Paul L. Caron

Tuesday, July 19, 2016

Thimmesch:  The Tax Aspects Of Pokémon Go

Pokemon GoThe Surly Subgroup:  The Tax Aspects of Pokémon Go, by Adam Thimmesch (Nebraska):

The new Pokémon Go app has already generated many discussions regarding the multiple ways that the game intersects with the law. I’ve previously opined on some of the broader issues, but, as a tax professor, my thoughts have naturally focused on that topic. Fortunately, the Surly Subgroup was nice enough to let me present those thoughts here in a guest post.

The tax issues that I’ve been thinking about stem largely from the fact that Pokémon Go is built on a freemium business model. That is, the app is free, but users can pay for certain “premium” features like additional Pokéballs, incense, and lure modules. (If these phrases mean nothing to you, here is a nice primer on the game.) Those purchases are all done through the purchase and use of an in-app currency called Pokécoins. The whole thing might sound silly, but the app is already generating over $1.5 million in daily revenue for its developer, Niantic, Inc. The company will also soon be selling “sponsored partnerships” that allow companies to be listed more prominently in the game. The potential revenue streams look plentiful at this point. So what are the tax issues?

  • State Tax-Base Issues ...
  • Constitutional Issues ...
  • State Income Taxes ...
  • Data as Currency ...

In sum, even if you don’t have the inclination to “catch ‘em all,” Pokémon Go and similar digital games raise many tax issues. Some states are already discussing new taxes on digital downloads and those proposed taxes have already been labeled as Pokémon taxes. We will undoubtedly hear more about this in the near future.

Update:  Forbes:  IRS Taxes Sale Of Pokémon GO Accounts, by Robert W. Wood

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