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Role Playing (Games) The Almighty Buck

When Tax Day Comes to Azeroth 141

1up is running a short piece originally from Games For Windows: The Official Magazine. It discusses the inevitability of taxation coming to virtual worlds, and a little bit about what that might mean in the indeterminate future: "Taxable income includes everything from tangibles like cookies to more ephemeral and subjective things like works of art, concert tickets, or advice. Those big, scary books that most sane people pay accountants to understand for them don't really narrow down what counts as taxable income so much as meticulously define it as damn near any piece of matter, energy, or information that should happen to pass into your possession over the course of the year. That goofy World of WarCraft gnome that GFW editor-in-chief Jeff Green's been leveling isn't any more intangible than, say, stocks."
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When Tax Day Comes to Azeroth

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  • by commisaro ( 1007549 ) on Wednesday April 18, 2007 @01:49PM (#18785207) Homepage
    Hmm, yes... scamming the IRS... ALWAYS a good plan.
  • Re:Frist Psot (Score:5, Informative)

    by m0rph3us0 ( 549631 ) on Wednesday April 18, 2007 @01:50PM (#18785233)
    Just show them your EULA.

    Blizz claims ownership of the items, thus it would be illegal for them to tax you on something you don't own.

    Remember, you licensed it, you don't own it.

    Tax time in WOW is stupid and will never happen. OTOH, Tax time in second life is a possibility.
  • by oneiros27 ( 46144 ) on Wednesday April 18, 2007 @02:23PM (#18785839) Homepage
    Many people forget this, but when WoW first came out, people were up in arms about their Terms of Service []. Specifically, the ownership clauses:

    2. Ownership

    All rights and title in and to the Program and the Service (including without limitation any user accounts, titles, computer code, themes, objects, characters, character names, stories, dialogue, catch phrases, locations, concepts, artwork, animations, sounds, musical compositions, audio-visual effects, methods of operation, moral rights, any related documentation, "applets" incorporated into the Program, transcripts of the chat rooms, character profile information, recordings of games played on the Program, and the Program client and server software) are owned by Blizzard or its licensors. The Program and the Service are protected by United States and international laws. The Program and the Service may contain certain licensed materials, and Blizzard's licensors may enforce their rights in the event of any violation of this Agreement.

    8. Ownership/Selling of the Account or Virtual Items.

    Blizzard does not recognize the transfer of Accounts. You may not purchase, sell, gift or trade any Account, or offer to purchase, sell, gift or trade any Account, and any such attempt shall be null and void. Blizzard owns, has licensed, or otherwise has rights to all of the content that appears in the Program. You agree that you have no right or title in or to any such content, including the virtual goods or currency appearing or originating in the Game, or any other attributes associated with the Account or stored on the Service. Blizzard does not recognize any virtual property transfers executed outside of the Game or the purported sale, gift or trade in the "real world" of anything related to the Game. Accordingly, you may not sell items for "real" money or otherwise exchange items for value outside of the Game.

    So, Blizzard owns your account. You own nothing, therefore, they'd have no reason to track sales. Now, a company like Linden, on the other hand, wouldn't have that loophole.

  • by SydShamino ( 547793 ) on Wednesday April 18, 2007 @03:40PM (#18786917)
    Regarding real-world sales of in-game items only:

    We'll never have to pay taxes on things we don't own.

    If you sell something you don't own, and you pocket the profit, you still owe taxes on it. If you steal car, and then sell that car, you can be convicted of tax evasion unless you pay taxes on the profit, with your "cost basis" correctly set to $0. Yes, this is true even if you are separately convicted of the theft.

    If I go to the library and rent a really popular book, and the next person on the waiting list offers me $250 to give the book to him, I would need to pay tax on that income. The book never belonged to either of us; he'll still have to return it to the library when he's finished with it.

    In short, it's not "We'll never have to", it's "We already have to".

    Which of course makes this "Not real news because existing laws apply" .
  • Re:Mod Parent UP!! (Score:3, Informative)

    by nickname225 ( 840560 ) on Wednesday April 18, 2007 @04:27PM (#18787553)
    Actually - the tax hobby loss rules, would not allow that. You need to show the IRS that you are engaged in a business for profit and not just a hobby to claim losses in excess of revenue. As a hobby - you can only claim expenses to the extent of revenue and any excess loss, cannot be carried forward. Sorry.
  • by TomRC ( 231027 ) on Wednesday April 18, 2007 @06:47PM (#18789469)
    If the government decided and declared, once and for all, that it would not tax in-game virtual transactions, people could start using MMORPGs to hide real-world profits.

    One might sell a million dollar house for $900K and $100K of in-game gold, where that $100K is the amount one would have otherwise taken as real-world profit. So no real-world taxes (or maybe even a loss), and one has in-game assets that can be used to pay other tax-cheats. Few of these tax cheats would take their real-world money out of the game - since they'd then have to pay taxes - but so long as there's a stable rate of exchange, and they can exchange in-game money for heavy real-world discounts on real goods, they don't care.

    And of course, since the game isn't a bank, it doesn't have the reporting requirements that banks have, meaning that it'd quickly become the favored medium for black market transactions - financing drugs and terrorism and worse.

    Which explains why we will keep getting these scare stories - the government wants to keep the whole mess from ever developing, so they don't have to actually engage in the messy practice of deciding how to tax virtual profits. But eventually - probably due to movement of drug money via MMORPGs - they will have to figure out a policy.

    Probably it'll be fairly reasonable - most ordinary players won't ever be bothered. MMORPG companies will be required to report any people trading "gold" worth over some black-market amount, and some subset of those people will eventually find themselves being audited, and the dollar value of any real-world benefits gained in exchange for game gold will be taxed and fines assessed.

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