Paul L. Caron
Dean




Monday, April 9, 2007

Tax Treatment of Players in Second Life and World of Warcraft

LedermanLeandra 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.

https://taxprof.typepad.com/taxprof_blog/2007/04/tax_treatment_o.html

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Comments

H&R Block obtains total revenues of almost $2 billion a year from preparing tax returns for almost 20 million taxpayers, most of rather modest means and, presumably, rather uncomplicated returns. The average expense of tax preparation to these taxpayers is thus $100.
------------------
Sally
WOW Gold

Posted by: reenasally | Oct 31, 2008 6:32:33 PM

To me the solution is quite obvious. It should follow the existing tax law. If I receive regular income from a store in SL (which I do) I also have to pay taxes, but only when I take the money out and convert it back. When I convert real money into Linden what ever my expenses were for land and advertising etc. should also be a tax write off accordingly. That way everybody pays taxes in their country according to the laws.

The best comparison is a lay person selling anything on EBay vs a professional reseller doing the same on EBay. The tricky part is where to draw the line.

Just my thoughts

Posted by: Athought Fromme | Jul 23, 2007 7:57:27 PM

If virtual funds are going to be taxed, they should be payable in virtual funds.

Dunno what the IRS is going to do with that gold though. eBay it?

Posted by: Elkad | Apr 14, 2007 10:35:32 AM

I think many of the comments flung at this post are unfair to Leandra. She states in her article that the government is being pressured to produce legislation and settle on a policy concerning the taxing of virtual worlds.

You see, it isn't *her* proposing this tax. The taxing will probably happen, regardless of what she thinks. All she's doing is looking at it as objectively as possible and making a sane decision concerning taxation.

Many of you should be hoping the government pays attention to her thoughts. A poorly informed legislator or some careless wording might otherwise lead to the worst case scenario: We as online community participants will be taxed whether or not we convert game properties into real world currency.

I have no doubt that Blizzard would submit to the IRS and turn over accounts of player transactions, so we can't look for help there. It's possible the Lindens would oppose the move, but realistically they'll realize the expense of a legal battle and simply cave.

Second Life is far more of a problem concerning taxation. Whether or not objects crafted in the game are considered 'real' or not, they're still creative property of their author, property that can be bought, sold, destroyed, and stolen. Selling something for lindens, and then turning those lindens into dollars is something that shouldn't (as much I hate to say it) escape taxation. If the authors were selling downloads of the objects via a website, they would be taxed. There's just a second step involved here that such vendors are hiding behind: no real world currency changes hands between the customer and the author.

If such things must be taxed however, I'd prefer to see the tax taken in the currency used to pay for the creative property exchange. On Second Life, Lindens. In World of Warcraft, gold/silver/bronze. Not only would this ignore the fluctuating real-world exchange rate for the online currency and escape complaints along those lines, it would prevent gamers from losing real world currency they can't afford to lose.

What would the government do with the taxed online currency? Well, exchanging it for money would be against the EULAs of some of the mentioned communities, so I imagine the government would use it to fund the raising of armies so it can conquer the digital frontier and control our lives just that little bit more.

Posted by: Yaounde | Apr 13, 2007 4:53:56 PM

Tax in MMORPG's?
fine, but then gather it ingame and incharacter too ^.^
(gank that taxman!)

Posted by: molotov02 | Apr 12, 2007 6:57:24 AM

Also, for those of you who claim that taxing the real-world sale of virutal items makes little sense because EULAs prohibit their sale: The IRS taxes drug sales. You affix pre-bought drug tax stamps to your wares to avoid IRS prosecution. Illegality is no excuse!

Posted by: Leviticus | Apr 11, 2007 8:00:57 PM

Firstly, I agree that once you convert items into out-of-game barter/cash, the IRS should tax them.

Turning to virtual property rights: Recognizing rights in virtual property is foolish. Some argue that virtual property rights would solve many issues in MMORPGs.


