Originally posted by leinad312 Some states have been taxing WoW subs for a while now. Seems to just be WoW, as I wasn't taxed on FFXI. I just so happen to live in WA state . This is from the WoW forums: Players in select states around the U.S. have found that their monthly subscription fee is slightly higher than expected. With the rise of many online subscription-based services, several states have begun to apply a tax to services that use such a model, and this tax is an additional cost that players are seeing added onto the base subscription rate. Specifically, residents of the following states will be charged this tax: Illinois
Massachusetts
New Mexico
New York
Texas
Washington
That's just a basic sales tax, and at the same rate as is applied to many other goods and services. That's not what the original poster is talking about, in which the tax levied could end up being much higher than the subscription fee.
The IRS is taking a good hard look at the MMO industry. They see games like Second Life and World of Warcraft where massive profits are possible. Because of this, the IRS is actually considering potential taxes based on MMO items / currency. Lets say you loot an epic sword. That sword has an estimated value of $50 dollars based on an average of sales on e-bay. Think of it like a car, with an established value you could potentially owe actual Taxes for that sword ! Looting epics might become expensive. Even if you never sell that sword, it still has value and therefore counts as a gain. You would owe taxes based on its real-world value Gold you loot certainly has real-world value. Its just like foreign currency conversion. The IRS could tax your gold using a conversion based on what it could sell / convert to dollars. This is the inherent danger gold farmers have established for us. They have shown virtual items have real-world value. Kinda scary to think Id have to pay taxes on gold I earned for that week from questing or some item I looted. Because the economy is so bad right now the IRS has really started to consider this potential income as taxable again. (theyve been considering this since 2005) http://www.gamespot.com/news/6162654.html http://news.cnet.com/2100-1043_3-6140298.html An accountant I know told me he took a weekend seminar course and this subject was mentioned. There is real talk going on right now about how to implement this tax
I think you confuse paying taxes for selling on ebay (for real money) with paying taxes for ingame earnings. This is not the same.
The whole EULA thing is meant to keep ingame activity seperared from real life, so players cant sell ingame service/items for real money. Governments dont have any jurisdiction inside games, so cant raise taxes there either.
According to the EULA /TCOS selling ingame items for real money is illegal. This makes raising taxes on these activities also illegal. It is as if the IRS is raising taxes when a burglar sells stolen items.
The IRS is taking a good hard look at the MMO industry. They see games like Second Life and World of Warcraft where massive profits are possible. Because of this, the IRS is actually considering potential taxes based on MMO items / currency. Lets say you loot an epic sword. That sword has an estimated value of $50 dollars based on an average of sales on e-bay. Think of it like a car, with an established value you could potentially owe actual Taxes for that sword ! Looting epics might become expensive. Even if you never sell that sword, it still has value and therefore counts as a gain. You would owe taxes based on its real-world value Gold you loot certainly has real-world value. Its just like foreign currency conversion. The IRS could tax your gold using a conversion based on what it could sell / convert to dollars. This is the inherent danger gold farmers have established for us. They have shown virtual items have real-world value. Kinda scary to think Id have to pay taxes on gold I earned for that week from questing or some item I looted. Because the economy is so bad right now the IRS has really started to consider this potential income as taxable again. (theyve been considering this since 2005) http://www.gamespot.com/news/6162654.html http://news.cnet.com/2100-1043_3-6140298.html An accountant I know told me he took a weekend seminar course and this subject was mentioned. There is real talk going on right now about how to implement this tax
the government will do anything to scam more money out of it's people... isn't that why we broke away from England "Taxation w/out representation"?
Not to go off-topic in my own thread but take a look at my quote under my avatar. We didnt break away from England because of taxes like the elite-run education system has taught you to believe.
We revolted because the Bank of London owned by the Rothschild family wanted control of our money. The american colonists were using colonial script that was interest-debt free. While England labored in debt, poverty, and inflation the colonies prospered. When London's bank learned that colonies were issuing their own currency debt-free they went on the attack. Taxes was just one weapon they used against america.
Ironically america eventually lost the revolutionary war. In 1913 the Rothschilds eventually got control of america's currency with the establishment of the Federal Reserve.
I seem to remember a Declaration of Indpendence that listed ALL of our problems with England, those taxes did piss us off just look at what Boston did.
Anyways I don't think this will happen in games such as LOTRO and WoW that don't do RMT. I could see this done in RMT but as lon as it is against the EULA to do RMT it shouldn't be taxable.
read Ben Franklin's works...
Benjamin Franklin identified this as the real reason for the War of Independence:
"The refusal of King George to operate an HONEST colonial MONEY SYSTEM which freed the ordinary man from the clutches of the manipulators was probably the prime cause of the Revolution."
"The Colonies would gladly have borne the little tax on tea and other matters, had it not been that England took away from the Colonies their money, which created unemployment and dis-satisfaction."
Ben Franklin before the Revolution was called before the King to explain the colonists' prosperity...
"It is because, in the Colonies, we issue our own paper money. We call it Colonial Script, and we issue only enough to move all goods freely from the producers to the Consumers; and as we create our money, we control the purchasing power of money, and have no interest to pay."
The control of money is the very heart of our revolution. It is also why the founding fathers gave the govt the power (and only them which is why the Federal Reserve is illegal) to create money backed by gold.
Our founding fathers were well aware of the inherent danger of allowing a private bank the power to issue currency...
Thomas Jefferson - "If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."
Unfortunately most americans dont learn the true history of the founding of this nation. The textbooks and education system are owned by the very same folks who own the banks so you arent taught the truth. Taxes had little to do with it, it was the control of money that our founding fathers wanted. Unfortunately we gave up that power to private hands in 1913 with the passage of the unconstitutional Federal Reserve act
It's a wonderful thing to see that not everyone is completely unaware of the facts of the founding of the USA. I'm just astounded to find such intelligence in the forums of a gaming website! Aren't most of us here for the sole purpose of finding deeper inroads into the fantastic fictions of meaningless gameplay? One cannot help but notice the similarities between that simple pursuit and the fictional accounts of American History as is taught in our schools though... They're both a quaint diversion from reality and intended to keep us contentedly entertained.
Kudos to you admriker4 for refusing to wear the blindfold and encouraging others to recognize the truth.
As for taxing intangible items.... Some already pay taxes on the transactions of real currency for the privileges of playing the games. I seriously doubt they will ever be able to legitimately tax any in-game items or currency as they simply do not exist except as copyrighted thoughts rendered in pixels. However... the Federal Reserve does exist despite being completely unconstitutional so I guess all bets are off
The IRS is taking a good hard look at the MMO industry. They see games like Second Life and World of Warcraft where massive profits are possible. Because of this, the IRS is actually considering potential taxes based on MMO items / currency. Lets say you loot an epic sword. That sword has an estimated value of $50 dollars based on an average of sales on e-bay. Think of it like a car, with an established value you could potentially owe actual Taxes for that sword ! Looting epics might become expensive. Even if you never sell that sword, it still has value and therefore counts as a gain. You would owe taxes based on its real-world value Gold you loot certainly has real-world value. Its just like foreign currency conversion. The IRS could tax your gold using a conversion based on what it could sell / convert to dollars. This is the inherent danger gold farmers have established for us. They have shown virtual items have real-world value. Kinda scary to think Id have to pay taxes on gold I earned for that week from questing or some item I looted. Because the economy is so bad right now the IRS has really started to consider this potential income as taxable again. (theyve been considering this since 2005) http://www.gamespot.com/news/6162654.html http://news.cnet.com/2100-1043_3-6140298.html An accountant I know told me he took a weekend seminar course and this subject was mentioned. There is real talk going on right now about how to implement this tax
The law doesn't need to change to enforce the tax law. You are suppose to report income. Nobody in the USA should be surprised at the law.
