now things are just getting too crazy
http://www.legalaffairs.org/issues/January-February-2006/feature_dibbell_janfeb06.msp

Quote :

"Buying and selling imaginary goods in computer-game worlds is big business. Now let's figure out whether gamers should pay real-world taxes on virtual treasures. By Julian Dibbell IF YOU HAVEN'T MISSPENT HOURS battling an Arctic Ogre Lord near an Ice Dungeon or been equally profligate spending time reading the published works of the Internal Revenue Service, you probably haven't wondered whether the United States government will someday tax your virtual winnings from games played over the Internet. The real question is, Why hasn't it happened already? Gamers who play EverQuest, an online game with 450,000 subscribers—playing parts that range from Frogloks, a race of sentient amphibians, to Vah Shir, a regal feline race—generate in their virtual world the kind of imaginary economic activity that can be measured in real-world terms like "gross domestic product." According to Indiana University economist Edward Castronova, EverQuest's annual GDP—the total wealth in goods and services an economy creates—is about $135 million, or around half the GDP of the Caribbean island nation of Dominica. Castronova sized up the virtual economy (in a widely read 2001 paper that launched his career as the Adam Smith of video games) in part to mock the pomposity of traditional econometrics. But the finding of the paper was no joke. EverQuest's subscribers are playing a game, to be sure, yet like all massively multiplayer online games, often called MMOs, it's one with remarkable economic potential"

Quote :

"Most significant for my purposes, here too are items acquired either through barter or as prizes in a game. The rules make clear the IRS's fundamental point: Goods taken in trade or won at play are taxable the moment they fall into somebody's hands, even if they are not sold for money. The more I read, the more I wondered whether reporting the amount I had brought home from selling virtual items on eBay was enough to satisfy the IRS. What about the assets I bartered for or won in the game but never sold in the real world, the suits of armor stashed here and there with their easily established fair market value? What if I traded those assets for their value in Ultima Online's official currency, the Britannian gold piece, rather than for dollars? Wouldn't it be easy to establish their value in dollars nonetheless and, if I owed American taxes on the exchange, put a number on the deal that the IRS could grasp and love? And what about all the other MMO players out there—how long could the IRS be expected in good conscience to leave the resulting millions of dollars in wealth untouched? You might think that I was letting my imagination run away with me—I certainly hoped I was. I thought that a glance at past IRS practices would assure me that the feds would never dream of taxing assets that had not been turned into money. I thought wrong. "

Quote :

""O.K., so I got a fake jewel that's worth 80 million points, gives me all kinds of invincibility," said Knight, striving doggedly to nail down what I was talking about. "But I got two of them, or don't want to play [anymore]. And I can go on eBay and sell my jewel to some other character?" "Uh, yeah," I confirmed. Knight considered the facts and offered a nonbinding opinion: "That's so weird." "

2/10/2006 9:29:09 AM

Actually no.

The article is just one idiot trying to ty real world value to virtual realms. He reasons that because item A is worth XXX on ebay, then it could be taxed a certian percentage when recieved and/or bartered in game. Unfortunately, the items he sells are not a goods produced or manufactured, they are rather entertainment services exchanged for virtual pleasure.

The "items" and accounts sold on Ebay, however, can be taxed and are.

2/10/2006 9:41:39 AM

Lets just get a chair with a virtual reality set up.....lay in it, with tubes for food and oxygen, as well as waste removal and just not live in the real world. I mean come on, its a perfect system

2/10/2006 10:11:23 AM

I don't think he's an idiot - the irs lady urged him to get a judgement on it.

and i mean, look:

Quote :

"here too are items acquired either through barter or as prizes in a game. The rules make clear the IRS's fundamental point: Goods taken in trade or won at play are taxable the moment they fall into somebody's hands, even if they are not sold for money."

[Edited on February 10, 2006 at 12:34 PM. Reason : .]

2/10/2006 12:34:22 PM

but they're not actual items or prizes being aquired. The only thing really being sold/bought on ebay is the time required to obtain them in game, in that way a service is being sold. Taxing items not-sold in the game would be like taxing potential service or skill. You can't make someone pay a tax because they have a degree or skill, you tax income and property aquired. The virtual property is not property and therefore cannot be taxed as a good or item. The sale can however be taxed as it represents income as well as the exchange of a service for money.

2/10/2006 12:54:00 PM

Virtual property doesn't exist. His point isn't valid. The value of virtual items are based solely how difficult and time consuming it would be to get that item in conjunction with how much more fun you'd have using it. In essence, you're paying someone else to spend the time to get that item. Its a service tax, and service taxes are notoriously hard to implement.

If the IRS wants to tax you for earning 11,000$ selling virtual characters, however, they are well within their right.

2/10/2006 1:44:21 PM

Quote :

"Virtual property doesn't exist. His point isn't valid"

software

2/10/2006 3:04:38 PM

TAX CUTS FOR THE RICH
TAX HIKES FOR THE NERDS

2/10/2006 3:06:18 PM