Congressman: No Tax on MMO Transactions

I hope they don’t tax virtual transactions simply due to my nature of being a smartass (which increases my liklihood of being jailed). I would gladly send the IRS a check made out in the form of ISK or Gil.

So would I not just because I like to be a wise ass, I play an MMORPG which bans trading their gold for real money, nevertheless people do anyway, so if the IRS wants to tax me on my gold I'll send them a check in gold since I can't convert it to cash without potentially losing my entire acoount (and all its money), this will also mean that the IRS won't be able to convert the gold into money since the makers of the MMORPG (which is based in the UK) will undoubtedly be keeping an eye on them.

Charging sales tax for genuine currency spent makes some sense, but trying to charge for something like World of Warcraft makes abotu as much sense as trying to charge property tax to monopoly players.

great now the government is trying to tax my virtual income. Before you know it the government will be in our games as much as real life. By that I mean voting, politicians, blah blah blah. I play games to escape realism not an extension of it.

The government is putting stupid pills in the water again, and I think their drinking it now

^ Gee, I dunno. I mean, who really wants free money?

Seriously, though, if they really did want to take a serious look at considering this, can you imagine the money they'd have to put into it putting people in charge of managing virtual-to-real money conversions for every game out there and then monitoring every transaction taking place in the game?

Aren't XBox Live Marketplace's microtransaction already taxed, when you buy the MS Points or whatever it is you need to exchange within said Marketplace?

Taxing on World of Warcraft assets would never be legal because from a legal standpoint, gold buying and selling is againg WoW's TOS and EULA. Therefore, from a legal perspective, WoW gold is worthless and serves only to mark one's place within the game.

The government may as well attempt to tax someone's Monopoly money.

No EULA to the best of my knowledge has ever been tested in Court. It does not carry the force of law. It's a contract, but how enforceable in Courts it is, remains to be seen.

No one is talking about taxing the gold you got from doing the Crashing the Wickerman Festival Quest last night. We are talking about taxing Gold Farmers. THIS IS A GOOD THING! It eats into their profits, and helps to discourage the practice.

http://www.wcradio.com/forums/index.php?showforum=42

Nicholas:

The majority of goldfarming operations are set up outside the US. I haven't imported in awhile, but last I checked whenever I bought something from Lik-Sang, there was no tax on it. Same deal here, unfortunately.

@Grahmar:

Unfortunately, he looks like he's less than a year away from turning into a fossil fuel.

The legality of the transaction, the actual value of the item in question, is irrelvent to the IRS. If I sold a breath of fresh air to someone for a million dollars the IRS would want their cut of that million. The IRS states it the best:

http://www.irs.gov/individuals/article/0,,id=140253,00.html

The problem with taxing something that doesn't exist is that it has no value until it's sold for real currency and that is something that Rep. Saxton recognizes. Same thing with any item in the real world. They can't tax you for growing tomatoes until you sell them to your neighbors. If you just consume them, no tax. Despite the claim that tech is growing faster than the law, it really isn't in this case.

This is not about taxing virtual money acquired through gameplay to buy virtual items acquired through gameplay. This is about taxing the same of virtual property acquired through gameplay using real money.

I think it may become necessary to do so, simply because of the legal implications. Need a boost in your campaign fund, but don't want to call it a contribution? I'll give it to you in the virtual world. Want to collect drug money, but have a credible story of where that money came from? Virtual selling covers it. Want to make a large business transaction but avoid taxes? Cover it in an online transaction of virtual goods!

There should be some thought into findind the right balance. It should be an income tax rather than a sales tax - the taxation should be placed on the seller and not the buyer.

taxing transactions in a game? Are they serious? Whats next, taxing weapons i buy in Counter-Strike or something. Quickly! pack away all the air you can before they tax that too!

What is being taxed here is anything bought with real U.S. dollars, not anything bought with fictional game money. There are communities of people who buy and sell in-game objects using real-world money. Should they avoid federal taxes, even though they are still making financial transactions using U.S. currency?