The game companies can squelch that real quick. Anything in a game is the game developers property. The ones making money buying/selling virtual property are selling the developers property, not the account holder. You are only "renting" the right to use the items while subscribing and playing the game. So unless the I.R.S. plans to start taxing sales of stolen goods ( which they can't ), there's no danger.
Then the IRS can arrest you for failure to report. Remember Al Capone? They got him from not reporting money from his crimes. Damn, how ignorant people are about the law.
The IRS is taking a good hard look at the MMO industry. They see games like Second Life and World of Warcraft where massive profits are possible. Because of this, the IRS is actually considering potential taxes based on MMO items / currency. Lets say you loot an epic sword. That sword has an estimated value of $50 dollars based on an average of sales on e-bay. Think of it like a car, with an established value you could potentially owe actual Taxes for that sword ! Looting epics might become expensive. Even if you never sell that sword, it still has value and therefore counts as a gain. You would owe taxes based on its real-world value Gold you loot certainly has real-world value. Its just like foreign currency conversion. The IRS could tax your gold using a conversion based on what it could sell / convert to dollars. This is the inherent danger gold farmers have established for us. They have shown virtual items have real-world value. Kinda scary to think Id have to pay taxes on gold I earned for that week from questing or some item I looted. Because the economy is so bad right now the IRS has really started to consider this potential income as taxable again. (theyve been considering this since 2005) http://www.gamespot.com/news/6162654.html http://news.cnet.com/2100-1043_3-6140298.html An accountant I know told me he took a weekend seminar course and this subject was mentioned. There is real talk going on right now about how to implement this tax
the government will do anything to scam more money out of it's people... isn't that why we broke away from England "Taxation w/out representation"?
Not to go off-topic in my own thread but take a look at my quote under my avatar. We didnt break away from England because of taxes like the elite-run education system has taught you to believe.
We revolted because the Bank of London owned by the Rothschild family wanted control of our money. The american colonists were using colonial script that was interest-debt free. While England labored in debt, poverty, and inflation the colonies prospered. When London's bank learned that colonies were issuing their own currency debt-free they went on the attack. Taxes was just one weapon they used against america.
Ironically america eventually lost the revolutionary war. In 1913 the Rothschilds eventually got control of america's currency with the establishment of the Federal Reserve.
I seem to remember a Declaration of Indpendence that listed ALL of our problems with England, those taxes did piss us off just look at what Boston did.
Anyways I don't think this will happen in games such as LOTRO and WoW that don't do RMT. I could see this done in RMT but as lon as it is against the EULA to do RMT it shouldn't be taxable.
read Ben Franklin's works...
Benjamin Franklin identified this as the real reason for the War of Independence:
"The refusal of King George to operate an HONEST colonial MONEY SYSTEM which freed the ordinary man from the clutches of the manipulators was probably the prime cause of the Revolution."
"The Colonies would gladly have borne the little tax on tea and other matters, had it not been that England took away from the Colonies their money, which created unemployment and dis-satisfaction."
Ben Franklin before the Revolution was called before the King to explain the colonists' prosperity...
"It is because, in the Colonies, we issue our own paper money. We call it Colonial Script, and we issue only enough to move all goods freely from the producers to the Consumers; and as we create our money, we control the purchasing power of money, and have no interest to pay."
The control of money is the very heart of our revolution. It is also why the founding fathers gave the govt the power (and only them which is why the Federal Reserve is illegal) to create money backed by gold.
Our founding fathers were well aware of the inherent danger of allowing a private bank the power to issue currency...
Thomas Jefferson - "If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."
Unfortunately most americans dont learn the true history of the founding of this nation. The textbooks and education system are owned by the very same folks who own the banks so you arent taught the truth. Taxes had little to do with it, it was the control of money that our founding fathers wanted. Unfortunately we gave up that power to private hands in 1913 with the passage of the unconstitutional Federal Reserve act
It's a wonderful thing to see that not everyone is completely unaware of the facts of the founding of the USA. I'm just astounded to find such intelligence in the forums of a gaming website! Aren't most of us here for the sole purpose of finding deeper inroads into the fantastic fictions of meaningless gameplay? One cannot help but notice the similarities between that simple pursuit and the fictional accounts of American History as is taught in our schools though... They're both a quaint diversion from reality and intended to keep us contentedly entertained.
Kudos to you admriker4 for refusing to wear the blindfold and encouraging others to recognize the truth.
As for taxing intangible items.... Some already pay taxes on the transactions of real currency for the privileges of playing the games. I seriously doubt they will ever be able to legitimately tax any in-game items or currency as they simply do not exist except as copyrighted thoughts rendered in pixels. However... the Federal Reserve does exist despite being completely unconstitutional so I guess all bets are off
Stupid idea. One of the reasons why MMO is popular and profitable is because it can be enjoyed by people of different status. Got cash? Play WoW. Broke? Play a free2play MMO. Tax both and the MMO world will definitely feel losses.
My aunt is an accountant. They are learning about how to properly handle income reported from virtual sales.
In order for there to be a tax there must be income earned. If they could tax you on potential income earned because these ingame items have some type of value it would be as ridiculous as them taxing you on potential income based on what career you choose.
Oh you are going to medical school well here is your $34,000 tax bill for your yearly income. What you haven't earned any income yet? You don't even have a job? Oh that doesn't matter your education is worth that much so we are going to go ahead and tax you on the real world value of your education.
Sounds pretty ridiculous doesn't it. Sorry but it will never happen. The IRS already has rules that cover RMT profits and income reporting. Otherwise your "Epic sword of uberness" is safe from the tax man.
Currently playing: LOTRO & WoW (not much WoW though because Mines of Moria rocks!!!!)
Looking Foward too: Bioware games (Dragon Age & Star Wars The Old Republic)
My aunt is an accountant. They are learning about how to properly handle income reported from virtual sales.
In order for there to be a tax there must be income earned. If they could tax you on potential income earned because these ingame items have some type of value it would be as ridiculous as them taxing you on potential income based on what career you choose.
Oh you are going to medical school well here is your $34,000 tax bill for your yearly income. What you haven't earned any income yet? You don't even have a job? Oh that doesn't matter your education is worth that much so we are going to go ahead and tax you on the real world value of your education.
Sounds pretty ridiculous doesn't it. Sorry but it will never happen. The IRS already has rules that cover RMT profits and income reporting. Otherwise your "Epic sword of uberness" is safe from the tax man.
Its not potential income. If a sword in WoW sells for 50 dollars on e-bay and you loot that sword you have technically gained 50 dollars worth of said item. Whether you sell it or not, you have gained 50 dollars worth of items.
If you loot 5,000 gold from questing and that gold has a real-world value of 100 dollars, again thats a gain toward your net worth.
If you go on a gameshow and win a year's supply of rice-a-roni you have gained whatever value said rice product sells for.
In each case you have gained something of real-world value. This gain is taxable.
developers selling RMT items and gold farmers have set the precedent by assigning real value to virtual items. Im not saying I like this or agree with taxes but the argument has merit (thanks to the idiot developers who offer RMT)
The accountant I know explained to me why this is being looked into by the IRS. The IRS fears that people will use MMO's as a means to transfer and hide wealth. Its no different than hiding money in a blind trust or an overseas account. A rich person could theoretically take a million dollars and use it to buy virtual items and hide that million from the IRS. And at some later date they could transfer that virtual wealth back to real-world wealth. He went into more details, over my head frankly but in essence the IRS sees the potential for MMO's as tax shelters
My aunt is an accountant. They are learning about how to properly handle income reported from virtual sales.