The creation of virtual property interests, however, brings further problems. Because programmers are free to create virtual worlds which are dissimilar from the real world, virtual property law would have to be redefined and then individually tailored for each separate game. Some games, for example, allow users the opportunity to own in-game houses; others explicitly provide users with the opportunity to seize other users’ property as an integral part of game-play.
Laws protecting virtual property would also encounter trouble with the mechanics of in-game ownership, particularly in dealing with when “ownership” is established. In some MMORPGs, users spend many hours waiting for certain monsters to appear. If the game also lacks queuing or priority procedures to determine which users may kill these monsters, users might wait for many hours for a monster to appear only for another user or group of users to kill the monster first (and thus, by nature of the MMORPG’s coding, have a superior right to take the item) – a technique known as “kill stealing.” Many MMORPGs either ban kill stealing or seek to program around it ; but an outright ban would seemingly violate the principles set forth by the Pierson v. Post line of cases – an example of the potential for conflicts between MMORPG-practice and the extension of legal principles to virtual property; even then, bans on kill-stealing are enforced inconsistently throughout different MMORPGs. Unlike their counterparts in the natural world, users in many MMORPGs can predict exactly when and where some monsters will spawn, presenting our legal system’s ferae naturae paradigm with an inconsistent, basic-assumption-defying hypothetical.
Another significant problem arises with “ninja-looting,” whereby a user ignores a pre-arranged item-looting agreement by taking a valuable item without permission from his group: Some games prohibit ninja-looting ; others prize having no rules at all.
Many MMORPGs also have a player versus player (“PvP”) function in addition to a player versus enemy (“PvE”) function. In PvP combat, users can attack the avatars of other users. Because avatars lose experience, levels, or items upon losing a PvP battle, games have actually built a tort-like threat to virtual property rights into the game. Indeed, even in strictly-PvE environments, it is common-place in MMORPGs for one user to negligently or recklessly cause the death, and thus decrease in value of, another user’s avatar.
There also might exist server-side issues.
Because MMORPGs are ultimately created and altered by the MMORPG companies, the recognition of virtual property rights would also have to cope with how creators manage their game world. If MMORPG companies recognize that some aspect of the game play results in an imbalance or unfairness, the company will implement a fix. Fixes which decrease the strength of an item or of a class of avatars are known as “nerfs.” If the laws of virtual property recognized rights in a user’s avatar, a MMORPG company might have to reimburse users for any corresponding decrease in avatar value resulting from nerfs.
Likewise, because virtual worlds are hosted on servers and are not actually permanent, if the server on which the virtual world is hosted crashes because of a computer glitch or power outage, avatars might lose items or be reset to a previous level when the MMORPG company restores the older data. MMORPG companies would then face hundreds of thousands of suits for these lost items or for decreased avatar value. The feasibility of protecting against game-wide devastation like that experienced during a server crash is dubious at best, as insurance fails where insurance purchasers’ probability of loss is not independent. MMORPG companies, like governments, would have to be granted something akin to sovereign immunity in order to survive.
Perhaps even more pressing are companies’ decisions to end a virtual world’s existence. Invocations of vertical property rights donot provide an adequate solution for how users’ property rights will be affected by a virtual world’s collapse. Unlike an eminent domain action, where a government can reimburse a land-owner based on fair market value which can be ascertainable, or the collapse of a government or state, where there simply is no entity which is capable of reimbursing users (thus eliminating the issue of ascertaining fair market value), when a virtual world ends, there is no ascertainable fair market value yet there remains a company capable of reimbursing users. Because virtual worlds are ephemeral, virtual property lacks permanent intrinsic value. When a virtual world collapses, its properties’ value is wiped clean: unlike an eminent domain proceeding where other citizens might still attach a value to the property, virtual property becomes valueless.
Some counter that it is not necessary for virtual property laws to mimic those currently governing property. This response, however, misses the point. By recognizing rights in virtual property, we ask virtual world creators to relinquish their own rights in the virtual world. Virtual world creators are the guardians and maintenance crew, ensuring that the world’s physics, resources, and non-player characters (monsters, neutral non-player characters) remain balanced and unexploitable. Most virtual world creators also must continually expand a virtual world’s content (story-line, geography, and monsters) as the world’s population grows and characters become more advanced. Because nature serves this function in our real world, there exists no real world analogue to a virtual world’s creator. By implanting a real life actor (the virtual world creator) into nature’s role, virtual worlds introduce a profit-interested real-life actor who can be sued and sue.
Additionally, because the in-game physics of virtual worlds vary so greatly, courts would have to produce sets of individually tailored laws for each specific virtual world. Even then, we would be asking courts to substitute their own uninformed judgment for that of a virtual world’s creators. Unlike our real world, where there exist laws of nature which courts cannot simply supplant, recognizing virtual property rights would encroach on the need for virtual world developers to create their own brand of these laws of nature. Simply put, virtual worlds defy our familiar paradigm by which there exist unassailable natural laws and courts to govern worlds, given these laws. Virtual world creators instead must constantly change the laws of a world as communities test a world’s limits. Some worlds, like Second Life, erect natural laws which leave some room for our world’s courts to interfere. Most virtual worlds do not.

