exchanges of virtual items exchanged on internet networks should only be taxed by those that control the internet protocol and physical channels of communication, and of course by the controllers of those virtual items. Since the protocol (usually HTTP) is free, the only remaining possible taxing entity should be the internet providers, and if the internet could be free (as in beer, possibly via mesh networks), then there can be no tax!
I would appreciated it if you kept your favorite online fantasy games and the black force of taxation seperate, such that those less endowed in the membrane not get the wrong idea. Otherwise, you should be wise to disclaim that you don't know jack about the internet and what it is.
- Jack
Posted by: JackGardener | Apr 9, 2007 12:09:56 PM
>>You DO realize to 99.9% of the people, that this is a game and that these "drops" have no monetary value?
This statement is very ignorant. Nothing has a different monetary value to someone else. If a BOE purple drops in a heroic instance that is valued at 500g, that drop has a real-world value of whatever the current market price is for 500g (right now it's probably about $50) Whether the player that picks up the drop recognizes this real-market value is irrelevant, that BOE still holds a market value because it can be exchanged (Until it becomes equipped, at which point it loses most of its value because the only way of exchanging it is to exchange the character)
Posted by: Ken Sykora | Apr 9, 2007 12:12:05 PM
Exchanges of virtual items exchanged on internet networks should only be taxed by those that control the internet protocol and physical channels of communication, and of course by the controllers of those virtual items. Since the protocol (usually HTTP) is free, the only remaining possible taxing entity should be the internet providers, and if the internet could be free (as in beer, possibly via mesh networks), then there can be no tax!
I would appreciated it if you kept your favorite online fantasy games and the black force of taxation seperate, such that those less endowed in the membrane not get the wrong idea. Otherwise, you should be wise to disclaim that you don't know jack about the internet and what it is.
- Jack
Posted by: JackGardener | Apr 9, 2007 12:12:07 PM
I'm not paying the American government tax unless I get something in return. You Americans had a Tea Party in Boston to demonstrate your disregard for Taxation without Representation. What right would the American government have to tax me for Virtual transactions conducted on foreign soil?
CIA abductions and torture in secret prisons are about all that the American government offers me. I'm not paying you guys tax to fund your invasions and assassinations.
If you tax Virtual Characters for making Virtual Money then why can't they pay in Virtual Currency? You're essentially taxing foreign nationals when you tax a Virtual Economy. American Law is not valid within a Virtual Community, only in the real community that the machinery is housed.
Of course you'll want to change that so that Virtual Space becomes American Space. I'd hazard that even if Second Life were housed on Sealand the American government would still seek to tax all of the members based on the rather tenuous argument that "we have more guns than you" which has worked so well in your invasion of Iraq. How will America assert it's dominance over Virtual Space? Through control over the Internet - your department of "defense" is making some very suspicious noises regarding public key encryption.
America is often accused of seeking hegemony. I wouldn't be surprising if you started to accuse Second Life of harbouring WMD. At least you have incontrovertible evidence that WoW routinely slaughters armies of people - not even Dubya could blame an intelligence flaw for invading that particular Virtual Community.
I can just see Dubya arguing that a big red dragon tried to kill his daddy which is why American soldiers must travel to it's the secret cave under the hill and die in the thousands.
Posted by: Andy | Apr 9, 2007 12:13:15 PM
Considering that all items in WoW and similar games are owned by the company and we the players are merely using those items within the game we are playing I'm curious as to how they can be taxable at all? I do not play WoW but I do play a similar game, Guild Wars. Everything I find within the game is owned by the company and I derive no material benefits from them whether I trade or sell them for in game money. Now...if I "sell my time" as many people do when they sell items on eBay then I agree that money is income and should be taxed, but then again we're talking transfer of actual federal currency.
In your article you mention the difficulty of figuring taxation within the game, I argue instead that its impossible based on the ownership of the material. I test software for a living and know that even though you purchase the software the real ownership of the code resides with the company that created it. And given the current events where companies are pressuring eBay to not allow auctions for virtual merchandise there seems to be nothing to tax.
Please note I have carefully steered clear of talking about Second Life...since there is a real world correlation (as defined by the software company) between in-world money and federal currency I would not argue it is non-taxable...for that reason alone I am closing my Second Life account. I do not want to be taxed on perceived income from that game.
It's an interesting intellectual discussion but nothing more. Taxing "gold" in an online game is functionally the equivalent of taxing the money in a Monopoly game, in each case I own neither "currency" and I derive no material gain from having it.
Finally I leave with this thought...Taxing the fake money in a computer game only leaves the players with one choice, stop playing the game. If no one plays the game then there is no income, the company makes no sales on software which leads to the eventual closing of the company. What taxes can you collect then?
Posted by: Scott | Apr 9, 2007 12:13:41 PM
But then the question would be, who would tax it, and should we also get a tax deduction then on the business expense of our network connection, the computer we use to connect to the game, and the fees to use the game?
If so, I could see my deductions far outweighing any taxable income from anyone who choses to play the game. In my case, I know I have spent more than $140 on computer upgrades for WoW in the last 6 months. I have spent $40 + 6 x $14.99 to cover the game itself. I spent 6 * $5 so I don't have to deal with Windows while playing WoW. So that is about $420 this year without buying more upgrades.
So even at my high lvl of taxation, it is going to take about $1500 of real sales to get to a break even with my gaming deductions. If someone is selling enough to make $1500, they are likely doing this as their sole means of employment. At that time, they should be easy to track down.
As something that has no real location, who gets to tax it? I know from legal precident that NY would like a bite of the income tax if anything ever happened in their state. I am sure some other states would like to then get their hands on a similar slice. Then you have the problem of, do you tax based on the location of the servers that host the virtual items, or the location of the person who "earned" the item, or the location of the person who bought the item? If you go there, then the states might want IP addresses of the transactions to know who gets a chance at the money. This is especially true when you have mobile users.
Or where you thinking of sales tax? If so, we get into who collects it, the seller or the purchaser? Are you going to try and track internet sales to users in other states, or even in other countries?
I hope this doesn't give the wrong impression, I don't thik it is a bad idea to tax real money transactions. I do think taxing anything virtually is going to ask for problems. I also think you might be looking at such small revenue as to make it not all that interesting. Then again, I don't know what the Second life market space is like.
Posted by: Steven | Apr 9, 2007 12:14:02 PM
I'm not paying the American government tax unless I get something in return. You Americans had a Tea Party in Boston to demonstrate your disregard for Taxation without Representation. What right would the American government have to tax me for Virtual transactions conducted on foreign soil?
