One reason this won't happen is foreign countries playing on American servers. The IRS have no control over who connects to said game server. Thus they have no control over what a person from X country earns in game. They cannot tax them from their gold, items, etc.
If they cannot tax them, they cannot tax us. Fair taxation.
Only way to fix = close off servers to the world. Which, will lead developers to not host servers in the U.S. or simply not create games for us period.
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
I would imagine that someone, somewhere studied how you could tax breathing. I just read of a study that concluded that women do not like when men tell them that they look fat in a dress. People do studies on the silliest things and most of the time those studies tell us the same thing that common sense already did.
There is a definate problem of people avoiding taxes on millions of income generated through trade in virtual items. You bet that the IRS is seriously studying how they can recover all that money. However, the idea of taxing unrealized potential future financial gains for what are essentially collector items with no intristic value would definetly stretch the definition of 'income' way beyond the norm. It would most certainly e fought tooth and nail all the way to the US Supreme Court.
Originally posted by admriker4 "Im not saying my belief is this will happen. Im merely sharing the topic because it is being looked at by the IRS." Please don't attempt to sidestep your vacuous tripe just because you are finally beginning to realize it as such. Your past remarks say otherwise… “Its not a question of if now but rather when this will happen.”
“I dont like it anymore than the next person but it seems inevitable taxes are coming to MMO's“
“This isnt my opinion, read the links. google mmo taxes and you'll see this is coming.”
“And this isnt my opinion, this is what the IRS, accountants, etc are stating“ These don't demonstrate belief? Right...
"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" I'm glad you finally realize this, but do you also realize that the logistics of such a venture precludes its success or implementation? This is the entire reason this thread and argument has gone on for so long, not because we don't believe some form of taxation will occur, but because this stance is invalidated by the immenseness of the venture. No one with any knowledge on this subject would argue that taxation will not be attempted. It is the asinine statements on individual item taxation, especially the non profitting kind, that is causing many of us to comment.
"eula has no legal weight honestly. Anyone can make you sign their EULA but that doesnt make it legal or have merit." Here you are simply talking out your ***. This point has been brought up many times with I and a few others busting this game industry urban myth. Unfortunately MMORPG deleted the thread, so I can't simply link you. Here is a news article, detailing in a much shorter fashion than our original thread, that not only is the EULA enforcable, but so is the TOS, Vivendi vs bnetd, "The district court granted summary judgment in favor of Blizzard and Vivendi and determined that: (1) Blizzard's software end-user license and terms of usage agreements were enforceable
contracts;"
"The change to MMO worlds could be profound" God... Shut up.... lol
Have you noticed how many of these sort of threads admriker4 does? I recon he is either a games journalist looking for ideas or a student who has a unit about the games industry.
We will see more tax enforcing when virtual things transfer to real money.
For years hardly anyone taxed his ebay sellings or virtual gold sellings as the market was to small to be bothered with. This changes and with it the IRS watches these sales closer too and looks to get its money easier without chasing over thousands of ebay/gold sellers sites.
can you imagine being in a raid and an epic drops. "roll if you want item" "one sec, looking up how much taxes I'll owe for that item" Like someone else here posted, devs are further opening this pandora box by RMT
Thats the most ridiculous thing I've ever heard. There's absolutely no value to a virtual item until its actually been sold for real money. If the government taxes MMOs it'll be taxing cash shops / RMT and virtual sellers. This is what I find funny about our community. People believe that these epic raid items are actually worth something. They're not worth a damn thing really unless someone goes on ebay or a cash shop and actually sells it. Then you've just paid X dollars for an item that the devs can take away from you at anytime since you don't techincally own it.
The IRS has been watching the internet for years and yet they still have yet to successfully come up with a tax system because you can't frigging just randomly tax people for stuff without knowing what jurisidiction they fall under. IRS can't tax people from other countries infact they're not the ones incharge of sales tax which is what sort of tax your talking about. IRS is the government's lap dog for making sure they get their cut out of your pay check for random purposes that most of us will never benefit from. Sales tax is handled by local state governments and in such trying economic times ...I really don't see them wanting to fight the hordes of law suites and fights that'll come up over this issue.
Items only have value if someone actually exchanges dollars for it and even then that value only extends to you. I say let them tax RMT / Cash shops and gold sellers if they can find a way to figure out what state those sales are being made in. Thats the only way they could actually 'tax' anything from the MMO world because those are the only places where those items have value.