In order for there to be a tax there must be income earned. If they could tax you on potential income earned because these ingame items have some type of value it would be as ridiculous as them taxing you on potential income based on what career you choose.
Oh you are going to medical school well here is your $34,000 tax bill for your yearly income. What you haven't earned any income yet? You don't even have a job? Oh that doesn't matter your education is worth that much so we are going to go ahead and tax you on the real world value of your education.
Sounds pretty ridiculous doesn't it. Sorry but it will never happen. The IRS already has rules that cover RMT profits and income reporting. Otherwise your "Epic sword of uberness" is safe from the tax man.
Its not potential income. If a sword in WoW sells for 50 dollars on e-bay and you loot that sword you have technically gained 50 dollars worth of said item. Whether you sell it or not, you have gained 50 dollars worth of items.
If you loot 5,000 gold from questing and that gold has a real-world value of 100 dollars, again thats a gain toward your net worth.
If you go on a gameshow and win a year's supply of rice-a-roni you have gained whatever value said rice product sells for.
In each case you have gained something of real-world value. This gain is taxable.
developers selling RMT items and gold farmers have set the precedent by assigning real value to virtual items. Im not saying I like this or agree with taxes but the argument has merit (thanks to the idiot developers who offer RMT)
But, as stated in their ToS, the sword (and everything else) belongs to Blizzard. So wouldn't blizzard be paying the taxes?
In order for there to be a tax there must be income earned. If they could tax you on potential income earned because these ingame items have some type of value it would be as ridiculous as them taxing you on potential income based on what career you choose.
You're telling me that I don't have to pay property taxes until I sell the house?
And since when has sheer ridiculousness ever stopped the government from doing anything? Recall that we're only a few weeks removed from the federal government declaring that General Motors is a bank, not a car company.
My aunt is an accountant. They are learning about how to properly handle income reported from virtual sales.
In order for there to be a tax there must be income earned. If they could tax you on potential income earned because these ingame items have some type of value it would be as ridiculous as them taxing you on potential income based on what career you choose.
Oh you are going to medical school well here is your $34,000 tax bill for your yearly income. What you haven't earned any income yet? You don't even have a job? Oh that doesn't matter your education is worth that much so we are going to go ahead and tax you on the real world value of your education.
Sounds pretty ridiculous doesn't it. Sorry but it will never happen. The IRS already has rules that cover RMT profits and income reporting. Otherwise your "Epic sword of uberness" is safe from the tax man.
Its not potential income. If a sword in WoW sells for 50 dollars on e-bay and you loot that sword you have technically gained 50 dollars worth of said item. Whether you sell it or not, you have gained 50 dollars worth of items.
If you loot 5,000 gold from questing and that gold has a real-world value of 100 dollars, again thats a gain toward your net worth.
If you go on a gameshow and win a year's supply of rice-a-roni you have gained whatever value said rice product sells for.
In each case you have gained something of real-world value. This gain is taxable.
developers selling RMT items and gold farmers have set the precedent by assigning real value to virtual items. Im not saying I like this or agree with taxes but the argument has merit (thanks to the idiot developers who offer RMT)
But, as stated in their ToS, the sword (and everything else) belongs to Blizzard. So wouldn't blizzard be paying the taxes?
I dont think the EULA matters to the IRS. If I profit from selling gold or armor in WoW, thats a gain whether Blizz says its okay or not.
Blizz might not agree or believe that virtual items in WoW has value but the rest of the world disagrees. People sell accounts and gold all the time. And other developers have even gone so far as to sell items themselves (establishing virtual items have real value)
Heck the IRS expects drug dealers to report income and pay taxes on it legitimate or not. They put drug lords in prison all the time for failure to pay taxes.
Whether the gains made are considered legit, legal, ethically matters not to the IRS. All they are concerned with is if a gain was indeed taxed.
Gold farming is a 500 million dollar a year industry. Its big business. The IRS clearly is interested in this area as a result
So I found this in an msn article, "U.S. law requires those who have more than $10,000 in a foreign trust or bank account to report those accounts on their 1040s. "
What if we all migrated to euro servers, they wouldn't tax us if our character's value is less than 10 grand? XD
Playing - FFXIV, ESO Played - FFXI, WoW, Lineage 2, Guild Wars, Aion, SWToR, LotRO, GW2, TERA, Rift, ArcheAge, TSW
I have the feeling that it all comes down to individual game mechanics, thus it is and will be hard to apply some blanket tax on all current MMOs. Especially when considering subscription based MMOs, the difficult is even harder. The biggest issue is that game assets change values at too short a time span, so they can't be really considered an investment. Patches and expansions alter the game world value of items. Guild membership is more important than the items themselves when you consider decking characters in high profile items. Value is very relative depending on the player. For example, that sword of uberness may gets sold for 1000g to a casual player but it can also be an instant shard or vendor trash to a high profile raider.
Bottom line, ingame wealth is a moving target. One can't just buy 1M gold in a game, say WoW and expect it to have the same value one year from now. There maybe other games with a more steady economic environment, but from what I've seen all developers are trying to introduce money sinks for players to dump money gained. Perhaps it would be more reasonable to be seen in a per case basis, but I foresee mistakes made from people that may have not a proper exposure to this kind of online environments.
Well as soon as this happens, the goverment wont have to worry about it anymore cause that would be the end of mmo's. Or every item will be soul bound/no drop and poeple will have to stop selling toons..take gold out of mmo's. FUN!
The IRS is taking a good hard look at the MMO industry. They see games like Second Life and World of Warcraft where massive profits are possible. Because of this, the IRS is actually considering potential taxes based on MMO items / currency. Lets say you loot an epic sword. That sword has an estimated value of $50 dollars based on an average of sales on e-bay. Think of it like a car, with an established value you could potentially owe actual Taxes for that sword ! Looting epics might become expensive. Even if you never sell that sword, it still has value and therefore counts as a gain. You would owe taxes based on its real-world value Gold you loot certainly has real-world value. Its just like foreign currency conversion. The IRS could tax your gold using a conversion based on what it could sell / convert to dollars. This is the inherent danger gold farmers have established for us. They have shown virtual items have real-world value. Kinda scary to think Id have to pay taxes on gold I earned for that week from questing or some item I looted. Because the economy is so bad right now the IRS has really started to consider this potential income as taxable again. (theyve been considering this since 2005) http://www.gamespot.com/news/6162654.html http://news.cnet.com/2100-1043_3-6140298.html An accountant I know told me he took a weekend seminar course and this subject was mentioned. There is real talk going on right now about how to implement this tax
is it just me, or are the two articles linked both dated in 2006?
could we please get correspondent writers and moderators, on the eve forum at mmorpg.com, who are well-versed on eve-online and aren't just passersby pushing buttons? pretty please?
This is just a pathetic, stupid, disgrace. It's like that no name company starting a fuss against NCsoft. The world will deserve to end in 2012, if this becomes reality.
My aunt is an accountant. They are learning about how to properly handle income reported from virtual sales.
In order for there to be a tax there must be income earned. If they could tax you on potential income earned because these ingame items have some type of value it would be as ridiculous as them taxing you on potential income based on what career you choose.
Oh you are going to medical school well here is your $34,000 tax bill for your yearly income. What you haven't earned any income yet? You don't even have a job? Oh that doesn't matter your education is worth that much so we are going to go ahead and tax you on the real world value of your education.