CIA abductions and torture in secret prisons are about all that the American government offers me. I'm not paying you guys tax to fund your invasions and assassinations.
If you tax Virtual Characters for making Virtual Money then why can't they pay in Virtual Currency? You're essentially taxing foreign nationals when you tax a Virtual Economy. American Law is not valid within a Virtual Community, only in the real community that the machinery is housed.
Of course you'll want to change that so that Virtual Space becomes American Space. I'd hazard that even if Second Life were housed on Sealand the American government would still seek to tax all of the members based on the rather tenuous argument that "we have more guns than you" which has worked so well in your invasion of Iraq. How will America assert it's dominance over Virtual Space? Through control over the Internet - your department of "defense" is making some very suspicious noises regarding public key encryption.
America is often accused of seeking hegemony. I wouldn't be surprising if you started to accuse Second Life of harbouring WMD. At least you have incontrovertible evidence that WoW routinely slaughters armies of people - not even Dubya could blame an intelligence flaw for invading that particular Virtual Community.
I can just see Dubya arguing that a big red dragon tried to kill his daddy which is why American soldiers must travel to it's the secret cave under the hill and die in the thousands.
Posted by: AndyB | Apr 9, 2007 12:14:27 PM
Thats is possibly the stupidest article/blog i have ever encountered in my life. It displays your staggering ignorance.
Posted by: Nick | Apr 9, 2007 12:16:40 PM
You dumb cow. It's a game, leave it at that, why dont you go tax people playing hungry hungry hippo... im sure you would relate.
Posted by: neno | Apr 9, 2007 12:17:25 PM
You dumb cow. It's a game, leave it at that, why dont you go tax people playing hungry hungry hippo... im sure you would relate.
Posted by: neno | Apr 9, 2007 12:18:21 PM
Exchanges of virtual items exchanged on internet networks should only be taxed by those that control the internet protocol and physical channels of communication, and of course by the controllers of those virtual items. Since the protocol (usually HTTP) is free, the only remaining possible taxing entity should be the internet providers, and if the internet could be free (as in beer, possibly via mesh networks), then there can be no tax!
I would appreciated it if you kept your favorite online fantasy games and the black force of taxation seperate, such that those less endowed in the membrane not get the wrong idea. Otherwise, you should be wise to disclaim that you don't know jack about the internet and what it is.
- Jack
Posted by: JackGardener | Apr 9, 2007 12:18:35 PM
Did you lawyers ever here of the medical saying, first do no harm. If you are going to find new and innovative ways for our government to pull more undeserved dollars from our pockets then dont be surprised if you are deservedly hanged by the neck until dead when the revolution comes and anarchy reigns on the streets of north america. Sound unbelievable, you better hope so because when there are no police the laws that make life more difficult or expensive will lead only to their creators destruction. When anarchy reigns lawyers and judges hang.
Frezno :D
Posted by: FreznoBob | Apr 9, 2007 12:19:27 PM
I cannot believe that the government would try to tax something like a video game. Honestly, how desperate do you have to be to try to tax thousands of screeching ten-year olds? The idea of taxing a virtual economy is in my opinion, the worst idea ever. Many players aren't even in the US to boot. And why would I pay such a tax when I get nothing in return for it? The govt. doesn't pay for my online fees, they don't help me in any way pertaining to this game.
Even so, taxing a virtual "item" doesn't make sense. You know what that Item is? A variable that SAYS you have that "item". Its not really anything. So you are really taxing data. How can you tax data? should they start taxing businesses based on how many documents they have?
Posted by: Ian Gamble | Apr 9, 2007 12:25:47 PM
The day gameplay is taxes, is the day I stop playing. A whole industry will die. This idea is preposterous.
Posted by: Jeff | Apr 9, 2007 12:27:30 PM
Quote: Do you suggest we start taxing all the weed and cocaine that gets trafficked through America? It's a nice dream for the IRS.
They already do. Money gained illegally is taxable. If you rob a jewelery store, and forget to declare that as income, the IRS can get you on tax evasion charges regardless of whether you were ever prosecuted for the crime. Same thing for the drug trade. If you import heroin and sell it, and don't report the income to the IRS, you are now guilty of tax evasion.
The most famous example of this is Al Capone, who made the lion's share of his money manufacturing, importing, and selling illegal drugs. In his case, it happened to be liquor during Prohibition, but.
While they never managed to prove he was a bootlegger, rum-runner, and racketeer in court, they did manage to prove twenty odd counts of evading income taxes on his liquor sales and put him behind bars for a decade.
Posted by: Jim | Apr 9, 2007 12:30:55 PM
How bored are you lady? Do you have a first life? Do you even play any of these games you want to tax people on? I payed tax when I purchased the game. Blizzard pays corporate taxes to be in business to run the game. If you want more from us than that you can kiss my ass.
Posted by: Charlie Harper | Apr 9, 2007 12:43:04 PM
I would pay tax on virtual income using my virtual earnings, but my virtual wife ran off with my virtual accountant, leaving me virtually bankrupt.
Ah well at least my cyberdog, Prof. Scott, stuck with me through all this. Good puppy.
Posted by: Taxmebaby | Apr 9, 2007 12:43:39 PM
Seems typepad is broken. My comments are Attributed to a Scott, and I am assuming his are under my name.
Posted by: Steven | Apr 9, 2007 12:45:59 PM
I find it difficult to believe that anyone would be "mentally-lacking" enough to actually believe taxation in the virtual world of online gaming is feasible. Thus, I'm left to conclude that the author of this article simply took a popular part of our current culture (MMO's) and a hot topic (taxes) and combined them with the simple intention of getting read, nothing more.
Kudos to you, ma'am, for attracting so much attention to your writing today (as evidenced by the plethora of comments left here). Perhaps you could strive to build on this new-found celebrity with some useful content tomorrow?
Posted by: Cuppojoe | Apr 9, 2007 12:47:39 PM
My IQ just dropped 10 points by reading your blog. Thanks a lot!
Posted by: NA | Apr 9, 2007 12:48:26 PM
I worship the WoW developers as living gods. As such, I am merely participating in a religious activity and it is hence not taxable. At least *I* only virtually kill people in the name of my religion.
Oh, and I'd like to see the IRS come after my warlock. I got that instant howl-of-terror for a reason! I pity the fool.
Sideburnz casts Deathcoil.
AgentSmith is afflicted with Deathcoil.
AgentSmith dies.