IRS wants their cut no doubt...but it'll come from places where money is actually being exchanged not from looting a mob.
Originally posted by admriker4 "Im not saying my belief is this will happen. Im merely sharing the topic because it is being looked at by the IRS." Please don't attempt to sidestep your vacuous tripe just because you are finally beginning to realize it as such. Your past remarks say otherwise… “Its not a question of if now but rather when this will happen.”
“I dont like it anymore than the next person but it seems inevitable taxes are coming to MMO's“
“This isnt my opinion, read the links. google mmo taxes and you'll see this is coming.”
“And this isnt my opinion, this is what the IRS, accountants, etc are stating“ These don't demonstrate belief? Right...
I thought the exact same thing when I read his latest statement. I still maintain that this entire thread is borderline trolling.
Have you noticed how many of these sort of threads admriker4 does? I recon he is either a games journalist looking for ideas or a student who has a unit about the games industry. But calm down guys this is hardly a flame issue!
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.
food for thought...
is our currency really any different than gold in WoW ? The majority of currency in the United States is merely digits on some computer screen. Its not backed by gold anymore. It spend its entire existence in a virtual world going from one computer to another.
That's not possible for them to tax virtual items, however I can see the IRS adding taxes to monthly fees and such or possibly taxing the comanies like Blizzard for running an MMO and it would affect gamers indirectly because cost to play would go up. Either way if they do that shit then id quit MMO's altogether, im sure there would be a lot of strikes.
silly question but, can the American IRS tax only Americans?
if yes then i honestly dont care if they want to spend lots of cash to make sure they get tax on virtual goods.
if no then they can think again if they are going to tax people from other countries just because they play an American game (and we suddenly enter new uncharted legal waters on which countries own what virtual worlds, good fun )
MMO wish list:
-Changeable worlds -Solid non level based game -Sharks with lasers attached to their heads
silly question but, can the American IRS tax only Americans?
if yes then i honestly dont care if they want to spend lots of cash to make sure they get tax on virtual goods.
if no then they can think again if they are going to tax people from other countries just because they play an American game (and we suddenly enter new uncharted legal waters on which countries own what virtual worlds, good fun )
If I were a congressman and someone proposed a tax of this sort, I'd propose an amendment that the tax be made payable in the in-game currency of the games.
I'd also encourage the companies that make the games have enough gold drop to cover the cost of the tax drop along with any items, and that they periodically ban the IRS accounts that collect the taxes, to ensure that they can't sell the gold for real-life money.
That is, after all, doing nothing more than taking the idea to its logical conclusion. That, of course, is why my amendment would be voted down.
FYI, massively.com is reporting on the IRS' National Taxpayer Advocate 2008 Annual Report to Congress, because it includes a section on Virtual Worlds (starting on page 213, for those of you who download it). In a nutshell, the IRS basically states that traditional income, as already defined in the tax code, has always been taxable It also recommends clarifying that "in-world transactions are not taxable". Here's a nice quote:
IRS guidance could improve taxpayer compliance even if it simply clariied that in-
world transactions are not taxable.
Internet-based transactions are a potential area of noncompliance, particularly when they
are not subject to information reporting. Yet, the IRS sometimes responds to questions
from taxpayers who want to comply with the rules, which the IRS has not adequately
explained or written down, by asking the taxpayer to request a private letter ruling at
signiicant personal expense. In 2005, for example, when a taxpayer asked the IRS how to report the acquisition, exchange, and sale of virtual property, IRS employees gave him two different answers and one advised him to submit a private letter ruling request. The taxpayer later published a book describing the situation, as well as his discussion with the IRS.
Some people are likely to conclude that if the rules are so complicated that the IRS cannot
even igure them out, it is unreasonable for the government to expect taxpayers to do so.
They might also use such reasoning to justify noncompliance in other areas. Moreover,
our system of voluntary compliance will break down if it demands that taxpayers report
income that is impossible to report, pay tax on “virtual” income that cannot be used to pay
real taxes, or makes taxpayers feel like “chumps” if, perhaps mistakenly, they do pay tax
on such virtual income. Thus, promulgating guidance would likely promote voluntary compliance even if it exempts in-world transactions from tax.
~Ripper
p.s. The JEC Report that was supposed to come out in August, 2008 still hasn't been published.
I saw this post awhile back and just laughed and went on. I cannot believe people are actually posting about something like this. Get a grip people, does the term "reality" have any meaning for you?
