IRS May Be Gearing Up To Send Tax Collectors Into Second Life
from the how-much-is-the-tax-on-a-magic-sword? dept
It wasn't difficult to predict that this day was coming -- especially with both China and Australia already experimenting with charging taxes on virtual goods and transactions in virtual worlds. However, Game Politics points us to the news that the US's "taxpayer advocate" (we have such a thing?) is now suggesting the IRS start taxing transactions in virtual worlds as well. While the initial suggestion is for the IRS to just issue "guidelines" for taxpayers, that's the start down the path to active taxation in those worlds. This could get troublesome fast -- as you could easily see scenarios where kids who thought they were just playing a game suddenly owe significant real world taxes, just because they've been successful in the game and accumulated "valuable" assets. It seems fairly pointless, and potentially troublesome, to do any kind of taxation on virtual transaction until such time as real dollars exchange hands.Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.
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Filed Under: irs, second life, tax collections, taxes, virtual worlds
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Tax = Extortion
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So you assume they will do something else just to piss you off ? or just to manufacture some outrage for your blog ?
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I don't see how...
So I spend a lot of time building up experience points and finding treasures on WoW or whatever, and then someone comes along and says "Because you might SOMEDAY sell those, we're going to levy a tax against you for them now."? How do they even assess the value of it? Are we going to see a whole slew of "digital appraisers" show up to tell me that my +4 Axe of Might is now valued at $1200, and that I therefore owe $65 in taxes on it? The concept seems ridiculous.
If they're sending tax collectors into Second Life, it should only be at the point (as Mike mentioned) where actual money changes hands. If they want to nail Linden (or anyone) for accepting payment for digital goods that's one thing. But arguing that I owe some kind of federal tax on the CREATION of a thing, rather than the sale of it, is absurd.
What if I make a really nice table in my garage? Should I be taxed prior to selling it? What if I never sell it? Why should I pay taxes on it? That's not what taxes are for. Taxes are what you pay for the kind of infrastructure that allows you to conduct a transaction without fear that the other party will screw you. No transaction? No tax.
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I wouldn't worry about it, in the end.
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Re: Ownership of Goods
(Is it ethical for the government to collect taxes on technically illegal sales?)
On the flip side, I've sold three World of Warcraft and two Eve Online accounts with a combined profit of about $2500 dollars. Before eBay shut down the sale of virtual items, it was big business.
I agree with Mike; tax items when the sale is made, not in-game.
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Re: Re: Ownership of Goods
Bootleggers and Mafiosos are often nailed on tax evasion charges. The fact that the money may be the result of illegal activities is irrelevant; if it's in the possession of an individual and not reported as income, they're screwed.
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The law is carefully written that your filing of profits on illegal activity will not result in criminal prosecution.
This is how they finally took down Al Capone -- tax evasion.
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So it's quite easy for Blizzard to *own* property but still have you pay the tax on it.
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Imaginary money
I understand that if I put $50 in to the game and in a month cash out with $100 that I would owe some tax because I made real money that the IRS can use. But how is the IRS going to use an imaginary currency to pay for anything. I don't think that people will take government contract that pay millions or billions of Linden Dollars.
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Re: Imaginary money
Explain to my why I owe taxes, what benefit I've recieved that I need to contribute money towards, what service I made use of that requires upkeep, and then we call talk about what taxes I owe.
In the case of MMOs, I make use of the ISP's cables (which I pay for) and the Game's servers (which I also pay for), so why is the government reaching into my pocket?
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Re: Re: Imaginary money
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Three Words
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H.F.S.
The IRS wants to tax people for "virtual" goods and "virtual" money? Please tell me I am really missing the point. Please tell me that I am too stupid to understand the real meaning of this story. As I said once before... Can the feds scream RICO for running the "Mobsters" application on My Space??
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Is this even how it should work? I live in Australia, so I dont have the best knowledge of your taxes and IRS, but I thought the whole point of taxes was to cover government costs in maintaining infrastructure etc. for example, taxes on cars and oil etc to cover the cost of maintaining the nation's roads.
What is it they need to maintain in this case? the internet services you are using are maintained through the monthly payments you make your isp... what else is there?
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What about the rich criminal class who are responsible for the major cockup in which we all find ourselves.
http://www.flickr.com/photos/stoller/2907411559/
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Fact: Welfare Costs 1 Percent of the Federal Budget
Widespread misperception about the extent of welfare exacerbate the problems of poverty. The actual cost of welfare programs-about 1 percent of the federal budget and 2 percent of state budgets (McLaughlin, 1997)-is proportionally less than generally believed. During the 104th Congress, more than 93 percent of the budget reductions in welfare entitlements came from programs for low-income people (Center on Budget and Policy Priorities, 1996). Ironically, middle-class and wealthy Americans also receive "welfare" in the form of tax deductions for home mortgages, corporate and farm subsidies, capital gains tax limits, Social Security, Medicare, and a multitude of other tax benefits. Yet these types of assistance carry no stigma and are rarely considered "welfare" (Goodgame, 1993). Anti-welfare sentiment appears to be related to attitudes about class and widely shared and socially sanctioned stereotypes about the poor. Racism also fuels negative attitudes toward welfare programs (Quadagno, 1994).
http://www.apa.org/pi/wpo/myths.html
If you have any evidence for your other primary claim, that the middle class is sliding into poverty, I'd be interested to see it.
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This could get troublesome fast as [people] who thought they were just [living in a free and open society] suddenly owe significant real world taxes, just because they've been successful in the [at life and in their careers] and accumulated "valuable" assets
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Now other games, like WoW, SWG,EQ so forth, are a totally different kettle of fish as most of them do not have that official financial game world to real world translation, quite the opposite actually, the publishers prohibit such transactions and to varying degrees try to stop it
And as a few people mentioned selling game accounts, hate to inform you, you most likely already owe taxes on such transactions
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next think you know they'll want to charge you money when you dream you made money.
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Some real money flows - but there's positively a portion that was never 'real money'. You can start an account free, get a small portion of lindens and assuming one was resourceful enough, they could make quite a bit - heck even if they just create objects or whatever in there. Lots of ways to make 'virtual' money, some people like the challenge of doing just that.
I wonder..... they they also collect taxes on money won in Golf Games at country clubs? Somehow; I doubt it.
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Virtual Check
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Virtual Tax Collectors
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Virtual No Brainer
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Re: Virtual No Brainer
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I am not playing monopoly any more !
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It works both ways
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