Sideburnz casts campfire.
Sideburnz chuckles.
Oh, and if you really want to tax an economy that's based on a faucet/sink economy, just start metering the sinks. Not sure what on earth Uncle Sam could possibly want with virtual currency though...
Posted by: Joseph Schafer | Apr 9, 2007 12:50:21 PM
WOW... Ok, taxing game items or gold only when you actually SELL it on eBay (for real money) is even kinda stupid but if you DARE try to tax the items/gold as we earn them in the game, that would be INSANE!! There are 10 year olds playing UO or WoW. You aren't actually considering TAXING them for playing a game, are you?? If an 11 year-old girl kills a monster and gets an artifact worth 10,000,000 gold (which, let's just say is worth $30), you aren't actually going to charge her $2.00 in tax, are you???
Well, I definately wouldn't pay tax on a virtual world...not even if I sell stuff on eBay. You can try though.
ha ha, I can just see it now...
OGRE LORD KILLED
You find 1000 gold pieces (100 for IRS, 900 for you)!
Posted by: Paul | Apr 9, 2007 12:50:55 PM
How bored are you lady? Do you have a first life? Do you even play any of these games you want to tax people on? I payed tax when I purchased the game. Blizzard pays corporate taxes to be in business to run the game. If you want more from us than that you can kiss my ass.
Posted by: Charlie Harper | Apr 9, 2007 12:50:56 PM
Any sales of items are purely black market.
Posted by: Paul Rhye | Apr 9, 2007 12:52:05 PM
Tax on cashout seems reasonable to me. I don't understand why you people are so bent up about it. If you play for 6 months, and sell your toon for $300, then 6*$15/mo = $90, so tax on $210. That's how *everything* works. If you use WoW as an investment to make money, then you can be taxed on it. Just like stocks. Just like collectibles. This is regardless of Blizzards EULA. The EULA is irrelevent here. And to a poster way up top, actually some states DO have tax laws for illegal drugs. Mainly so when you get arrested for smuggling, they also can fine you taxes owed. Some people consider this a double-whammy, but it still happens. As long as your taxed on cash-out, and not on drops or in game trades, it works for me. (I have played WoW for about 8 months now, btw, so I'm not biased against it, I'm just a realist)
Posted by: Tim | Apr 9, 2007 12:56:05 PM
Unreal...
Leave it to the government to find yet another retarded reason to tax its citizens.
I feel it's appropriate to reply in netspeak to this idiotic trend of thought.
U R fUk1nG sT00p1d omgwtflolbbq!!!!!1111oneoneone
Learn2think n00b!
Posted by: youarefuckingretarded | Apr 9, 2007 12:57:17 PM
What seems to be missing from all of this lively debate, and also completely lost on the author is the following:
Transactions that touch real-world value are *already* taxed. It's no different than if I sell something to my neighbor. Would it be taxed? Probably not, but from strictly legal perspective, yes it should be. The same issue exists when you by items through mail order from out of state. Your *supposed* to report that tax, but that vast majority of people don't.
This has absolutely nothing to do with online-gaming anymore than taxing the trading of baseball cards has to do with baseball.
If I'm doing business with an out of country seller, sorry, but the US gov't really has no grounds for any claim to the money.
However, if I'm SELLING goods and producing *income* they already have a mechanism for collecting that.
No new laws are needed here, period.
Posted by: pixelpusher220 | Apr 9, 2007 12:59:39 PM
I play WoW not for personal game, but for entertainment as do 99% of the people I know. The remaining 1% that play to try and earn money are heavily despised and typically are off shore farmers trying to earn real money off of virtual money. Good luck hunting them down and getting taxes from them.
While we're at it, can I please have some of the cheap drugs that are being passed around?!
Posted by: Reid | Apr 9, 2007 1:01:53 PM
Did half of you morons even bother reading this?
Several of you proceed to whine and complain about this and that. She did not say to make you pay a tax to PLAY the game. The tax is solely for when you make a trade for REAL, offline, money.
Those of you who say that selling items for money violates the EULA and that you don't partake, then fine. You are SAFE, no taxes for you.
WoW does not operate on HTTP. Readup before trying to sound smart.
Anyway, quit being whiny fags about having to pay taxes, unless you do not value your freedom and want to live in China.
Posted by: Anonymous | Apr 9, 2007 1:02:08 PM
I play WoW not for personal gain, but for entertainment as do 99% of the people I know. The remaining 1% that play to try and earn money are heavily despised and typically are off shore farmers trying to earn real money off of virtual money. Good luck hunting them down and getting taxes from them.
While we're at it, can I please have some of the cheap drugs that are being passed around?!
Posted by: Reid | Apr 9, 2007 1:03:18 PM
Never mind the EULA and TOS. Never mind even the legality of this. There is a higher issue at stake here. The government should not be trying to find ways to raise new taxes. Instead, they should should be focusing their energy on becoming more efficient with what they already take from us. Corporations have to be efficient in order to keep their edge but the government does not. It's high time that the government is told NO, if you need more cash, be smarter with what you have rather then stealing more from the people.
Posted by: SG | Apr 9, 2007 1:04:07 PM
I am dumber from having read this article. This woman should choke on a pretzel.
Posted by: what | Apr 9, 2007 1:04:50 PM
This is totally ridiculous. Hey Leandra, why don't you start taxing critical thinking skills? You can have a new stream of revenue for government waste without eating into your own pocketbook.
Posted by: Jason Camp | Apr 9, 2007 1:16:04 PM
>>This statement is very ignorant. Nothing has a different monetary value to someone else. If a BOE purple drops in a heroic instance that is valued at 500g, that drop has a real-world value of whatever the current market price is for 500g (right now it's probably about $50) Whether the player that picks up the drop recognizes this real-market value is irrelevant, that BOE still holds a market value because it can be exchanged (Until it becomes equipped, at which point it loses most of its value because the only way of exchanging it is to exchange the character)
---------
Actually that statement is very ignorant. You're playing into exactly what the author is talking about. You're giving a completely virtual item a *real world* value and blurring the line. Not only that but, as has been stated here, by stating a real world value for a virtual item you're going outside Blizzard's EULA. Therefore your argument is null, void, and your account would be banned upon being caught. Keep your real life your real life. Keep your virtual one the same.