(a) I think game companies pay taxes allready for their RTM (item mall) transactions. (Havent checked the facts on this I admit). Dont think this is a big business on western markets anway since the f2p games tend to be Korean. In future this might change if the games will follow Everquest in making a Item mall + subscription model.
(b) Gold-Sellers do illegal business already as it is so dont think they will pay taxes never.
(c) A deal worth 100.000 dollars that involves somekind of MMO property is once in a year transaction metaphorically. (And dont answer - no theres 10 of these done).
(d) Dont think you never have to pay for gathering something. Its rather when you start selling what you have gathered when IRS comes in between.
(e) IRS comes in between and the gaming companies will move to Monaco.
If it happens, the game service providers will have a huge dilemma on their hands with regards to NPC merchants. Suppose that every player in the game spontaneously sells back every piece of item they have, and now the merchants have acquired for the game service providers that much gain which is taxable. Will game service providers be required not to instantiate more gold and item wealth than their liquid assets(real world) can backup? Essentially, real-world money would be created out of thin air if the virtual assets aren't backed up by real assets. Or perhaps game service providers would elect to eliminate all forms of virtual player transactions; no more give command or drop command. But what about virtual characters themselves being considered as real world money, gold farmers transformed into power-levelers. Then each class/level in each virtual world could be assigned a real world value based on how much an average participant in that game would pay(real world) in order to acquire in-game help from that player; again, the game service provider would need to have the physical assets to back up each and every player ever created in their game less depreciation. It is a quagmire if you ask me.
well I got quite a few posts saying to basically ignore this subject simply because the links provided were old. Below is one from 2009.
I also was told that they would never consider taxing items or other virtual property in MMO's. Guess what, they are looking at that as I told you all. Theyre considering a capitol gains tax on virtual items.
I was also told by posters that you cant tax virtual good if the developer doesnt permit exchanges. That was also wrong.
Primarily if virtual goods / land and / or virtual currencies can be exchanged for some other taxable medium, then they themselves are taxable (whether or not the operator of the virtual environment or MMOG actually permits that exchange as a part of their terms-of-service).
Many countries (such as Australia and the USA) can and do tax barter transactions (the exchange of one type of goods and/or services for another type), but usually no reporting of such transactions is required if they are assessable in value at less than one dollar.
In some cases, however, many sub-threshold transactions may take place, or a non-corporeal item may appreciate significantly in value (virtual land, for example, or shares in a company, or simply the steady accumulation of game-currency that could be exchanged for US dollars). In those cases, Capital Gains Tax kicks in, and the difference in value of corporeal and incorporeal assets are assessed over a period of time, and tax is applied to the difference.
These articles are from 2006. Pleas cite more current sources or else this entire thread is moot. The IRS already has the right to collect taxes on items that a player converts to cash (E-Bayed characters, gold selling, etc...), because those activities generate income. Virtual items only have real world monetary value if somebody charges for them. In the case of iegitimate sales, the individual or company who earns revenue from the sales of such items will be the ones being taxed (companies with authorized RMT, for example). in the case of illegitimate sales (black market gold farming, character selling, etc...), the individual who receives money for selling the item is responsible for paying income taxes, whether the sale was legal or not. You'll never, ever be taxed simply for looting an item that might have real world value. This would be akin to being subjected to income tax/gaines taxes on Superbowl tickets you purchased, just because somebody would be willing to pay thousands more for scalped tickets.
If anything, I'd expect to see energy taxes added in to subscriptions and microtransactions for things like power consumption. ~Ripper
there hasnt been any stories written recently but that doesnt make the story less true. And I brought this topic up because accountants are discussing and planning for the possiblity of this.
read the articles, they state this isnt just a possibility its going to happen...just a matter of when, not if.
And you certainly could be required to pay a tax on a looted sword. Its no different than winning a car on a gameshow. You aquire an award that has value, you must pay taxes based on its worth. And this isnt my opinion, this is what the IRS, accountants, etc are stating
You keep on stating that it's not your opinion but you've only linked a couple pretty old stories that are not jumping to anywhere near the conclusion that you are:
"paying tax on a sword you loot"
Nope.
rhinok's points are the accurate ones.
Even then, it would be a night-mare for them to try and figure it out. The IRS can't even keep up with the back-log of issues arrising from real money transfers. Now you think they are going to be able to figure out an instantaneous method of charging taxes for virtual items within the game?