EULAs are therefore the best option -- a license for you to play the game and enjoy the virtual world. I've read a few articles which talk about how some countires, like Taiwan and Korea, recognize something approaching rights in virtual property.

It is possible that as countries grow their MMORPG communities at varying speeds and with different games, their approaches to recognizing virtual property will diverge further. As – and if – countries, like Taiwan before, continue to expand recognition of virtual property beyond using contractual principles, they will inevitably run into the issues cited in previous sections when conducting fact-intensive investigations into MMORPG-related disputes. While MMORPGs seek to, and at least in Taiwan are treated with attention to their, emulating characteristics of the real world, courts should seek to fashion legal contractual or intellectual property remedies in similar terms. One game, Second Life, has created leases in an effort to circumvent having to deal with the prospect of more lasting rights in virtual property. By honoring contractual solutions, courts let MMORPG companies create sophisticated quasi-rights in virtual property, which courts can monitor through current normative vehicles, like conscionability. This simple solution lets MMORPG companies and users – who know the material and structure of the game best – dictate the speed with which their relationship should evolve.
Contractual solutions are also consistent with the concept of a “game.” One major draw of virtual worlds is that users can experiment, behaving more rashly than they might in actual life because, unlike in real life, virtual world users can always create new avatars if their choices on one avatar yield consequences which prove unbearably detrimental. The very draw of a game is just that: It is merely a game. That a user might sink thousands of hours into the game each year and that a virtual world’s graphics more closely resemble the world in which we live demonstrate the success, and evince an underlying purpose, of these games. Virtual worlds are places for participants to experiment, to do what they would dare not in an actual world; and this appeal of lawlessness, vel non, of a virtual world drives virtual world creators to enact differing levels of regulation in order to attract different types of users to their world.
In many worlds thefts or (perceived) unfair game play robs users of years of hard work. In one highly-publicized incident, a huge alliance in Eve Online killed a player’s “Titan ship” (the player was a leader of the next-largest, but a much smaller, alliance) which took the alliance of close to 200 users one year of work to build. The user, who quit the game immediately, complained that his internet connection had died out just as the alliance initiated its attack. Yet these harsh lessons mimic the harsh realities of natural laws. No real world court can halt cancer or enjoin a tsunami’s quick approach. Likewise, virtual worlds design their own forces of nature in these pseudo-realities, offering their own dose of harsh reality in which real world courts should not interfere.

Posted by: Leviticus | Apr 11, 2007 7:50:37 PM

the virtual world element is irrelevant - the government will tax you on your earnings - however you come by them. So if you do sell a virtual item and make money, its no different to you selling a real item : they are both for REAL MONEY which can feasibly be taxed, especially if you do it a lot and make a substantial amount.

Posted by: dreadful.scathe | Apr 11, 2007 4:52:02 AM

I find it fascinating that a post on this tax blog, which I follow regularly, has elicited 120 comments. Let me ask Prof. Caron -- has any other post spurred this many comments?