It would be one thing if this kind of activity were promoted, or at least allowed. But it's not in WoW and the *GAME* should be left alone. That's where it and this train wreck of a taxation idea stops. If people do it, it's their own fault for having their account banned. If people buy drugs, or liquor when they're underage, or do ANYTHING illegal, it's still technically possible for them to do it right or wrong, but do they get taxed for it? Of course not and in fact they might get jailed for it (i.e. "caught"). I should tax you for wasting the last 2 minutes of my life for rebuking your bong-smoked hazy statement.
Posted by: Lum | Apr 9, 2007 1:18:05 PM
I agree with SG.
Also - just because money is being made somewhere does not entitle the government to it, btw.
Posted by: id | Apr 9, 2007 1:25:40 PM
The real world value of any in-game item is non-existent. It's the relative value of time verse capabilities of acquiring those items, which differ greatly from 1 person to the next. In-game currency is not backed by any tangible items (like gold) and is not controlled by the government. Therefore, there is nothing preventing those with the proper access from creating in-game currency for themselves, besides corporate interests (the PR kind).
If those hurdles were even attempted to be over-come, you now have to apply more real-life laws to fantasy worlds. For example, stealing items from players, or worse yet, killing players. Each of those scenarios can potentially deal with real-life financial loses of an unintended nature. How could you possibly think to apply real-life laws to in-game mechanics, especially when mechanics of that nature are not only supported, but even emphasized.
My advice is to do some real research, and include games such as Eve-Online and Guild Wars into your curriculum. Past games such as Everquest would also do you some good into understanding just how diverse fantasy realms and interactions with intangibles can be.
Basically, you're trying to tax a thought process in which a minority have figured out how to exploit for financial gain. Sounds quite ignorant, doesn't it?
Posted by: Jeff | Apr 9, 2007 1:29:32 PM
I would suggest that this person try using some of that thought power for some more worthy effort. However, I believe that particular effort would suffer from the same sort of mental masturbatory decline as this line of thought.
I agree with "what" above. The person who wrote this was an idiot of the lowest order.
Posted by: Random | Apr 9, 2007 1:36:46 PM
I actually kind of like this idea. They'll have to make our computer purchases as deductibles. If they do this, I think I'm going to have to sell like $20 worth of real-money items. Then I can deduct the $15*12 months, my cable bill, my electric bill, and of course any comp upgrades. So I pay $2 in taxes and get $180(WoW subscription for a year) + $540 (Cable costs for a year) + ~$2k (getting a new comp this year) for a total of $2720 in deductions (plus whatever my electric bill totals for a year). Now THAT'S a great deal. rotfl
Posted by: Scott | Apr 9, 2007 1:39:57 PM
If we accept the premise behind social contract, and the notion that people form Governments and give up certain personal liberties in the form of paying Taxes and obeying laws dictated by the tyranny of the majority, then typically the government provides representation and services such as schools,roads, defense, Police, laws, regulates commerce etc etc. Now, if we choose to ignore that Blizzards EULA says in game persona's are owned by Blizzard INC., as are the characters incomes/properties. I am then left with asking what services the U.S. government is going to provide within the game environment to justify taxes and levies against a "virtual world". Will the United States Government create a standing in game military and if so, which faction will they chose to protect.. Horde or Alliance? Would they build schools? Maintain public transport? Regulate commerce? Otherwise, your proposed taxation would just be yet another form of taxation without representation?
Booty Bay TEA PARTY 2007!
Posted by: Christian | Apr 9, 2007 1:40:07 PM
If we accept the premise behind social contract, and the notion that people form Governments and give up certain personal liberties in the form of paying Taxes and obeying laws dictated by the tyranny of the majority, then typically the government provides representation and services such as schools,roads, defense, Police, laws, regulates commerce etc etc. Now, if we choose to ignore that Blizzards EULA says in game persona's are owned by Blizzard INC., as are the characters incomes/properties. I am then left with asking what services the U.S. government is going to provide within the game environment to justify taxes and levies against a "virtual world". Will the United States Government create a standing in game military and if so, which faction will they chose to protect.. Horde or Alliance? Would they build schools? Maintain public transport? Regulate commerce? Otherwise, your proposed taxation would just be yet another form of taxation without representation?
Booty Bay TEA PARTY 2007!
Posted by: Christian | Apr 9, 2007 1:41:29 PM
This law review article is ridiculous. These are non-issues. People who only have a cursory understanding of federal taxation law would be able to dismiss these questions in a heartbeat.
There is no income until the value is realized. The value in World of Wacraft is simple: There is no value except that value received for real-world sale. You own no property interest in World of Warcraft gear. In fact, it is against the Terms of Service to sale said gear. In actuality, you are selling a "Bridge in Brooklyn" to anyone who purchases it -- for you have no rights. At most you are selling possession.
You only realize value in this sale, and therefore you can only be taxed for the income of said sale. Very simple: If you MAKE money, it is taxable. If money COMES IN, aka INCOME, then you are taxed upon it.
Even in the case of exemptions, you are taxed. Exemptions just provide a "credit" against your taxable income.
As for Second Life, there are murkier questions of tax law as Linden Labs grants you, through contract, property interest in your items. Theoretically items in Second Life could implicate greater taxable concerns. Generally, however, only real propery (and no, "virtual land" is NOT real property) is viewed, in common law, as assets available for non-realized tax. Some statutory law have created other property interests which may be taxable outside of realized INCOME from their sale (such as cars), but there have been none-such laws passed for virtual property.
So, basically, there you have the reality behind a ridiculous law review article. I only wish I could have such ridiculous articles published in the Law Reviews for which I have written.
All you other people whining about the tax code would be better served learning something about it first. Know yourself, know your enemy. Otherwise you just look like a fool.
Posted by: John W. | Apr 9, 2007 1:42:13 PM
I don't own ANY of the items that I get in an online game. I pay for the right to use the account. That is all. Anyone who is buying gold or items for real money is breaking the EULA and TOS. Woman you are nuts. Get out of politics. Too many morons in it all ready.
Posted by: Crista | Apr 9, 2007 1:43:49 PM
I personally enjoyed the article for it's hypothetical journey! Many of you point out the EULA of WoW and some even say only 1% of the player base make such transactions but in reality the "gold market" for online games is much, much bigger than many of you seem to realize.
There was a point in time when Everquest's economy, based on the value of gold to the U.S. dollar, was ranked between Russia and Bulgaria (http://news.com.com/2100-1040-823260.html). So, in my humble opinion this article has merit. I'm not saying I agree with taxation on such services but there's a very valid point to her writings.
I'd also like to note that while one response stated that the taxation should be relevant to the 'Real World' assets levied to make said transaction, they didn't take into account many services (such as a defense budget) that allows the citizen to even sit in that chair playing the game.