Couple of really big holes in your logic:
What happens in Full-loot games?
Like EvE, L2, DarkFall (when it releases)... can players that loot your items be charged with a crime then? Since they stole your money that you are expected to pay taxes on?
What about games that have item decay? When the item is gone, we get our money back that we paid taxes on?
What about games that have your items stay on your corpse when you die? Like EQ. So one day you loot an epic item... paid the taxes. Next day your corpse goes poof before you re-loot it. Is the IRS going to send you a rebate?
What about gifting items, or gold?
There are different tax rules and exceptions for family members with real world items in regards to gifting. So the IRS is going to setup a series of different regs for gifting and family members in game as well?
Who determines the worth of the items? The IRS? The person themselves? The game company? All are going to have wildly different ideas on that. So, the IRS is going to publish and maintain an database with the value of every item for every MMO?
Heh... see the point where they are so back-logged on audits now that it's a really silly notion they could take on something this big. The man hours to try and re-coup some of this would be 10-fold of what they could hope to recover.
The list goes on...
No, this idea wasn't thought through very well. But yeah... we know. It wasn't your idea. You're just the one that keeps on telling us it's coming. For some reason I don't think I'll be losing a lot of sleep over it.
If anything at all happens it will be as rhinok has listed. The places where real money is exchanged... that is the place they would have an opportunity.
Couldn't happen based on the fact that selling items in WoW and most other games is illegal. You won't be taxed on something that doesn't have a legal value.
You forget that developers are now selling in-game items (RMT).
Developers along with gold farmers have established that virtual items have real-world value. The IRS knows this and therefore is working on a means to tax it.
Its not a question of if now but rather when this will happen.
My accountant friend mentioned another reason as well. Players are starting to use MMO's as a means to earn money like a tax shelter. Player A buys a space station in Project Entropia for 100,000 dollars. He resells that virtual property for 200,000 a year later. Net profit 100,000 which should be taxable whether he converts it back to real-world currency or not.
Turbine offers items for sale in their MMO's. The IRS says thats a gain, whether the item physically exists or not and therefore should be subject to a sales tax. The player resells the item for a profit, that profit is also considered a gain and subject to taxes.
The idea here is that virtual items have real-world value. And since its been established now that virtual items can in fact convert to physical money they can and will be taxed.
I dont like it anymore than the next person but it seems inevitable taxes are coming to MMO's
So you said it yourself. TURBINE sells items in THEIR MMO's. Therefore, THEY are making money. And therefore, THEY will be taxed, and probably already are. Duh?
These articles are from 2006. Pleas cite more current sources or else this entire thread is moot. The IRS already has the right to collect taxes on items that a player converts to cash (E-Bayed characters, gold selling, etc...), because those activities generate income. Virtual items only have real world monetary value if somebody charges for them. In the case of iegitimate sales, the individual or company who earns revenue from the sales of such items will be the ones being taxed (companies with authorized RMT, for example). in the case of illegitimate sales (black market gold farming, character selling, etc...), the individual who receives money for selling the item is responsible for paying income taxes, whether the sale was legal or not. You'll never, ever be taxed simply for looting an item that might have real world value. This would be akin to being subjected to income tax/gaines taxes on Superbowl tickets you purchased, just because somebody would be willing to pay thousands more for scalped tickets.
If anything, I'd expect to see energy taxes added in to subscriptions and microtransactions for things like power consumption. ~Ripper
there hasnt been any stories written recently but that doesnt make the story less true. And I brought this topic up because accountants are discussing and planning for the possiblity of this.
read the articles, they state this isnt just a possibility its going to happen...just a matter of when, not if.
And you certainly could be required to pay a tax on a looted sword. Its no different than winning a car on a gameshow. You aquire an award that has value, you must pay taxes based on its worth. And this isnt my opinion, this is what the IRS, accountants, etc are stating
You keep on stating that it's not your opinion but you've only linked a couple pretty old stories that are not jumping to anywhere near the conclusion that you are:
"paying tax on a sword you loot"
Nope.
rhinok's points are the accurate ones.
Even then, it would be a night-mare for them to try and figure it out. The IRS can't even keep up with the back-log of issues arrising from real money transfers. Now you think they are going to be able to figure out an instantaneous method of charging taxes for virtual items within the game?
Couple of really big holes in your logic:
What happens in Full-loot games?
Like EvE, L2, DarkFall (when it releases)... can players that loot your items be charged with a crime then? Since they stole your money that you are expected to pay taxes on?