Sounds pretty ridiculous doesn't it. Sorry but it will never happen. The IRS already has rules that cover RMT profits and income reporting. Otherwise your "Epic sword of uberness" is safe from the tax man.
Its not potential income. If a sword in WoW sells for 50 dollars on e-bay and you loot that sword you have technically gained 50 dollars worth of said item. Whether you sell it or not, you have gained 50 dollars worth of items.
If you loot 5,000 gold from questing and that gold has a real-world value of 100 dollars, again thats a gain toward your net worth.
If you go on a gameshow and win a year's supply of rice-a-roni you have gained whatever value said rice product sells for.
In each case you have gained something of real-world value. This gain is taxable.
developers selling RMT items and gold farmers have set the precedent by assigning real value to virtual items. Im not saying I like this or agree with taxes but the argument has merit (thanks to the idiot developers who offer RMT)
The accountant I know explained to me why this is being looked into by the IRS. The IRS fears that people will use MMO's as a means to transfer and hide wealth. Its no different than hiding money in a blind trust or an overseas account. A rich person could theoretically take a million dollars and use it to buy virtual items and hide that million from the IRS. And at some later date they could transfer that virtual wealth back to real-world wealth. He went into more details, over my head frankly but in essence the IRS sees the potential for MMO's as tax shelters
Just complete nonsense. The sword you are talking about has zero value until you actually sell it. Until then it just some bits sitting on a computer. Unless you can somehow prove intent to sell it you cannot establish any sort of value. The IRS would be laughed out of court trying to prove such.
My aunt is an accountant. They are learning about how to properly handle income reported from virtual sales.
In order for there to be a tax there must be income earned. If they could tax you on potential income earned because these ingame items have some type of value it would be as ridiculous as them taxing you on potential income based on what career you choose.
Oh you are going to medical school well here is your $34,000 tax bill for your yearly income. What you haven't earned any income yet? You don't even have a job? Oh that doesn't matter your education is worth that much so we are going to go ahead and tax you on the real world value of your education.
Sounds pretty ridiculous doesn't it. Sorry but it will never happen. The IRS already has rules that cover RMT profits and income reporting. Otherwise your "Epic sword of uberness" is safe from the tax man.
Its not potential income. If a sword in WoW sells for 50 dollars on e-bay and you loot that sword you have technically gained 50 dollars worth of said item. Whether you sell it or not, you have gained 50 dollars worth of items.
If you loot 5,000 gold from questing and that gold has a real-world value of 100 dollars, again thats a gain toward your net worth.
If you go on a gameshow and win a year's supply of rice-a-roni you have gained whatever value said rice product sells for.
In each case you have gained something of real-world value. This gain is taxable.
developers selling RMT items and gold farmers have set the precedent by assigning real value to virtual items. Im not saying I like this or agree with taxes but the argument has merit (thanks to the idiot developers who offer RMT)
The accountant I know explained to me why this is being looked into by the IRS. The IRS fears that people will use MMO's as a means to transfer and hide wealth. Its no different than hiding money in a blind trust or an overseas account. A rich person could theoretically take a million dollars and use it to buy virtual items and hide that million from the IRS. And at some later date they could transfer that virtual wealth back to real-world wealth. He went into more details, over my head frankly but in essence the IRS sees the potential for MMO's as tax shelters
Just complete nonsense. The sword you are talking about has zero value until you actually sell it. Until then it just some bits sitting on a computer. Unless you can somehow prove intent to sell it you cannot establish any sort of value. The IRS would be laughed out of court trying to prove such.
I think the point he was trying to make is that MMO currency is being used for real transactions simply because it is considered "not real" in the eyes of the law.
For example, say someone wants to buy a car. Neither the buyer or the dealer really want to pay sales tax on it, because it ups the price. So the fear is that the buyer would simply buy MMO gold for the amount for the car, give the gold to the dealer, have the dealer sell the gold for cash, and have the car be sold without anyone having to pay sales tax. That's the sort of stuff that can happen if MMO gold isn't recognized as a legal currency.
Or what about the sale of narcotics or pornography? If the transactions are made in MMO gold, they aren't transactions in the eyes of the law, because MMO gold isn't considered a real currency according to the law. Therefore, criminals are able to launder their funds and cover their transactions because MMO gold isn't considered to have any value.
So the law is quickly trying to define MMO things as things with value to prevent the above scenarios from happening. And if MMO things have value, then by all rights they should fall under the tax laws, because it wouldn't be fair for people and businesses to be disadvantaged in transactions simply because they handle real currency.
__________________________ "Its sad when people use religion to feel superior, its even worse to see people using a video game to do it." --Arcken
"...when it comes to pimping EVE I have little restraints." --Hellmar, CEO of CCP.
"It's like they took a gun, put it to their nugget sack and pulled the trigger over and over again, each time telling us how great it was that they were shooting themselves in the balls." --Exar_Kun on SWG's NGE
I think the point he was trying to make is that MMO currency is being used for real transactions simply because it is considered "not real" in the eyes of the law. For example, say someone wants to buy a car. Neither the buyer or the dealer really want to pay sales tax on it, because it ups the price. So the fear is that the buyer would simply buy MMO gold for the amount for the car, give the gold to the dealer, have the dealer sell the gold for cash, and have the car be sold without anyone having to pay sales tax. That's the sort of stuff that can happen if MMO gold isn't recognized as a legal currency. Or what about the sale of narcotics or pornography? If the transactions are made in MMO gold, they aren't transactions in the eyes of the law, because MMO gold isn't considered a real currency according to the law. Therefore, criminals are able to launder their funds and cover their transactions because MMO gold isn't considered to have any value. So the law is quickly trying to define MMO things as things with value to prevent the above scenarios from happening. And if MMO things have value, then by all rights they should fall under the tax laws, because it wouldn't be fair for people and businesses to be disadvantaged in transactions simply because they handle real currency.
The main problem with your scenarios is that they still involve a RL cash/good for virtual currency transaction. As such they would would still be fully taxable at the point of the conversion such as they are supposed to be now.
The car dealer sale-tax avoidance scheme you described is really just a more complicated version of any 'under the table' deal where the customer pays cash and the dealer reports the transaction as happening at scrap value or at a greatly reduced price. Your scheme would never fly because the first thng an auditor would ask is why the dealer is giving away cars for no apparent payment. Further the dealer would have to claim the full value of the car as income which might cost him more than actually paying the sales tax.
As far as any money laundering schemes are concerned, if the police can establish what the real transaction was (ie money for drugs) then it will not matter what the medium used to camouflage the transaction was. You could be trading WoW gold, baseball cards, olives or glass marbles and it would come to the same end. Teh main purpose of anti-money laundering laws is so that you cannot hide the real transaction behind technicalities.
The big sticking point about the OPs position is his belief that the government will tax people on the potential RL value of ingame items whether those items ever get converted to RL cash or not. The logistics of tracking that and the enourmous legal headaches that would create make it an unrealistic scenario. A way more likely scenario is an excise tax on game subscriptions plus a second tax hit on any converstions of virtual items to RL cash.