Again, Mrs. Lederman makes an interesting point so enjoy it in context rather than flaming her with a knee jerk reaction ;)
Posted by: Bart | Apr 9, 2007 1:44:27 PM
Don't listen to them girl - you go - we need people like you in Washington!
First Lea, we get the tax passed and as some here have mentioned, it's basically a tax on a data "pointer" that says you own some item. Once we establish that small bits of datum can be taxed, the door is wide open for us to impose taxes, tariffs and duties on ANYTHING that transpires via the www.! just like the marijuana tax stamp laws! You are a GENIUS girl!!
Posted by: Janice Henway | Apr 9, 2007 1:45:11 PM
I have read you blog and see that you just don't understand World of Warcraft at all.
Please do you research better, if you were in college I would give you an F grade.
First, in World of Warcraft player's don't own anything at all, everything is owned by Blizzard. Please read the user agreement.
Players in WOW require drops to disenchant into other objects and not all drops can be traded.
If players are trading items in WOW for real money they are breaking the end user agreement that they have signed and will end up getting banded by Blizzard.
Posted by: David | Apr 9, 2007 1:45:30 PM
My god. This woman is a perfect example of the phrase "A little knolwedge is a dangerous thing".
Yes, let's begin to study how to tax something that we have no experience with.
I'll put in my submission right now: Mandatory 80% income tax for all tubby women who speak without knolwedge of the topic-at-hand. We have to find a way to fund the massive increase in muzzle production.
Posted by: Mike | Apr 9, 2007 1:54:14 PM
First, this is the problem with pretty much every topic discussed anywhere. Ill informed people making observations about topics they have absolutely no idea about. It boggles my mind that someone who is supposed to be versed in the law would make such an outlandish case.
Have you bothered to read the EULA of World of Warcraft? Although selling of virtual items and/or monies for real world currency does happen; it is not sanctioned by Blizzard. None of the virtual items and/or monies is owned by the "player." In the event that Blizzard catches the individual selling virtual goods from the game for real world currency their account is banned.
Where do we draw the line in taxation? When is enough, enough? I don't mind paying my fair share to help provide services, law enforcement, stability, etc. We have to draw the line somewhere. The Goverment is not serperate from us. We make up the Government. Everyday people like you and me. Somewhere along the line we have envisioned the Goverment as some corrupt, covert, and malicious being that wants to control our very existence. It's not the Government, it's the people that we choose to run it. Think about that the next time you go to vote. If the person that wrote this arctile ever runs for office I would suggest not voting for them.
-JP
Posted by: JP | Apr 9, 2007 1:55:10 PM
Great now I'm going to get charged with murder for "playing" on a PVP server... How many years does 10,000 kills get?
So the next time I play Monopoly do I need to send in my taxes for the cash earned? Ohh crap and that Microsoft game that comes with every install... ya know the card game that you can switch to cash?
Have they ever thought about the fact there is no limit to the amount of cash that can be spawned in the game and even if they wanted to tax it, it would be at such a crappy rate the yen would look expensive.
Posted by: Fatty | Apr 9, 2007 1:55:25 PM
You ought be hung upon an inverted cross and flogged with flaming swine balls until your soul begs for forgiveness.
Posted by: Son of Man | Apr 9, 2007 1:56:10 PM
>>The tax is solely for when you make a trade for REAL, offline, money.
>>...
>>WoW does not operate on HTTP. Readup before trying to sound smart.
Ever trip on your own words, Anonymous?
Posted by: JackGardener | Apr 9, 2007 1:57:37 PM
I would agree to this if the only thing taxes were gains made in a non-game currency. The exchange of lindens to us$ would be taxable. But only at the end of the year. Some people play the US$-Linden$ market. They should be taxed on their profits. Warcraft like games are even easier. You get taxed on the US$ you make from the game. Everything else can't be taxed because one little business decision and all of that stuff you were taxed on can be deleted. Or you can get banned from the game and thus never be able to access the goods you have paid taxes for.
If this isn't what you are trying to say, please do more research.
Posted by: Altaree | Apr 9, 2007 2:05:02 PM
I would support something that discourages people from making real world money in WoW then encourages them. It's bad enough when I read about friends getting their accounts broken in to and everything stolen. I don't need to see the federal or local governments encourage this type of activity by taxing and encouraging people to make money from WoW.
Posted by: Bullhoof | Apr 9, 2007 2:11:27 PM
WAY TO MISQUOTE THE LADY! She says in her article that the only thing needing to be taxed is the conversion from game object(thing/currency) into real currency.
Posted by: Altaree | Apr 9, 2007 2:12:35 PM
The base of this matter is not to discuss whether virtual communities should or should not be taxed in some way, but rather to discuss when and how the U.S. Government and other national Governments will do so. If you think Governments will not find a way to tax avenues such as this, stop, close your browser and go back to your virtual world.
Other interesting points related to issues like this are:
-When virtual economies are considered and treated like actual economies, when will terrorist seizures begin within them (or are they already occurring? think item duping, location warping, speed hacking, etc).
-What laws will be put into place to regulate these virtual economies?
-Will there be a centralized banking system to which all economies will be required to adhere or will they create and maintain their own virtual banking systems?
-What security measures will become required?
-Will there be age regulation/restrictions?
Establishing laws, taxation methodologies, regulations, security systems and so on is certainly a very large task that will take a very long time to not only identify, but also to implement. Those of you sweating this have few worries and will likely have moved onto other MMO type games with other virtual economies and will not be affected by any of these ideas.
As a former player of these types of games and also someone who actively chose to purchase in-game gold (time is money, right?), I understand the woes of the masses regarding these ideas. I also admit that they (virtual economy taxation ideas) have a great chance to become reality (unlike their virtual counterparts (when a flying Griphon is available to me in my daily life, I'll shut the Hell up...)).
Posted by: sumyunguy | Apr 9, 2007 2:13:13 PM
I have also experienced the dumbening from reading this article, but I don't think she should choke on a pretzel. I think she's upset because:
a) She isn't a very good gamer and she's bitter
b) She has nothing better to do and is bitter
c) No one will play with her when she is gaming and is bitter
d) She has the only 1 person guild and is bitter.
Posted by: mccloed | Apr 9, 2007 2:17:13 PM
Wow, this is the most retarded article I have ever read in my entire life. Taxing people for playing a video game? Die in a fire.
Posted by: Anon | Apr 9, 2007 2:28:14 PM
good luck taxing 16 year olds...
and best of luck taxing 36 year olds who live in their parent's basement...