I will answer these. nope
What about games that have item decay? When the item is gone, we get our money back that we paid taxes on?
Same as in real life. Nope. You junk a car, do you get your taxes back?
What about games that have your items stay on your corpse when you die? Like EQ. So one day you loot an epic item... paid the taxes. Next day your corpse goes poof before you re-loot it. Is the IRS going to send you a rebate?
Again same as real life. Nope. If you lose an item in real life you paid taxes on you do not get a refund.
What about gifting items, or gold?
There are different tax rules and exceptions for family members with real world items in regards to gifting. So the IRS is going to setup a series of different regs for gifting and family members in game as well?
Very doubtful
Who determines the worth of the items? The IRS? The person themselves? The game company? All are going to have wildly different ideas on that. So, the IRS is going to publish and maintain an database with the value of every item for every MMO?
Same as in real life.
Heh... see the point where they are so back-logged on audits now that it's a really silly notion they could take on something this big. The man hours to try and re-coup some of this would be 10-fold of what they could hope to recover.
The list goes on...
No, this idea wasn't thought through very well. But yeah... we know. It wasn't your idea. You're just the one that keeps on telling us it's coming. For some reason I don't think I'll be losing a lot of sleep over it.
If anything at all happens it will be as rhinok has listed. The places where real money is exchanged... that is the place they would have an opportunity.
It would very pretty easy to do actually. Most MMO company keep a record of what you loot anyways. It would just be more costly for them and in the end for any subscriber
They could easily take an average of what a normal MMO players loots in a month and charge taxes on that based on how many hours you play.
If you think that the IRS would never do it... Take a look at the tax laws right now. Some real crazy stuff there.
A few decades ago, how many people would have thought that the time would come when most of the cost of buying a pack of cigarettes was to pay the tax? Don't think that it's so stupid that politicians would never try it. Politicians have been known to try some really stupid things.
Couldn't happen based on the fact that selling items in WoW and most other games is illegal. You won't be taxed on something that doesn't have a legal value.
Exactly.
------------------------------ "Capitalism is currently working as intended."
Comments
Virtual commodities is a touchy issue, people who are good at what they do are making a killing, tax free.
One reason this won't happen is foreign countries playing on American servers. The IRS have no control over who connects to said game server. Thus they have no control over what a person from X country earns in game. They cannot tax them from their gold, items, etc.
If they cannot tax them, they cannot tax us. Fair taxation.
Only way to fix = close off servers to the world. Which, will lead developers to not host servers in the U.S. or simply not create games for us period.
IRS would bite themselves in the arse.
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
I would imagine that someone, somewhere studied how you could tax breathing.
I just read of a study that concluded that women do not like when men tell them that they look fat in a dress. People do studies on the silliest things and most of the time those studies tell us the same thing that common sense already did.
There is a definate problem of people avoiding taxes on millions of income generated through trade in virtual items. You bet that the IRS is seriously studying how they can recover all that money. However, the idea of taxing unrealized potential future financial gains for what are essentially collector items with no intristic value would definetly stretch the definition of 'income' way beyond the norm. It would most certainly e fought tooth and nail all the way to the US Supreme Court.
- Burying Threads Since 1979 -
Have you noticed how many of these sort of threads admriker4 does? I recon he is either a games journalist looking for ideas or a student who has a unit about the games industry.
But calm down guys this is hardly a flame issue!
We will see more tax enforcing when virtual things transfer to real money.
For years hardly anyone taxed his ebay sellings or virtual gold sellings as the market was to small to be bothered with. This changes and with it the IRS watches these sales closer too and looks to get its money easier without chasing over thousands of ebay/gold sellers sites.
Thats the most ridiculous thing I've ever heard. There's absolutely no value to a virtual item until its actually been sold for real money. If the government taxes MMOs it'll be taxing cash shops / RMT and virtual sellers. This is what I find funny about our community. People believe that these epic raid items are actually worth something. They're not worth a damn thing really unless someone goes on ebay or a cash shop and actually sells it. Then you've just paid X dollars for an item that the devs can take away from you at anytime since you don't techincally own it.
The IRS has been watching the internet for years and yet they still have yet to successfully come up with a tax system because you can't frigging just randomly tax people for stuff without knowing what jurisidiction they fall under. IRS can't tax people from other countries infact they're not the ones incharge of sales tax which is what sort of tax your talking about. IRS is the government's lap dog for making sure they get their cut out of your pay check for random purposes that most of us will never benefit from. Sales tax is handled by local state governments and in such trying economic times ...I really don't see them wanting to fight the hordes of law suites and fights that'll come up over this issue.