I think the point he was trying to make is that MMO currency is being used for real transactions simply because it is considered "not real" in the eyes of the law. For example, say someone wants to buy a car. Neither the buyer or the dealer really want to pay sales tax on it, because it ups the price. So the fear is that the buyer would simply buy MMO gold for the amount for the car, give the gold to the dealer, have the dealer sell the gold for cash, and have the car be sold without anyone having to pay sales tax. That's the sort of stuff that can happen if MMO gold isn't recognized as a legal currency. Or what about the sale of narcotics or pornography? If the transactions are made in MMO gold, they aren't transactions in the eyes of the law, because MMO gold isn't considered a real currency according to the law. Therefore, criminals are able to launder their funds and cover their transactions because MMO gold isn't considered to have any value. So the law is quickly trying to define MMO things as things with value to prevent the above scenarios from happening. And if MMO things have value, then by all rights they should fall under the tax laws, because it wouldn't be fair for people and businesses to be disadvantaged in transactions simply because they handle real currency.
The main problem with your scenarios is that they still involve a RL cash/good for virtual currency transaction. As such they would would still be fully taxable at the point of the conversion such as they are supposed to be now.
The car dealer sale-tax avoidance scheme you described is really just a more complicated version of any 'under the table' deal where the customer pays cash and the dealer reports the transaction as happening at scrap value or at a greatly reduced price. Your scheme would never fly because the first thng an auditor would ask is why the dealer is giving away cars for no apparent payment. Further the dealer would have to claim the full value of the car as income which might cost him more than actually paying the sales tax.
As far as any money laundering schemes are concerned, if the police can establish what the real transaction was (ie money for drugs) then it will not matter what the medium used to camouflage the transaction was. You could be trading WoW gold, baseball cards, olives or glass marbles and it would come to the same end. Teh main purpose of anti-money laundering laws is so that you cannot hide the real transaction behind technicalities.
The big sticking point about the OPs position is his belief that the government will tax people on the potential RL value of ingame items whether those items ever get converted to RL cash or not. The logistics of tracking that and the enourmous legal headaches that would create make it an unrealistic scenario. A way more likely scenario is an excise tax on game subscriptions plus a second tax hit on any converstions of virtual items to RL cash.
Im not saying my belief is this will happen. Im merely sharing the topic because it is being looked at by the IRS.
And I agree the logistics of trying to track and tax for any item of value in an MMO would seem impossible. But the fact remains the IR is studying the issue
No idea about US tax law to be honest, but this sounds like a scam to me.
I would call "FAKE" if it was a picture.
First of all, I do not own my items, they can be taken away from me within a moments notice, every MMO devloper reserver the right to end any subscription WITHOUT needing to explain themself.
If my items were taxed they would need to reimburse me real world currency for banning my account, or ending it for whatever reason.
It would move the ownership of all items and currency on my account to me, to be sold or bought at my own leisure, all gold sellers would become untouchable in an instant.
And even if you ban them they cash in, because you can not take away someones money, for whatever reason.
Well the IRS can, and the government and whatnot but no company can.
And even the G-man needs backing by the law to do it.
"Excuse me, this bank has a rule that you need to wear pink on tuesday, you have now forfeited all your money in this bank, thank you."
And tell me one more thing, that will perhaps end this debate.
When an artist, who can sell any art they make for say 10000$, make an artistic piece do he gets taxed when it is finished or when he sells it?
Because, it is by all means worth 10000$ so by making it he just earned that amount.
And by the logic put forth here he should be taxed at once, regardless if he sells it or not.
To be honest I am not sure wich one it is, but I kinda doubt he gets taxed before he has sold it.
Furthermore, as the developers have the ability to create gold, items or whatnot out of thin air they all of a sudden sits in the same chair as the federal reserve, they can actually PRINT money.
I just do not think they would let that slide.
Just some food for thought, not saying that it can not ever happen, but there are more legal matters behind a change like this then we can possibly understand, or predict.
And the fact that gold farmers, resellers or whatever is being taxed, werever they may be located is no news.
They were ALWAYS required to do so.
------------------------------------------------------------------------------------------ Originally posted by Jerek_
I wonder if you honestly even believe what you type, or if you live in a made up world of facts. ------------------------------------------------------------------------------------------
Even if you never sell that sword, it still has value and therefore counts as a gain. You would owe taxes based on its real-world value
Fortunately, that's not even remotely how it works. At least not in the US. Anybody who understands anything about taxes beyond "taking them to H&R Block" knows that the idea of paying income tax on a looted sword is a laughable, at best. Looting that sword would be an unrealized gain until it is converted into a realized gain, at which point it is already covered under existing law.
If the IRS could tax virtual and paper gains as they were accrued, the entire gaming industry wouldn't even be a blip on the radar compared to the financial and real estate markets.
--- I ask for so little. Just fear me, love me, do as I say and I will be your slave.
If the IRS manages to establish "Real World" value of items and cash you "own" in a MMO the entire economic system of the world would be turned on its ear. Imagine tens of millions of MMO players suddenly reporting their in-game assets as "Real World" assets....
Let's say that Kartuhn has 15 accounts active on 15 different games with an estimated value of $100,000 US Dollars (been playing awhile ). He plays only 2 of them with any frequency and hasn't played any of the others for years, but, since the accounts remain listed as "active" by the game's developers and he has the opportunity to return to play them when he wishes, the IRS claims that they are still assests and therefore taxable. Kartuhn's mailbox is now stuffed to overflowing with threats of audits and bills from the IRS and W2's from game companies that actually have his correct home address since he was honest when he opened the accounts. Poor Kartuhn is now in the market for an accountant and a good lawyer not to mention wracking his brain trying to remember the passwords to all of those accounts so that he can use the "Delete Character" function without delay!
Is Kartuhn a complete idiot for deleting those characters and sending all of his newfound wealth back into the ethereal abyss from whence it came? Should he have used his new net worth to fund his tax payments and quit his "Real World" job so that he could declare his game playing as a home business and slave away at the computer unto the wee hours surviving on Twinkies and Coca Cola attempting to make enough game coin to to sell on E-Bay to make the house payment while his kids complain that he's hogging all the bandwidth and they can't do their homework as a result? At this point Kartuhn realizes that his son has been playing Runescape since he was 8 years old just as he hears a heavy pounding at the front door... It's the police with a warrant for his arrest for violating the Child Labor laws! ZOMG!!!
In short... take a moment to spell the word "way". See? There's no "f" in "way"!
Comments
That's just a basic sales tax, and at the same rate as is applied to many other goods and services. That's not what the original poster is talking about, in which the tax levied could end up being much higher than the subscription fee.
I think you confuse paying taxes for selling on ebay (for real money) with paying taxes for ingame earnings. This is not the same.
The whole EULA thing is meant to keep ingame activity seperared from real life, so players cant sell ingame service/items for real money. Governments dont have any jurisdiction inside games, so cant raise taxes there either.
According to the EULA /TCOS selling ingame items for real money is illegal. This makes raising taxes on these activities also illegal. It is as if the IRS is raising taxes when a burglar sells stolen items.
Those ideas are plain bollocks.
the government will do anything to scam more money out of it's people... isn't that why we broke away from England "Taxation w/out representation"?
Not to go off-topic in my own thread but take a look at my quote under my avatar. We didnt break away from England because of taxes like the elite-run education system has taught you to believe.
We revolted because the Bank of London owned by the Rothschild family wanted control of our money. The american colonists were using colonial script that was interest-debt free. While England labored in debt, poverty, and inflation the colonies prospered. When London's bank learned that colonies were issuing their own currency debt-free they went on the attack. Taxes was just one weapon they used against america.
Ironically america eventually lost the revolutionary war. In 1913 the Rothschilds eventually got control of america's currency with the establishment of the Federal Reserve.
I seem to remember a Declaration of Indpendence that listed ALL of our problems with England, those taxes did piss us off just look at what Boston did.
Anyways I don't think this will happen in games such as LOTRO and WoW that don't do RMT. I could see this done in RMT but as lon as it is against the EULA to do RMT it shouldn't be taxable.
read Ben Franklin's works...