@Zanzer

You, like Nicholas, weren't paying attention. Read the article and the statement:

"A virtual economy is defined as the universe of transactions that occur WITHIN an online community, such as Second Life or World of Warcraft. These transactions include the sale of goods and services and take place ENTIRELY WITHIN virtual economies;"
[emphasis mine]

If someone puts a sword, character, or gold on e-bay or uses paypal to transfer real currency, then by -their own- definition that transaction did not occur inside a "virtual economy", but out in the normal internet economy that is already taxed under existing laws.

For the legal background on EULAs

EULAs have gone to court many times:

http://cyber.law.harvard.edu/ilaw/Contract/vault.htm
http://cyber.law.harvard.edu/metaschool/fisher/contract/cases/step.htm
http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=7th&navby=case&no...
http://www.eff.org/IP/Emulation/Blizzard_v_bnetd/20050901_decision.pdf

In most jurisdictions most of the provisions have been struck down as unenforceable. A few courts have upheld EULAs as valid contracts. In the most extreme cases (Virginia and Maryland) they even passed the excreable UCITA (Uniform Computer Information Transactions Act). However, these cases mostly had to do with the question of whether you're buying a good or buying a license, right of first-sale, fair use, etc. As for TOS cases, I'm looking...

Here is the breakdown in the US, the rest of you have to consult internet know-it-alls in your own country:

Ingame item for Ingame currency = No Tax
Ingame item for Real world cash = Income Tax

What some are confused about, even some in Congress it would appear, is if the first should be taxable and are under the mistaken belief that because it's on the internet or computers it is something new. It's not. Until the IRS takes people for passing GO and collecting 200 bucks, the standard of not charging people for game currency will remain.

The bottom line that many gold-buying defenders miss is simply this:

All assets within the WoW universe belong to Blizzard. All the gold you have, all the inventory agreements you have, everything. This is why Blizz can cancel your account for any reason, and even if you had 10,000 gold and were completely dressed in epic armor, you'd have no legal recourse.

That said, when you "possess" gold in-game, it is ONLY to mark your progress in game, much like Monopoly money.

When someone buys or sells gold, they are merely paying money to "move their marker", not for any sort of tangible asset.

Therefore, it can never be taxed because:

1. LEGALLY, it has NO real world value.
2. It all belongs to Blizzard anyway.

It's not that anyone missed it, it is that your points are moot. When real money changes hands in the outside world, such as in a sale of WoW currency, someone now has income and will have to pay taxes on that income if they fall under the jurisidiction of the IRS. Gold sales done by folks in the US are already taxed as income and failing to report it will get you into trouble if you are ever audited. SOE will charge a sales tax on game items sold in the places they have charge sales tax.

http://stationexchange.station.sony.com/faq.vm#SalesTaxCharge

Once a game transaction meets the real world, there is already a real world tax for it. This notion they can't tax it, or aren't taxing it, or that the tech has outpaced the law is to ignore the facts.

The ability to tax ingame sales for ingame currency is the impossible feat because there is no taxable event taking place. Once they finally get around to thinking about it past the soundbite stage, this tax threat will quietly fade away.

If I were to sell you the Golden Gate bride for a million dollars I'd have to pay taxes on that million. Of course, not paying taxes on it wouldn't be the only crime I would be guilty of, but to claim that because people don't own or possess the item being traded is to misunderstand what the IRS does. If you gain money from any source, it is income and they want it and they really don't care if it's legally obtained or not.

I wonder if the mmo makers can put this to their advantage. If they can convince the gov that they own all the properties. Maybe they can sue the sites that are trading their propertiy for real money.

There's a fundamental problem with an all-around tax on virtual goods. Although an outside sales tax is entirely possible, a tax on in-game goods themselves as has been mentioned before is entirely impossible (and crazy from a legal standpoint). Why, exactly?

Well, it's fact and legal practice that a stolen good is taxable. If I steal a neighbor's car, I (ideally) owe tax on it.

However, taxing in game goods themselves is like taxing me while my neighbor still has his car... It's still not mine to be taxed.