Items only have value if someone actually exchanges dollars for it and even then that value only extends to you. I say let them tax RMT / Cash shops and gold sellers if they can find a way to figure out what state those sales are being made in. Thats the only way they could actually 'tax' anything from the MMO world because those are the only places where those items have value.
IRS wants their cut no doubt...but it'll come from places where money is actually being exchanged not from looting a mob.
I thought the exact same thing when I read his latest statement. I still maintain that this entire thread is borderline trolling.
~Ripper
shhh
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.
food for thought...
is our currency really any different than gold in WoW ? The majority of currency in the United States is merely digits on some computer screen. Its not backed by gold anymore. It spend its entire existence in a virtual world going from one computer to another.
that's it...I'm moving to canada!
That's not possible for them to tax virtual items, however I can see the IRS adding taxes to monthly fees and such or possibly taxing the comanies like Blizzard for running an MMO and it would affect gamers indirectly because cost to play would go up. Either way if they do that shit then id quit MMO's altogether, im sure there would be a lot of strikes.
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Played:WoW, Darkfall, Warhammer, Shadowbane, Anarchy Online, Last Chaos, Runescape, Maplestory, Planeshift
Loved: Guild Wars, Eve, Darkfall
Playing:(none)
Waiting for: I don't know
silly question but, can the American IRS tax only Americans?
if yes then i honestly dont care if they want to spend lots of cash to make sure they get tax on virtual goods.
if no then they can think again if they are going to tax people from other countries just because they play an American game (and we suddenly enter new uncharted legal waters on which countries own what virtual worlds, good fun
)
MMO wish list:
-Changeable worlds
-Solid non level based game
-Sharks with lasers attached to their heads
IRS can only tax the US....
If I were a congressman and someone proposed a tax of this sort, I'd propose an amendment that the tax be made payable in the in-game currency of the games.
I'd also encourage the companies that make the games have enough gold drop to cover the cost of the tax drop along with any items, and that they periodically ban the IRS accounts that collect the taxes, to ensure that they can't sell the gold for real-life money.
That is, after all, doing nothing more than taking the idea to its logical conclusion. That, of course, is why my amendment would be voted down.
FYI, massively.com is reporting on the IRS' National Taxpayer Advocate 2008 Annual Report to Congress, because it includes a section on Virtual Worlds (starting on page 213, for those of you who download it). In a nutshell, the IRS basically states that traditional income, as already defined in the tax code, has always been taxable It also recommends clarifying that "in-world transactions are not taxable". Here's a nice quote:
IRS guidance could improve taxpayer compliance even if it simply clariied that in-
world transactions are not taxable.
Internet-based transactions are a potential area of noncompliance, particularly when they
are not subject to information reporting. Yet, the IRS sometimes responds to questions
from taxpayers who want to comply with the rules, which the IRS has not adequately
explained or written down, by asking the taxpayer to request a private letter ruling at
signiicant personal expense. In 2005, for example, when a taxpayer asked the IRS how to report the acquisition, exchange, and sale of virtual property, IRS employees gave him two different answers and one advised him to submit a private letter ruling request. The taxpayer later published a book describing the situation, as well as his discussion with the IRS.
Some people are likely to conclude that if the rules are so complicated that the IRS cannot
even igure them out, it is unreasonable for the government to expect taxpayers to do so.
They might also use such reasoning to justify noncompliance in other areas. Moreover,
our system of voluntary compliance will break down if it demands that taxpayers report
income that is impossible to report, pay tax on “virtual” income that cannot be used to pay
real taxes, or makes taxpayers feel like “chumps” if, perhaps mistakenly, they do pay tax
on such virtual income. Thus, promulgating guidance would likely promote voluntary compliance even if it exempts in-world transactions from tax.
~Ripper
p.s. The JEC Report that was supposed to come out in August, 2008 still hasn't been published.
I saw this post awhile back and just laughed and went on. I cannot believe people are actually posting about something like this. Get a grip people, does the term "reality" have any meaning for you?
(a) I think game companies pay taxes allready for their RTM (item mall) transactions. (Havent checked the facts on this I admit). Dont think this is a big business on western markets anway since the f2p games tend to be Korean. In future this might change if the games will follow Everquest in making a Item mall + subscription model.