Benjamin Franklin identified this as the real reason for the War of Independence:
"The refusal of King George to operate an HONEST colonial MONEY SYSTEM which freed the ordinary man from the clutches of the manipulators was probably the prime cause of the Revolution."
"The Colonies would gladly have borne the little tax on tea and other matters, had it not been that England took away from the Colonies their money, which created unemployment and dis-satisfaction."
Ben Franklin before the Revolution was called before the King to explain the colonists' prosperity...
"It is because, in the Colonies, we issue our own paper money. We call it Colonial Script, and we issue only enough to move all goods freely from the producers to the Consumers; and as we create our money, we control the purchasing power of money, and have no interest to pay."
The control of money is the very heart of our revolution. It is also why the founding fathers gave the govt the power (and only them which is why the Federal Reserve is illegal) to create money backed by gold.
Our founding fathers were well aware of the inherent danger of allowing a private bank the power to issue currency...
Thomas Jefferson - "If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."
Unfortunately most americans dont learn the true history of the founding of this nation. The textbooks and education system are owned by the very same folks who own the banks so you arent taught the truth. Taxes had little to do with it, it was the control of money that our founding fathers wanted. Unfortunately we gave up that power to private hands in 1913 with the passage of the unconstitutional Federal Reserve act
It's a wonderful thing to see that not everyone is completely unaware of the facts of the founding of the USA. I'm just astounded to find such intelligence in the forums of a gaming website! Aren't most of us here for the sole purpose of finding deeper inroads into the fantastic fictions of meaningless gameplay? One cannot help but notice the similarities between that simple pursuit and the fictional accounts of American History as is taught in our schools though... They're both a quaint diversion from reality and intended to keep us contentedly entertained.
Kudos to you admriker4 for refusing to wear the blindfold and encouraging others to recognize the truth.
As for taxing intangible items.... Some already pay taxes on the transactions of real currency for the privileges of playing the games. I seriously doubt they will ever be able to legitimately tax any in-game items or currency as they simply do not exist except as copyrighted thoughts rendered in pixels. However... the Federal Reserve does exist despite being completely unconstitutional so I guess all bets are off
The law doesn't need to change to enforce the tax law. You are suppose to report income. Nobody in the USA should be surprised at the law.
Then the IRS can arrest you for failure to report. Remember Al Capone? They got him from not reporting money from his crimes. Damn, how ignorant people are about the law.
the government will do anything to scam more money out of it's people... isn't that why we broke away from England "Taxation w/out representation"?
Not to go off-topic in my own thread but take a look at my quote under my avatar. We didnt break away from England because of taxes like the elite-run education system has taught you to believe.
We revolted because the Bank of London owned by the Rothschild family wanted control of our money. The american colonists were using colonial script that was interest-debt free. While England labored in debt, poverty, and inflation the colonies prospered. When London's bank learned that colonies were issuing their own currency debt-free they went on the attack. Taxes was just one weapon they used against america.
Ironically america eventually lost the revolutionary war. In 1913 the Rothschilds eventually got control of america's currency with the establishment of the Federal Reserve.
I seem to remember a Declaration of Indpendence that listed ALL of our problems with England, those taxes did piss us off just look at what Boston did.
Anyways I don't think this will happen in games such as LOTRO and WoW that don't do RMT. I could see this done in RMT but as lon as it is against the EULA to do RMT it shouldn't be taxable.
read Ben Franklin's works...
Benjamin Franklin identified this as the real reason for the War of Independence:
"The refusal of King George to operate an HONEST colonial MONEY SYSTEM which freed the ordinary man from the clutches of the manipulators was probably the prime cause of the Revolution."
"The Colonies would gladly have borne the little tax on tea and other matters, had it not been that England took away from the Colonies their money, which created unemployment and dis-satisfaction."
Ben Franklin before the Revolution was called before the King to explain the colonists' prosperity...
"It is because, in the Colonies, we issue our own paper money. We call it Colonial Script, and we issue only enough to move all goods freely from the producers to the Consumers; and as we create our money, we control the purchasing power of money, and have no interest to pay."
The control of money is the very heart of our revolution. It is also why the founding fathers gave the govt the power (and only them which is why the Federal Reserve is illegal) to create money backed by gold.
Our founding fathers were well aware of the inherent danger of allowing a private bank the power to issue currency...
Thomas Jefferson - "If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."
Unfortunately most americans dont learn the true history of the founding of this nation. The textbooks and education system are owned by the very same folks who own the banks so you arent taught the truth. Taxes had little to do with it, it was the control of money that our founding fathers wanted. Unfortunately we gave up that power to private hands in 1913 with the passage of the unconstitutional Federal Reserve act
It's a wonderful thing to see that not everyone is completely unaware of the facts of the founding of the USA. I'm just astounded to find such intelligence in the forums of a gaming website! Aren't most of us here for the sole purpose of finding deeper inroads into the fantastic fictions of meaningless gameplay? One cannot help but notice the similarities between that simple pursuit and the fictional accounts of American History as is taught in our schools though... They're both a quaint diversion from reality and intended to keep us contentedly entertained.
Kudos to you admriker4 for refusing to wear the blindfold and encouraging others to recognize the truth.
As for taxing intangible items.... Some already pay taxes on the transactions of real currency for the privileges of playing the games. I seriously doubt they will ever be able to legitimately tax any in-game items or currency as they simply do not exist except as copyrighted thoughts rendered in pixels. However... the Federal Reserve does exist despite being completely unconstitutional so I guess all bets are off
Im glad someone here knows their history
Kudos back to you my friend
Stupid idea. One of the reasons why MMO is popular and profitable is because it can be enjoyed by people of different status. Got cash? Play WoW. Broke? Play a free2play MMO. Tax both and the MMO world will definitely feel losses.
My aunt is an accountant. They are learning about how to properly handle income reported from virtual sales.
In order for there to be a tax there must be income earned. If they could tax you on potential income earned because these ingame items have some type of value it would be as ridiculous as them taxing you on potential income based on what career you choose.
Oh you are going to medical school well here is your $34,000 tax bill for your yearly income. What you haven't earned any income yet? You don't even have a job? Oh that doesn't matter your education is worth that much so we are going to go ahead and tax you on the real world value of your education.
Sounds pretty ridiculous doesn't it. Sorry but it will never happen. The IRS already has rules that cover RMT profits and income reporting. Otherwise your "Epic sword of uberness" is safe from the tax man.
Currently playing:
LOTRO & WoW (not much WoW though because Mines of Moria rocks!!!!)
Looking Foward too:
Bioware games (Dragon Age & Star Wars The Old Republic)
Road trip to mexico, anyone?
If something like this happened, I'd be out of the country.
Its not potential income. If a sword in WoW sells for 50 dollars on e-bay and you loot that sword you have technically gained 50 dollars worth of said item. Whether you sell it or not, you have gained 50 dollars worth of items.
If you loot 5,000 gold from questing and that gold has a real-world value of 100 dollars, again thats a gain toward your net worth.
If you go on a gameshow and win a year's supply of rice-a-roni you have gained whatever value said rice product sells for.