Posted by: Anon | Apr 9, 2007 2:29:20 PM
1. Regarding the issue of taxing illegal activities (e.g. selling WOW gold for USD), I seem to recall that Al Capone was finally arrested not for his illegal activities, but for income tax invasion (i.e. he did not pay income tax on the income from his illegal activities).
2. Regarding taxing transactions within Second Life, what's the legal status of the entire virtual world of Second Life? In real life, I go to the bank, use USD to buy Swiss francs, travel to Switzerland, buy stuff, maybe even sell stuff, using those Swiss francs. Is the US government entitled to tax those transactions that took place in Switzerland? Is my state government entitled? Or only the Swiss government?
With Second Life, if I use USD to buy Linden$, that transaction takes place (at least partly) in real life, between me and possibly multiple sellers via the Linden Exchange, with transaction fees being paid to LindeX, apparently in the same capacity as a bank selling any other currency. However, the Linden$ can only be spent within the Second Life virtual world. Does the US government have jurisdiction over that virtual world? Why? What if the servers (the actual physical computers) where Second Life "exists" are not in the US, but in say Canada. Would the Canadian government then have jurisdiction?
3. If activity within a virtual world is subject to tax laws in the real world, what about other activities? In WoW, it is expected that players commit murder. Should they be arrested and sentenced to life imprisonment or the death penalty in the real world? How about punishing them for looting the bodies of the beings they kill?
Posted by: Peter Dow | Apr 9, 2007 2:37:42 PM
Your article is ill founded. Game items in many games have no monetary value except to those willing to violate the game license, and Blizzard for example has been known to ban accounts for such violations. I have personally deleted a level 60 WoW character with gold and items when I quit playing, no cash changed hands as per the license agreement I had with Blizzard and Vivendi. Moreover, people in games on US servers are often from other nations and vice versa.
If there is taxation it should apply at the point of sale where items are converted to real world monetary value.
Posted by: ad | Apr 9, 2007 2:45:56 PM
Wow, this strikes me as the most absurd article I've read in a long time on so many levels. I hardly know where to start.
I think that the original writer of the article is confused because it's called 'Money' or gold in the virtual game. But it really isn't. It's a digital file. Period. Maybe all the virtual games should reword 'gold' to be called something like 'Points'. Then the tax lawyers won't be confused. Then again, they might start taxing all the PacMan and Bejeweled players for all their Points earned. Hahahaaha.
What exactly are we taxing here? People's hobbies? What about:
- My 'valuable' belongings I aquired in Animal Crossing?
-My upgraded weapons in Resident Evil 4?
- My library of articles I've written for my website?
The theme here is that people can work all day long on something to create an item of value. But unless it's being sold in the real world for real money, then we don't tax it. And in most online games this is illegal (against the terms).
The fact that it's virtual money makes it harder to grasp, but you can boil it down to any real world example:
Suppose my Aunt likes to make scrapbooks. She pays an initial taxed cost for supplies (buying WoW in the store). She then spends hours upon hours making a beautiful scrapbook (a rich high-level character). The scrapbook has value, but if she keeps it for herself or gives it as a gift (the virtual gold stays in the virtual world) then taxation doesn't apply. But, if my aunt tries to sell the scrapbook (say she made it for someone else), then it should get taxed with a sales tax. But there are laws that you don't have to pay sales tax until you start making like $30,000 per year (in Canada). So if I just ebay a bunch of my furniture, I don't have to collect sales tax from the buyer.
If the in-game currency or items get legally sold for real money, then fine, go ahead and tax away. Otherwise, I would urge the US gov to try using money management skills to get out of their hole, rather than taxing their citizens to death.
I am amazed that people would stand for this.
Posted by: Sherri | Apr 9, 2007 2:46:21 PM
For those who say others have gotten this wrong in complaining are ignoring the fact that this is a taxation on activities which breach the copyright license and occurs almost exclusively overseas.
Posted by: ad | Apr 9, 2007 2:48:19 PM
How many of us make more money on wow than we spend? If they tax it then wow expenses are a business expense. So thats like ((15$/month subscription fee and $30/month cable modem) * 30 months since wow came out) - ($0 wow profit) = $1350 deducted from my taxes. I might as well throw in my vent headset and a custom wow keyboard to make it an even 1.4k Tax away!
Posted by: zosima | Apr 9, 2007 2:52:52 PM
Taxing Virtual Reality games? Suuuuuure! Hope you don't expect we'll pay in something else than virtual money? And remember that the taxes aren't there for nothing, people must receive some services in return. So expect us to demand virtual firemen, virtual ambulance and virtual police to be funded by these virtual taxes. :)
Posted by: TheSpottedOne | Apr 9, 2007 2:58:15 PM
In a way they are taxed through Auction House Fees.
Posted by: Andy | Apr 9, 2007 3:01:22 PM
The real problem is that most people don't use real currency to buy gold then buy items. Most farm thier gold/items. Taxing all of the players based on a perceived value would be unreasonable to players that don't buy gold. I bought money to buy an epic mount, but that was it. I imagine that most players buy a little gold or none at all. Taxing it would assume that all gold was bought and sold.
Posted by: Andy | Apr 9, 2007 3:05:31 PM
A couple of things about this article...
1. The TOS and EULA make this a moot point for WoW (i have no idea about Second Life) as all items are the property of Blizzard and you are not allowed to sell or trade items outside of the game environment (no selling items via ebay)
2. There is an ingame trading system for a reason. If something like this were to ever actually go forward, it would force Blizzard to make all items BoP (bind on pickup) and get rid of trading items. That would mess up gameplay for certain types of items such as herbs/minerals/potions/etc.
3. If any government wants to tax sells of ingame items via reallife money, then how would that be tracked. There are many many many gold selling sites. They are illegal via Blizzard as is, will the US government start tracking them? If so i'm all for this as i'm sick and tired of getting all the in game spam for them. These sites and practices are against the rules to start with, so be my guest and tax them. As for sells of characters via ebay (again, against the ToS/Eula, but get around due to technicalities), then you are taxing interstate commerce via the internet, which is currently prohibited. Those laws would need to be repealed/replaced.
Either way, go for the taxation, but good luck enforcing it... it will be as easy as the RIAA enforcing no file sharing and will not affect the normal (legal) gamer of WoW either way.
Posted by: Chris | Apr 9, 2007 3:21:19 PM
Amazing.... She is even serious, huh? Well, the only result of this article for me was that I finally started thinking - why in the heck do we need any goverment at all?