(b) Gold-Sellers do illegal business already as it is so dont think they will pay taxes never.
(c) A deal worth 100.000 dollars that involves somekind of MMO property is once in a year transaction metaphorically. (And dont answer - no theres 10 of these done).
(d) Dont think you never have to pay for gathering something. Its rather when you start selling what you have gathered when IRS comes in between.
(e) IRS comes in between and the gaming companies will move to Monaco.
If it happens, the game service providers will have a huge dilemma on their hands with regards to NPC merchants. Suppose that every player in the game spontaneously sells back every piece of item they have, and now the merchants have acquired for the game service providers that much gain which is taxable. Will game service providers be required not to instantiate more gold and item wealth than their liquid assets(real world) can backup? Essentially, real-world money would be created out of thin air if the virtual assets aren't backed up by real assets. Or perhaps game service providers would elect to eliminate all forms of virtual player transactions; no more give command or drop command. But what about virtual characters themselves being considered as real world money, gold farmers transformed into power-levelers. Then each class/level in each virtual world could be assigned a real world value based on how much an average participant in that game would pay(real world) in order to acquire in-game help from that player; again, the game service provider would need to have the physical assets to back up each and every player ever created in their game less depreciation. It is a quagmire if you ask me.
well I got quite a few posts saying to basically ignore this subject simply because the links provided were old. Below is one from 2009.
I also was told that they would never consider taxing items or other virtual property in MMO's. Guess what, they are looking at that as I told you all. Theyre considering a capitol gains tax on virtual items.
I was also told by posters that you cant tax virtual good if the developer doesnt permit exchanges. That was also wrong.
Primarily if virtual goods / land and / or virtual currencies can be exchanged for some other taxable medium, then they themselves are taxable (whether or not the operator of the virtual environment or MMOG actually permits that exchange as a part of their terms-of-service).
Many countries (such as Australia and the USA) can and do tax barter transactions (the exchange of one type of goods and/or services for another type), but usually no reporting of such transactions is required if they are assessable in value at less than one dollar.
In some cases, however, many sub-threshold transactions may take place, or a non-corporeal item may appreciate significantly in value (virtual land, for example, or shares in a company, or simply the steady accumulation of game-currency that could be exchanged for US dollars). In those cases, Capital Gains Tax kicks in, and the difference in value of corporeal and incorporeal assets are assessed over a period of time, and tax is applied to the difference.
http://www.massively.com/2009/01/13/irs-reports-to-congress-virtual-worlds-mmogs-have-always-been-t/
there hasnt been any stories written recently but that doesnt make the story less true. And I brought this topic up because accountants are discussing and planning for the possiblity of this.
read the articles, they state this isnt just a possibility its going to happen...just a matter of when, not if.
And you certainly could be required to pay a tax on a looted sword. Its no different than winning a car on a gameshow. You aquire an award that has value, you must pay taxes based on its worth. And this isnt my opinion, this is what the IRS, accountants, etc are stating
You keep on stating that it's not your opinion but you've only linked a couple pretty old stories that are not jumping to anywhere near the conclusion that you are:
"paying tax on a sword you loot"
Nope.
rhinok's points are the accurate ones.
Even then, it would be a night-mare for them to try and figure it out. The IRS can't even keep up with the back-log of issues arrising from real money transfers. Now you think they are going to be able to figure out an instantaneous method of charging taxes for virtual items within the game?
Couple of really big holes in your logic:
What happens in Full-loot games?
Like EvE, L2, DarkFall (when it releases)... can players that loot your items be charged with a crime then? Since they stole your money that you are expected to pay taxes on?
What about games that have item decay? When the item is gone, we get our money back that we paid taxes on?
What about games that have your items stay on your corpse when you die? Like EQ. So one day you loot an epic item... paid the taxes. Next day your corpse goes poof before you re-loot it. Is the IRS going to send you a rebate?
What about gifting items, or gold?
There are different tax rules and exceptions for family members with real world items in regards to gifting. So the IRS is going to setup a series of different regs for gifting and family members in game as well?
Who determines the worth of the items? The IRS? The person themselves? The game company? All are going to have wildly different ideas on that. So, the IRS is going to publish and maintain an database with the value of every item for every MMO?
Heh... see the point where they are so back-logged on audits now that it's a really silly notion they could take on something this big. The man hours to try and re-coup some of this would be 10-fold of what they could hope to recover.