In each case you have gained something of real-world value. This gain is taxable.
developers selling RMT items and gold farmers have set the precedent by assigning real value to virtual items. Im not saying I like this or agree with taxes but the argument has merit (thanks to the idiot developers who offer RMT)
The accountant I know explained to me why this is being looked into by the IRS. The IRS fears that people will use MMO's as a means to transfer and hide wealth. Its no different than hiding money in a blind trust or an overseas account. A rich person could theoretically take a million dollars and use it to buy virtual items and hide that million from the IRS. And at some later date they could transfer that virtual wealth back to real-world wealth. He went into more details, over my head frankly but in essence the IRS sees the potential for MMO's as tax shelters
Its not potential income. If a sword in WoW sells for 50 dollars on e-bay and you loot that sword you have technically gained 50 dollars worth of said item. Whether you sell it or not, you have gained 50 dollars worth of items.
If you loot 5,000 gold from questing and that gold has a real-world value of 100 dollars, again thats a gain toward your net worth.
If you go on a gameshow and win a year's supply of rice-a-roni you have gained whatever value said rice product sells for.
In each case you have gained something of real-world value. This gain is taxable.
developers selling RMT items and gold farmers have set the precedent by assigning real value to virtual items. Im not saying I like this or agree with taxes but the argument has merit (thanks to the idiot developers who offer RMT)
But, as stated in their ToS, the sword (and everything else) belongs to Blizzard. So wouldn't blizzard be paying the taxes?
You're telling me that I don't have to pay property taxes until I sell the house?
And since when has sheer ridiculousness ever stopped the government from doing anything? Recall that we're only a few weeks removed from the federal government declaring that General Motors is a bank, not a car company.
Its not potential income. If a sword in WoW sells for 50 dollars on e-bay and you loot that sword you have technically gained 50 dollars worth of said item. Whether you sell it or not, you have gained 50 dollars worth of items.
If you loot 5,000 gold from questing and that gold has a real-world value of 100 dollars, again thats a gain toward your net worth.
If you go on a gameshow and win a year's supply of rice-a-roni you have gained whatever value said rice product sells for.
In each case you have gained something of real-world value. This gain is taxable.
developers selling RMT items and gold farmers have set the precedent by assigning real value to virtual items. Im not saying I like this or agree with taxes but the argument has merit (thanks to the idiot developers who offer RMT)
But, as stated in their ToS, the sword (and everything else) belongs to Blizzard. So wouldn't blizzard be paying the taxes?
I dont think the EULA matters to the IRS. If I profit from selling gold or armor in WoW, thats a gain whether Blizz says its okay or not.
Blizz might not agree or believe that virtual items in WoW has value but the rest of the world disagrees. People sell accounts and gold all the time. And other developers have even gone so far as to sell items themselves (establishing virtual items have real value)
Heck the IRS expects drug dealers to report income and pay taxes on it legitimate or not. They put drug lords in prison all the time for failure to pay taxes.
Whether the gains made are considered legit, legal, ethically matters not to the IRS. All they are concerned with is if a gain was indeed taxed.
Gold farming is a 500 million dollar a year industry. Its big business. The IRS clearly is interested in this area as a result
So I found this in an msn article, "U.S. law requires those who have more than $10,000 in a foreign trust or bank account to report those accounts on their 1040s. "
What if we all migrated to euro servers, they wouldn't tax us if our character's value is less than 10 grand? XD
Playing - FFXIV, ESO
Played - FFXI, WoW, Lineage 2, Guild Wars, Aion, SWToR, LotRO, GW2, TERA, Rift, ArcheAge, TSW
I have the feeling that it all comes down to individual game mechanics, thus it is and will be hard to apply some blanket tax on all current MMOs. Especially when considering subscription based MMOs, the difficult is even harder. The biggest issue is that game assets change values at too short a time span, so they can't be really considered an investment. Patches and expansions alter the game world value of items. Guild membership is more important than the items themselves when you consider decking characters in high profile items. Value is very relative depending on the player. For example, that sword of uberness may gets sold for 1000g to a casual player but it can also be an instant shard or vendor trash to a high profile raider.
Bottom line, ingame wealth is a moving target. One can't just buy 1M gold in a game, say WoW and expect it to have the same value one year from now. There maybe other games with a more steady economic environment, but from what I've seen all developers are trying to introduce money sinks for players to dump money gained. Perhaps it would be more reasonable to be seen in a per case basis, but I foresee mistakes made from people that may have not a proper exposure to this kind of online environments.
Well as soon as this happens, the goverment wont have to worry about it anymore cause that would be the end of mmo's. Or every item will be soul bound/no drop and poeple will have to stop selling toons..take gold out of mmo's. FUN!
is it just me, or are the two articles linked both dated in 2006?
could we please get correspondent writers and moderators, on the eve forum at mmorpg.com, who are well-versed on eve-online and aren't just passersby pushing buttons? pretty please?
This is just a pathetic, stupid, disgrace. It's like that no name company starting a fuss against NCsoft. The world will deserve to end in 2012, if this becomes reality.
Its not potential income. If a sword in WoW sells for 50 dollars on e-bay and you loot that sword you have technically gained 50 dollars worth of said item. Whether you sell it or not, you have gained 50 dollars worth of items.
If you loot 5,000 gold from questing and that gold has a real-world value of 100 dollars, again thats a gain toward your net worth.
If you go on a gameshow and win a year's supply of rice-a-roni you have gained whatever value said rice product sells for.
In each case you have gained something of real-world value. This gain is taxable.
developers selling RMT items and gold farmers have set the precedent by assigning real value to virtual items. Im not saying I like this or agree with taxes but the argument has merit (thanks to the idiot developers who offer RMT)
The accountant I know explained to me why this is being looked into by the IRS. The IRS fears that people will use MMO's as a means to transfer and hide wealth. Its no different than hiding money in a blind trust or an overseas account. A rich person could theoretically take a million dollars and use it to buy virtual items and hide that million from the IRS. And at some later date they could transfer that virtual wealth back to real-world wealth. He went into more details, over my head frankly but in essence the IRS sees the potential for MMO's as tax shelters
Just complete nonsense. The sword you are talking about has zero value until you actually sell it. Until then it just some bits sitting on a computer. Unless you can somehow prove intent to sell it you cannot establish any sort of value. The IRS would be laughed out of court trying to prove such.
Its not potential income. If a sword in WoW sells for 50 dollars on e-bay and you loot that sword you have technically gained 50 dollars worth of said item. Whether you sell it or not, you have gained 50 dollars worth of items.
If you loot 5,000 gold from questing and that gold has a real-world value of 100 dollars, again thats a gain toward your net worth.
If you go on a gameshow and win a year's supply of rice-a-roni you have gained whatever value said rice product sells for.
In each case you have gained something of real-world value. This gain is taxable.
developers selling RMT items and gold farmers have set the precedent by assigning real value to virtual items. Im not saying I like this or agree with taxes but the argument has merit (thanks to the idiot developers who offer RMT)
The accountant I know explained to me why this is being looked into by the IRS. The IRS fears that people will use MMO's as a means to transfer and hide wealth. Its no different than hiding money in a blind trust or an overseas account. A rich person could theoretically take a million dollars and use it to buy virtual items and hide that million from the IRS. And at some later date they could transfer that virtual wealth back to real-world wealth. He went into more details, over my head frankly but in essence the IRS sees the potential for MMO's as tax shelters
Just complete nonsense. The sword you are talking about has zero value until you actually sell it. Until then it just some bits sitting on a computer. Unless you can somehow prove intent to sell it you cannot establish any sort of value. The IRS would be laughed out of court trying to prove such.
I think the point he was trying to make is that MMO currency is being used for real transactions simply because it is considered "not real" in the eyes of the law.
For example, say someone wants to buy a car. Neither the buyer or the dealer really want to pay sales tax on it, because it ups the price. So the fear is that the buyer would simply buy MMO gold for the amount for the car, give the gold to the dealer, have the dealer sell the gold for cash, and have the car be sold without anyone having to pay sales tax. That's the sort of stuff that can happen if MMO gold isn't recognized as a legal currency.