Posted by: Alex | Apr 9, 2007 3:22:05 PM
I don't see what all the screaming is about from these people. It isn't like Leandra Lederman came up with the idea of taxing virtual economies - just offering their input on an idea that began to carry more weight when that real estate mogul in second life became a real life millionaire using in game economics.
On the WoW front with all of your rants, take a step back for a second and think about what you are talking about (it helps to not be raiding on your other monitor in the game if you plan to give this some thought).
Lets say BoE owns all the virtual items in the game (and yes, i know the EULA states they do) and that it is a breach of contract to use the items in anyway that denotes ownership (aka selling the item) - the action is still carried out. That is, people still sell their characters and items and gold in the real world marketplace. They get out of the breach of contract in this case by saying that they are not selling the item, the gold, or the character (because of course it is owned by Blizzard), but rather they are selling you the work/time spent into getting the item - hence it becomes a service. Services are taxable, period. How the govt will go about doing this is beyond me, especially with WoW. I can only see this taxation being applicable in virtual worlds like Second Life where in game mechanics have built in exchange rates between virtual currency and real world currency.
Posted by: dLee | Apr 9, 2007 3:40:40 PM
The issue isn't about taxing on cashout. Most people understand that taxes are owed on this as it does become tangible income if you sell your items on eBay to other players, even though I'm sure a large percentage of those will never report it to Uncle Sam. The fact that think-tanks are trying to find a way to attach a monetary value to every transaction that is performed 'in-game' is what is really scary. How will this be monitored? Will new software have to be installed on the client machines that record the transactions? Will the servers record every transaction and send you a 1099-MISC at the end of the year? Somebody earlier made a reference to the game Monopoly. Does the government tax that as well since a currency (which has no monetary value outside the confines of the game) is changing hands? The game is entertainment to most, not a form of income. The taxation of anything game related (excl. Second Life) is an absurd thought.
I've never played Second Life, but isn't that game premised on the idea that your Linden Dollars have a corresponding real world monetary value? If so, then taxation should be expected, but only in cases where a person has traded their Linden Dollars for US Dollars.
Posted by: your-name-here | Apr 9, 2007 3:45:56 PM
The ad hominem attacks and vulgar references in the user comments on this page are inappropriate and inexcusable.
Ms. Lederman is talking about a very legitimate subject. If you want to direct your hatred toward someone, do it towards those responsible for the congressional act that made online poker illegal.
I agree that World of Warcraft was perhaps a bad choice of subject because its EULA states that RMT is forbidden, but Second Life (and Entropia Universe) will have to deal with these very real subjects if they are to continue to prosper.
My guess is that the vitriol in these user comments is a self defense mechanism among people who have something to lose by the taxation of their gaming activities...or just flaming from 12 year olds. Don't kill the messenger.
Posted by: Grow up people | Apr 9, 2007 3:47:40 PM
This is a non-issue.
If someone is deriving an income from WoW, then that income is taxable just as their income from eBay would be. It is up to the taxpayer to declare it. However, the reasonable expenses used to generate that income would be deductible (monthly fee, portion of connectivity, cheetos and Mountain Dew.)
Posted by: Christopher | Apr 9, 2007 3:51:16 PM
Your arguments for taxing or not taxing in-game activities in World of Warcraft make me sick. You want to tax people on hours they spend in a recreational activity? Its not based on real-world transactions because there are none, no transfer of money into or out of the game. How about a little league tax, taxing children on the numbers of hours they spend playing baseball. Or how about a Family Television tax, taxing families on every hour they spend watching TV.
Oh, and nice little dig you had about not supporting a World of Warcraft tax because the poorest people would be paying the most, assuming they had no job and were not contributing to society. You went on to state that those people who played less must of coure "tend to spend money in the 'real market' in lieu of hours of 'grinding' to level up". Thats a great generalization, saying all WoW players that play only part time are rich and the rest are poor. Where do you get your facts from, a Cracker Jack box? Maybe you should get off your soap box about which activity should be taxed and which shouldn't and go reanalyze your greedy urge to steal honest income away from people for enjoying a few hours of their lives.
Posted by: Jack Dawson | Apr 9, 2007 3:54:56 PM
This is silly. If you sell your WoW account for $1000 after building multiple max-level characters and acquiring a big pile of gold, you can't argue that isn't taxable. It is silly, however, to extend that logic to conclude that the pile of gold itself is taxable, or that it's taxable IFF you made it acting like a WoW shopkeeper rather than a WoW mercenary/treasurehunter.
Tax players if and when they realize gain. That is, if and when they sell the cartoon stuff for actual dollars. Any other scheme would be like the government claiming every fourth pawn taken in a game of chess.
Posted by: Phil | Apr 9, 2007 3:56:12 PM
The government has a tax code that hasn't been updated in decades. How can decade's old tax codes apply to virtual economies? They can't... period. Until they update the code they shouldn't even attempt to try and tax virtual economies.
My personal take on this is selling stuff via Ebay and exchanging Lindex is no less different than those that sell their stuff in a garage sell. Most have day jobs. A garage sell is a way to generate a small amount of spending cash, which, I might add, gets taxed when purchases are made.
Posted by: Ryan | Apr 9, 2007 4:06:09 PM
The government has a tax code that hasn't been updated in decades. How can decade's old tax codes apply to virtual economies? They can't... period. Until they update the code they shouldn't even attempt to try and tax virtual economies.
My personal take on this is selling stuff via Ebay and exchanging Lindex is no less different than those that sell their stuff in a garage sell. Most have day jobs. A garage sell is a way to generate a small amount of spending cash, which, I might add, gets taxed when purchases are made.
Posted by: Ryan | Apr 9, 2007 4:07:44 PM
Anybody who thinks this insane idea is a good one is an idiot, nothing more than a slave begging for their chains.
Posted by: Henry the Eighth | Apr 9, 2007 4:15:21 PM
You can't call WOW time, or character grinding done by others, a service. The EULA strictly prohibits it.
Posted by: Dave | Apr 9, 2007 4:17:35 PM
You've got to be kidding! Leave it to government to come in and not only ruin our fun, but take our freedoms away here in the virtual world as well. I'm sure taxation would simply kill SecondLife and others if it were implemented.
Existing US tax laws already taxes us on *any* income produced in the *real* world, and so I see no reason why the virtual world should be singled out for this.
Alas, this is a sign that the US government wishes to force its hegemony into the virtual world as well.