Posted by: Jake | Apr 10, 2007 6:42:52 PM

If you are making real world money through games like WoW, or a metaverse like Second Life, there are already laws dealing with the tax situation here.

I paid taxes on my Second Life income this year, and I will do the same next year. So long as you agree that only the USD cashed out is subject to tax, then there is absolutely no issue here. If you earn more than $600USD in a year, you need to declare it. There is no need for new laws regarding this, the laws currently in place do the job perfectly fine. Income tax, as some one already posted about.

This also avoids the Bert and Anna problem. Anna is already paying taxes when she cashes out from Second Life. Bert isn't, because Bert is not cashing out in amounts the government cares about.

Using current laws and realizing there is no issue here also avoids the very large misunderstanding which has lead to many of the more irate replies to this blog. Taxing in-game money and items in a game is ridiculous to an extreme often reserved for dystopian satire and it was wise to suggest only taxing "cashed-out" income, however the fact that this income is already taxed leads people to believe that you realize this and intend for even more taxation, possibly against those who are simply playing a game.

The rest of us, who already pay taxes on this income from SecondLife and whatnot, remain very confused as to what it is you're suggesting. The worst fears being that you suggest we take a relatively simple taxing situation and make it far more complex than it needs to be, or worse yet, that you're suggesting we be taxed twice on the same income.

Posted by: Penny | Apr 10, 2007 12:49:56 PM

iceph03nix said:
"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?"
Once I sell an epic sword on Ebay or through cash exchange, I can get a tax break for playing a game, free internet through business, expense, a new video card to boot. I can actually pay the money for powerleveling since its expensed.

Truthfully, how can someone even think this can be possible. Will the government treat virtual sellers as businesses? Does my character get his/her own tax id number much like businesses have their own tax info.

My Tax form: Business Name: xxHunt3R_l33t_R0x0rxx
Total Income: $50*12 (sale of legendary sword once per month averge)
Deduction:
60 - Game purchase
15*12 - Yearly charge subscription
50*15 - Yearly charge - amount covers 25% of internet bill - my game usage
16.40*12 - 1% of rent/home = % occupied by computer as home business
75 - power leveling charge
300 - Video card
1500 - New "office" PC

by all mean tax my $600 a year income as long as I can cliam all those expenses for first year. I use them all to "run" my virtual goods business.

Posted by: JC | Apr 10, 2007 12:38:35 PM

Don't we already pay enough taxes without people trying to think up ways for the government to rape us further? Taxes on gameplay, indeed!

Posted by: Me | Apr 10, 2007 11:33:20 AM

After reading the abstract, I no longer support public funding/subsidies for law schools.

Posted by: guy in the veal calf office | Apr 10, 2007 11:31:58 AM

All those people who say "You cannot do that because the EULA says so!". Well guess what? The EULA is not binding in a court of law. There have been court cases where the subscriber of an MMORPG won against the company. The court basically said the player did "pay" for the items in question. (In this case, items were being sold for real world money.) Payment in the form of subscription fees, time, and effort.

Posted by: EQPlayer | Apr 10, 2007 6:10:03 AM

I think it's definitely possible to tax WoW.

LOL.. since the mode of currency is gold, they can tax us in WoW gold. LOL!

It would be funny to see the US Gov't sending whispers in game for people to buy their gold

Posted by: ozzie | Apr 10, 2007 12:20:20 AM

"I argue that players of games like WoW should be taxed if and when they cash out—that is, on real market trades"

In my contry that is called income tax.
I believe you've had that in the US since 1913.

Posted by: Al Hassan | Apr 9, 2007 10:56:08 PM

next UP!

You have passed Go, collect 190$ please forward 10$ to the IRS, Severe penalties for tax evasion may result for non-compliance.

Don't forget the state tax,
the "Family-time Rebalancing Tax" Tax to get poorer families their own monopoly games..

The "Universal Assement Tax" This tax is collected on behalf of Milton-Bradley to copies fees and Levies weighed upon 'MB' for the printing of Monopoly money.