The list goes on...
No, this idea wasn't thought through very well. But yeah... we know. It wasn't your idea. You're just the one that keeps on telling us it's coming. For some reason I don't think I'll be losing a lot of sleep over it.
If anything at all happens it will be as rhinok has listed. The places where real money is exchanged... that is the place they would have an opportunity.
You forget that developers are now selling in-game items (RMT).
Developers along with gold farmers have established that virtual items have real-world value. The IRS knows this and therefore is working on a means to tax it.
Its not a question of if now but rather when this will happen.
My accountant friend mentioned another reason as well. Players are starting to use MMO's as a means to earn money like a tax shelter. Player A buys a space station in Project Entropia for 100,000 dollars. He resells that virtual property for 200,000 a year later. Net profit 100,000 which should be taxable whether he converts it back to real-world currency or not.
Turbine offers items for sale in their MMO's. The IRS says thats a gain, whether the item physically exists or not and therefore should be subject to a sales tax. The player resells the item for a profit, that profit is also considered a gain and subject to taxes.
The idea here is that virtual items have real-world value. And since its been established now that virtual items can in fact convert to physical money they can and will be taxed.
I dont like it anymore than the next person but it seems inevitable taxes are coming to MMO's
So you said it yourself. TURBINE sells items in THEIR MMO's. Therefore, THEY are making money. And therefore, THEY will be taxed, and probably already are. Duh?
there hasnt been any stories written recently but that doesnt make the story less true. And I brought this topic up because accountants are discussing and planning for the possiblity of this.
read the articles, they state this isnt just a possibility its going to happen...just a matter of when, not if.
And you certainly could be required to pay a tax on a looted sword. Its no different than winning a car on a gameshow. You aquire an award that has value, you must pay taxes based on its worth. And this isnt my opinion, this is what the IRS, accountants, etc are stating
You keep on stating that it's not your opinion but you've only linked a couple pretty old stories that are not jumping to anywhere near the conclusion that you are:
"paying tax on a sword you loot"
Nope.
rhinok's points are the accurate ones.
Even then, it would be a night-mare for them to try and figure it out. The IRS can't even keep up with the back-log of issues arrising from real money transfers. Now you think they are going to be able to figure out an instantaneous method of charging taxes for virtual items within the game?
Couple of really big holes in your logic:
What happens in Full-loot games?
Like EvE, L2, DarkFall (when it releases)... can players that loot your items be charged with a crime then? Since they stole your money that you are expected to pay taxes on?
I will answer these. nope
What about games that have item decay? When the item is gone, we get our money back that we paid taxes on?
Same as in real life. Nope. You junk a car, do you get your taxes back?
What about games that have your items stay on your corpse when you die? Like EQ. So one day you loot an epic item... paid the taxes. Next day your corpse goes poof before you re-loot it. Is the IRS going to send you a rebate?
Again same as real life. Nope. If you lose an item in real life you paid taxes on you do not get a refund.
What about gifting items, or gold?
There are different tax rules and exceptions for family members with real world items in regards to gifting. So the IRS is going to setup a series of different regs for gifting and family members in game as well?
Very doubtful
Who determines the worth of the items? The IRS? The person themselves? The game company? All are going to have wildly different ideas on that. So, the IRS is going to publish and maintain an database with the value of every item for every MMO?
Same as in real life.
Heh... see the point where they are so back-logged on audits now that it's a really silly notion they could take on something this big. The man hours to try and re-coup some of this would be 10-fold of what they could hope to recover.
The list goes on...
No, this idea wasn't thought through very well. But yeah... we know. It wasn't your idea. You're just the one that keeps on telling us it's coming. For some reason I don't think I'll be losing a lot of sleep over it.
If anything at all happens it will be as rhinok has listed. The places where real money is exchanged... that is the place they would have an opportunity.
It would very pretty easy to do actually. Most MMO company keep a record of what you loot anyways. It would just be more costly for them and in the end for any subscriber
They could easily take an average of what a normal MMO players loots in a month and charge taxes on that based on how many hours you play.
If you think that the IRS would never do it... Take a look at the tax laws right now. Some real crazy stuff there.
A few decades ago, how many people would have thought that the time would come when most of the cost of buying a pack of cigarettes was to pay the tax? Don't think that it's so stupid that politicians would never try it. Politicians have been known to try some really stupid things.
Exactly.
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"Capitalism is currently working as intended."