What next? Will the Child Suppport Nazis come in and garnish your virtual earning for Child Support? Yes, I can see "Wanted" posters popping up all over SecondLife: "Ows his child L1,000,000!!!!" Would that mean your avatar goes to a virtual jail if you can't pay? Or worse -- would they put YOU in real jail for not giving your ex-spouse her due? "Johnny wants to build an island and daddy won't give him enough Linden dollars to do it! Bad Daddy!"
Really, we all should be seeking to abolish taxes, not take on more. Time did an article a few years back about how few government agencies are able to pass an audit -- that they write off missing money to the tune of $billions. But the IRS -- who themselves couldn't pass their own audit -- will rake you and I over the coals if we miss a single dollar.
My friends, I think it's time for a virtual Boston Tea Party!!!!!!!!!!
Posted by: Flajann Marcus | Apr 9, 2007 4:17:40 PM
I saw several comments saying that this cannot be taxed because it is forbidden in the EULA to sell goods outside of WOW, or that you do not own the goods, or that you pay to play.
Whether it is forbidden or not to sell the goods, if you make an income from such transactions, then it is taxable. Does anyone remember Al Capone? All his income was derived from illegal activies, but he was still put in jail for tax evasion.
Whether you own the goods or not, if you make an income from the use of those goods, you must pay taxes. A good example is selling stock short. You borrow stock that you do not own to sell on the market. Later you buy the stock at a lower price and give back to the owner keeping the difference and paying taxes on something you don't own.
The monies you pay to play the game are considered expenses and are first deducted from any revenue you earn before taxes are paid. The same would be true of any resource used to gain said revenue. Like a computer, internet access and electricity.
It would be considered a business and should be taxed as such if a person derives income from said activity.
Posted by: Davper | Apr 9, 2007 4:26:02 PM
Oh, I just want to put all the people whose heads swim with this kind of thinking on a spaceship and shoot them off to a better planet to prepare the economy for our upcoming arrival.
*wink wink, be right behind ya*
Posted by: Acountant hater | Apr 9, 2007 4:28:37 PM
The only way to tax in game money is when it is converted from virtual currency to real currency. Usualy, you are taxed when you gain wealth. It would be extreamly difficult to value this wealth in such a volital market.
If you get your 500g 'Sword of 1000 truths' and a week later the price of it drops to 400g what happens? Can I get aroud taxation if I trade it to a friend for 1g?
They will need to put Secret Sevevice personal in the server room because who's to say that company customer service reps won't just dupe gold? That's creating wealth from nothing. Thats like one of the employees at the US Mint just printing up a few extra bills for them self.
Posted by: WorldOfWarTax | Apr 9, 2007 4:33:01 PM
This is hilarious - all these people frothing at the mouth who clearly haven't even bothered to read the _summary_, let alone the actual paper.
Leandra: "My view is that drops and purely in-game trades should not bear income tax."
Fanboys: "How dare you suggest taxing drops and purely in-game trades!"
Comedy gold.
Posted by: ROFL | Apr 9, 2007 4:35:29 PM
How about this:
Tax my *profits* made from sales of virtual materials for online goods.
But let's treat it like the small business everyone is trying to make it out to be...
We'll start with some tax write-offs for purchasing the game (that I pay sales tax on.) Next, some tax credit on the monthly subsciption fees that I seem to be paying more taxes on. After that I want some tax credit on my internet connection since it is fundamental to my small business.
Then some compensation every time I die in-game and have to repair my gear I'd like some of that to offset my profits. Oh, I'd also like deductions each time I get new equipment that forces me to sell soulbound/nodrop/whatever gear to a vendor... like a car trade-in.
How about some additional tax breaks for PVP servers as well... extra deaths = extra repairs and time wasted after all.
I'd also like federal law-enforcement officials to protect my virtual assets. I want laws put in place to jail in-game scammers and spammers. I want to be able to file restraining orders against people in-game for harassment (sexual and otherwise) that carry viable real-life jail terms for multiple offenses.
How about we just jump right to 1984 and get it over with... I'm sure the IRS will think it's "double plus good".
Posted by: Rexell | Apr 9, 2007 4:36:26 PM
I don't like you!
Posted by: Wow Player | Apr 9, 2007 4:42:11 PM
I REALLY REALLY DON'T LIKE YOU.
Thanks though.
Posted by: WoW Player | Apr 9, 2007 4:47:09 PM
Ms Lederman... As to your policy consideration for "loot drops", I agree with your summation that taxing this would be both problematic and regressive.
The remaining notion of taxation upon sale/transfer would espouse a presumption of guilt of the citizen taxpayers. Evidence would have to be provided to conclude the activity occurred. Even given a prepoderance of evidence (if prosecuted), I see no reason to presume that players engage in purchase/sale of gold or items. The necessary surveilance to technically allow for such intelligence would be illegal as the government is not granted this power, nor would it have jurisdiction.
http://arstechnica.com/news.ars/post/20051217-5791.html
The game being registered/played by minor only adds to the problematic nature of this proposal... probably even worse than direct taxation on "loot drops".
Posted by: tk | Apr 9, 2007 5:24:08 PM
It should only be taxable if you get real money. Do you report Park Place or Baltic Avenue when you are playing Monopoly?
Posted by: Andy | Apr 9, 2007 5:27:02 PM
this is totally absurd, your baseline of purposing a taxation of drops or loot for a game such as WoW would totally destroy the game. the author of this article is a completely ignorant fool with regard to the World Of Warcraft. The Whole purpose of the game is to acquire phat loot... taxation of this loots transactions would destroy the game so much that it would cause the 9 million subscribers who "grind" for said taxable loot to stop the very thing the game is designed to encourage.
You need to play a game to realize the economic implications prior to spurting pure and utter nonsense.
Posted by: Mike | Apr 9, 2007 5:42:41 PM
While your comments on this issue may be valued by some, a tax on a virtual economy should not be enforced... The government has no role in this virtual economy and technically doesn't exist within it. Developers of these kinds of games could argue that it damages their business because everytime a player aquires "The ultimate sword/item" they have to worry about the tax that comes with it. This is just going
to be a pain for everyone, and would actually probably double tax many. IF they do impose a tax on virtual worlds it should ONLY be when players get a cash benefit out of the time they have invested, not upon a purchase within the game or profit within the game but only if they take a currency from the game and are able to convert it to USD. Come on though, seriously, we give the government way to much money as it is and they do to little with it. If they want more money they need to show that they are going to be productive with the money we alraedy give them.
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