Posted by: Cory | Apr 9, 2007 8:36:52 PM

"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."

You know as well as anyone else who plays WoW (or has played WoW, like myself) that gold is bought and sold online, despite whatever Blizzard's policy is. There are literally active exchange rates on US Dollars to WoW Gold. And contrary to your opinion, since I can take an in-game sword, sell it to another player for a certain amount of gold, and then take that gold and sell it on the online marketplace for U.S. $$$, the sword DOES, in fact, have (potential) real-world value. But that isn't important, because TFA reads as follows: "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."

The writer proposes that only people who are actually selling their in-game property for "real-world" cash be subject to tax -- income tax, that is. And technically, it's already the case that you have to report extra or "on-the-side" income to the IRS (though no one does). In any case, the 99.9% of the people you're acting like a jackass in the name of, wouldn't even be affected by this. Indeed, their drops would continue to not have monetary value to them.

So, in conclusion, read TFA before you comment, because the idea that you're criticizing the writer for not knowing anything about ("I think you have little knowledge of the actual game"), is an idea that the writer actually addressed in the article you were responding to.

Epic Fail.

Posted by: Justin Fowler | Apr 9, 2007 8:34:56 PM

I could be wrong (and I didn't read all the responses already posted), but I believe that we already pay taxes on profit for selling things from games.

I recently filed my taxes, and while I haven't played any such games, let alone sold anything, I do recall seeing a part for reporting all other income - a category under which profits from game-related-sales would go into, I suspect.

So, no changes are needed!

Posted by: MattC | Apr 9, 2007 8:22:39 PM

This is one of the funniest comment threads I have read in a while.

Its ironic that Professor Lederman's article advocates the views of the same people who insult her here.

And for all the haters out there, she's one of the nicer ones. There are those who believe that virtual world activities should be taxed at both the in-world transaction level AND the cash out level.

Posted by: Steven | Apr 9, 2007 7:12:34 PM

Quote: From Paul

"The Second Life terms of service assign no monetary value to in-game currency, and Warcraft goes further. Assets should only be taxed when converted to U.S. $, anything else is problematic, and frankly just stupid. Too bad Leandra doesn't understand these environments, or the technology."

So you're saying you agree with Leandra. Too bad you don't understand common english. She said that unless game stuff is converted to real money it shouldn't be taxed.

Posted by: Jon | Apr 9, 2007 6:33:51 PM

The problem is, that whenever anyone writes an article about this, they beat around the question as to what is taxable, and present both arguements, that:
A. taxation only upon realization (cashing out) virtual wealth.

vs.

B. Taxation of virtual items as obtained. if you gain 100g within a game by killing sheep and skinning them and selling the skins, you get taxed on the potential real world money that you could posibly obtain by cashing out this gold.

the real trouble is, people are by far, pesimistic on this subject. they see it as the IRS looking to stick you every chance they get, and instnatly react to option B.

here are a few obvious problems with option B that i did not see mentioned.

1. massive fluctuation in precived value.
In WoW for example, the price of gold as sold by gold vendoring services varies greatly day to day, and server to server. for taxation to be posible on the detailed level put forth in option B, these would have to be stable and consistent across all servers, otherwise taxation would be imposible to impose in a Just method.

2. Preemptive taxation of gains obtained via ileagal actvitys.
this is like charging somone an extra tax because they grew weed in there basement, they may have grown it for there own use, but we will tax them just in case they decide to sell it. (this would start a whole hell-hole of leagal isues)

3. Issue 2 leads to the final problem, taxation of profits never received.
This is almost the same as issue 2, but paints it in a difrent light. A player pays X dollars a month to play the game, and over time, spends several hundred dolars to play, and never cashes any potential out of the game (lby leagal means or otherwise, this applys to WoW type games with a no selling TOS, as well as Second Life) if an individual never receives any real world monitary gains from virtual income, and is taxed on such virtual income, a special exemption would be required in taxes that efectively refunded all taxes garnered for virtual gains. (otherwise, people would pitch a shit-fit over being taxed for paying for something)