Or what about the sale of narcotics or pornography? If the transactions are made in MMO gold, they aren't transactions in the eyes of the law, because MMO gold isn't considered a real currency according to the law. Therefore, criminals are able to launder their funds and cover their transactions because MMO gold isn't considered to have any value.
So the law is quickly trying to define MMO things as things with value to prevent the above scenarios from happening. And if MMO things have value, then by all rights they should fall under the tax laws, because it wouldn't be fair for people and businesses to be disadvantaged in transactions simply because they handle real currency.
__________________________
"Its sad when people use religion to feel superior, its even worse to see people using a video game to do it."
--Arcken
"...when it comes to pimping EVE I have little restraints."
--Hellmar, CEO of CCP.
"It's like they took a gun, put it to their nugget sack and pulled the trigger over and over again, each time telling us how great it was that they were shooting themselves in the balls."
--Exar_Kun on SWG's NGE
The main problem with your scenarios is that they still involve a RL cash/good for virtual currency transaction. As such they would would still be fully taxable at the point of the conversion such as they are supposed to be now.
The car dealer sale-tax avoidance scheme you described is really just a more complicated version of any 'under the table' deal where the customer pays cash and the dealer reports the transaction as happening at scrap value or at a greatly reduced price. Your scheme would never fly because the first thng an auditor would ask is why the dealer is giving away cars for no apparent payment. Further the dealer would have to claim the full value of the car as income which might cost him more than actually paying the sales tax.
As far as any money laundering schemes are concerned, if the police can establish what the real transaction was (ie money for drugs) then it will not matter what the medium used to camouflage the transaction was. You could be trading WoW gold, baseball cards, olives or glass marbles and it would come to the same end. Teh main purpose of anti-money laundering laws is so that you cannot hide the real transaction behind technicalities.
The big sticking point about the OPs position is his belief that the government will tax people on the potential RL value of ingame items whether those items ever get converted to RL cash or not. The logistics of tracking that and the enourmous legal headaches that would create make it an unrealistic scenario. A way more likely scenario is an excise tax on game subscriptions plus a second tax hit on any converstions of virtual items to RL cash.
The main problem with your scenarios is that they still involve a RL cash/good for virtual currency transaction. As such they would would still be fully taxable at the point of the conversion such as they are supposed to be now.
The car dealer sale-tax avoidance scheme you described is really just a more complicated version of any 'under the table' deal where the customer pays cash and the dealer reports the transaction as happening at scrap value or at a greatly reduced price. Your scheme would never fly because the first thng an auditor would ask is why the dealer is giving away cars for no apparent payment. Further the dealer would have to claim the full value of the car as income which might cost him more than actually paying the sales tax.
As far as any money laundering schemes are concerned, if the police can establish what the real transaction was (ie money for drugs) then it will not matter what the medium used to camouflage the transaction was. You could be trading WoW gold, baseball cards, olives or glass marbles and it would come to the same end. Teh main purpose of anti-money laundering laws is so that you cannot hide the real transaction behind technicalities.
The big sticking point about the OPs position is his belief that the government will tax people on the potential RL value of ingame items whether those items ever get converted to RL cash or not. The logistics of tracking that and the enourmous legal headaches that would create make it an unrealistic scenario. A way more likely scenario is an excise tax on game subscriptions plus a second tax hit on any converstions of virtual items to RL cash.
Im not saying my belief is this will happen. Im merely sharing the topic because it is being looked at by the IRS.
And I agree the logistics of trying to track and tax for any item of value in an MMO would seem impossible. But the fact remains the IR is studying the issue
No idea about US tax law to be honest, but this sounds like a scam to me.
I would call "FAKE" if it was a picture.
First of all, I do not own my items, they can be taken away from me within a moments notice, every MMO devloper reserver the right to end any subscription WITHOUT needing to explain themself.
If my items were taxed they would need to reimburse me real world currency for banning my account, or ending it for whatever reason.
It would move the ownership of all items and currency on my account to me, to be sold or bought at my own leisure, all gold sellers would become untouchable in an instant.
And even if you ban them they cash in, because you can not take away someones money, for whatever reason.
Well the IRS can, and the government and whatnot but no company can.
And even the G-man needs backing by the law to do it.
"Excuse me, this bank has a rule that you need to wear pink on tuesday, you have now forfeited all your money in this bank, thank you."
And tell me one more thing, that will perhaps end this debate.
When an artist, who can sell any art they make for say 10000$, make an artistic piece do he gets taxed when it is finished or when he sells it?
Because, it is by all means worth 10000$ so by making it he just earned that amount.
And by the logic put forth here he should be taxed at once, regardless if he sells it or not.
To be honest I am not sure wich one it is, but I kinda doubt he gets taxed before he has sold it.
Furthermore, as the developers have the ability to create gold, items or whatnot out of thin air they all of a sudden sits in the same chair as the federal reserve, they can actually PRINT money.
I just do not think they would let that slide.
Just some food for thought, not saying that it can not ever happen, but there are more legal matters behind a change like this then we can possibly understand, or predict.
And the fact that gold farmers, resellers or whatever is being taxed, werever they may be located is no news.
They were ALWAYS required to do so.
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Originally posted by Jerek_
I wonder if you honestly even believe what you type, or if you live in a made up world of facts.
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Fortunately, that's not even remotely how it works. At least not in the US. Anybody who understands anything about taxes beyond "taking them to H&R Block" knows that the idea of paying income tax on a looted sword is a laughable, at best. Looting that sword would be an unrealized gain until it is converted into a realized gain, at which point it is already covered under existing law.
If the IRS could tax virtual and paper gains as they were accrued, the entire gaming industry wouldn't even be a blip on the radar compared to the financial and real estate markets.
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I ask for so little. Just fear me, love me, do as I say and I will be your slave.
Here's a neat thought!
If the IRS manages to establish "Real World" value of items and cash you "own" in a MMO the entire economic system of the world would be turned on its ear. Imagine tens of millions of MMO players suddenly reporting their in-game assets as "Real World" assets....
Let's say that Kartuhn has 15 accounts active on 15 different games with an estimated value of $100,000 US Dollars (been playing awhile
). He plays only 2 of them with any frequency and hasn't played any of the others for years, but, since the accounts remain listed as "active" by the game's developers and he has the opportunity to return to play them when he wishes, the IRS claims that they are still assests and therefore taxable. Kartuhn's mailbox is now stuffed to overflowing with threats of audits and bills from the IRS and W2's from game companies that actually have his correct home address since he was honest when he opened the accounts. Poor Kartuhn is now in the market for an accountant and a good lawyer not to mention wracking his brain trying to remember the passwords to all of those accounts so that he can use the "Delete Character" function without delay!
Is Kartuhn a complete idiot for deleting those characters and sending all of his newfound wealth back into the ethereal abyss from whence it came? Should he have used his new net worth to fund his tax payments and quit his "Real World" job so that he could declare his game playing as a home business and slave away at the computer unto the wee hours surviving on Twinkies and Coca Cola attempting to make enough game coin to to sell on E-Bay to make the house payment while his kids complain that he's hogging all the bandwidth and they can't do their homework as a result? At this point Kartuhn realizes that his son has been playing Runescape since he was 8 years old just as he hears a heavy pounding at the front door... It's the police with a warrant for his arrest for violating the Child Labor laws! ZOMG!!!
In short... take a moment to spell the word "way". See? There's no "f" in "way"!