THUS.
the only way a tax could be efectively weighed against virtual income would be through a strictly monitored and controlled cash-out system. the trouble with this, is that it is easily bypassed via the use of outside transaction preperations, such as used to cash out of games where it violates the TOS. In fact, i would wager that such activitys would begin in huge numbers as tax evasion aginst such a tax.
The final problem with the idea of taxing this income is the compliance of game designers. to make the tax efective, a cash out system such as i just talked about would need to be placed in all the games. what action would be taken against these game designers should they decide they do not want people to be able to cash out virtual propertys? the cashing out of virtual propertys would be a strain on the resources of those tasked to maintain the game, which is why most games to not include such a feature at this time. do game designers/maintainers get fined for not creating a cash out system for there virtual world? is the game prevented from releasing? is the game shut down because they chose not to create a cash out system?

the tecnical hurdles of creating and enforcing such a tax are outside the relm of curent practical aplication. also included is the fact that curent tax laws are not prepaired for this, as well as laws concerning the penaltys for actions such as setting up a outside cash out service are not in existence.

Posted by: Jarik | Apr 9, 2007 5:03:57 PM

a) No Taxation Without Representation

b) What right do you have to tax "the game"? If it's because "the game" is hosted on American soil, or run by an American company , both those issues can be resolved *real fast*.

c) What currency will the taxes be paid in? (logic dictates taxes are paid in the currency being taxed)

d) What (in game) services are being provided, in return for the taxes?

e) If I earn and pay taxes on 1 million currency units *in game*, do I then get taxed (ie double-dipping) when I convert currency-units to US dollars? (or does the govt want to treat it like a foreign currency conversion, or like a transfer from one bank account to another)?

f) If you want to insist that Tax laws apply in game, why not any and all other laws? You cannot pick-and-choose how to apply the legal system. (building codes, etc) and who will enforce all these laws? Where's the police, the judicial system, etc?

Basically people are confused, they want to instigate a new tax "because money is being made", but haven't fully thought through *where* the "money" is made, and the implications of that.

Treating it like "just another state in the US" (and taxing earnings in-game) will force the operators overseas (and the US will lose all that taxation revenue from the operator).

Treating it like "a game" and openly acknowledging that "in game money" is literally worthless until it's converted into reality-currency would work.

In the end , people have to eat/live if they want to run a business supporting themselves from the proceeds from the game, they "make money" (from a taxation perspective)at the point they convert game-cash to real-world-money, and that's where they get taxed.

The Govt taxes them "in the real world" , the Govt represents and provides services "in the real world".

Oddly enough, there are existing laws covering taxation "in the real world" and they seem to work just fine.

Posted by: phil | Apr 9, 2007 4:42:51 PM

The Second Life terms of service assign no monetary value to in-game currency, and Warcraft goes further. Assets should only be taxed when converted to U.S. $, anything else is problematic, and frankly just stupid. Too bad Leandra doesn't understand these environments, or the technology.

Posted by: Paul | Apr 9, 2007 4:20:56 PM

Frankly, I'm a bit shocked at all the tin foil hat folks here, because this post makes a great deal of sense.

If I spend my time making a painting, and sell it, that's taxable income. What is the difference between painting something, and spending time acquiring digital items? There is the sticky issue of tax breaks on business expenses, however.

Additionally, it doesn't matter if Blizzard or any other company forbids the sale of these items. It doesn't matter if a third party doesn't like how the money is made. It's between you, and Uncle Sam.

For all the "how the hell can the evil government tax us any more" idiots out there, did you stop to think that maybe folks who make a living in this manner should pay their fair share?

Posted by: Mikel | Apr 9, 2007 4:09:14 PM

If I play a game that someone in another country plays, is the government going to try and tax them too?
They have no authority. So, I'll get a buddy in another country to buy my gear and then "give" it to me. I'll "give" him gear to sell and he'll give me a gift of some currency. Thqat's only 1 way around it. This has been debated for years. I play Entroia Universe which is owned by Mindark - in Denmark. US tax law has no authority over them. Here's an idea - maybe if the government stopped THROWING MONEY AWAY on idiotic wars and pork-laiden bills then they wouldn't have to find new sources of taxation all the time. Gee, what a friggin' idea!

Posted by: James | Apr 9, 2007 3:54:55 PM

if I'm reading this correctly, they're NOT proposing taxes on transactions that happen in game. Meaning, I pay no tax for the gold i make from an item I've sold in the AH (auction house).

I think it's perfectly legit to impose taxes on dollars made in the real world, even if it's based on sales of items sold in the virtual world. Let's put aside Blizz's EULA for a sec, and pretend selling gold and power leveling is acceptable behavior to Blizzard.

Why shouldn't the person that's selling gold and other services have to pay taxes on services rendered even if they're in game? The heart of the matter is they're not selling anything per se, rather they're saving the buyer time.

Think of it as paying for someone to paint your house or wash your car. You're perfectly capable of washing your own car, but trade money for someone to do it for you because it saves your time. The painters and car wash guys are going to have to pay taxes on the money you paid.. Why shouldn't gold farmers?

Posted by: mark | Apr 9, 2007 3:47:15 PM

This is absolutely hilarious - how many people read her full paper? By the comments on this page seem to imply - none. She addresses everything rather well and her conclusions are not quite what all of these knee-jerk comments make of it.

I would suggest you actually sit down and read all 57 pages before leaping to conclusions about what she did or did not say. She actually makes a conclusion that while the current federal tax code *may* support such taxation, doing so would be wrong.

RTFR

Posted by: colson | Apr 9, 2007 3:23:14 PM

Hunter Weapon.

Posted by: LlamaMan | Apr 9, 2007 3:11:52 PM

You're saying that you would not tax virtual exchanges, which leads me to ask you this question. Why post about the subject? You also say that "real world" exchanges should be taxed however, which violate the game's Terms of Service, and of which is a bannable offense to a player.

I think you're just another scumbag pig that is out there trying to come up with any possible scam to extract more money out of hard working, tax paying citizens, as if we're not paying enough as it is.

If you spent your time on a treadmill, instead of trying to cheat people out of money, perhaps you wouldn't be quite so fat and hideous.


Posted by: mb | Apr 9, 2007 3:00:30 PM

I like the idea.

Posted by: Spambot | Apr 9, 2007 2:53:25 PM

Someone needs to put down that crack pipe. And fast!

Its a game dillweed!

Posted by: The Horde / The Alliance | Apr 9, 2007 2:53:20 PM

omgwtflolbbq!
lern2think

Posted by: Heywood Je'blowme | Apr 9, 2007 2:50:02 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.

Posted by: Magusxion | Apr 9, 2007 2:43:56 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 2:42:41 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 2:27:02 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 2:24:08 PM

I REALLY REALLY DON'T LIKE YOU.

Thanks though.

Posted by: WoW Player | Apr 9, 2007 1:47:09 PM

I don't like you!

Posted by: Wow Player | Apr 9, 2007 1:42:11 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 1:36:26 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 1:35:29 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 1:33:01 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 1:28:37 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 1:26:02 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 1:17:40 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 1:17:35 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 1:15:21 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 1:07:44 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 1:06:09 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 12:56:12 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 12:54:56 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 12:51:16 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 12:47:40 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 12:45:56 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 12:40:40 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 12:22:05 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 12:21:19 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 12:05:31 PM

In a way they are taxed through Auction House Fees.

Posted by: Andy | Apr 9, 2007 12:01:22 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 11:58:15 AM

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 11:52:52 AM

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 11:48:19 AM

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 11:46:21 AM

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 11:45:56 AM

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 11:37:42 AM

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 11:29:20 AM

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 11:28:14 AM

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 11:17:13 AM

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 11:13:13 AM

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 11:12:35 AM

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 11:11:27 AM

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 11:05:02 AM

>>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 10:57:37 AM

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 10:56:10 AM

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 10:55:25 AM