Congressman: No Tax on MMO Transactions

 An influential member of Congress thinks it “would be a mistake” for the IRS to tax virtual economies within games like Second Life or World of Warcraft.

As reported by Adam Pasick, Reuters’ man within Second Life (we love that “Second Life” dateline, by the way…), Rep. Jim Saxton (R-NJ) confirms that the Joint Economic Committee, which he chairs, is looking into the tax ramifications of virtual economies.

Saxton released a statement this week which read, in part:

“There is a concern that the IRS might step forward with regulations that start taxing transactions that occur within virtual economies. This, I believe, would be a mistake.”

“Clearly, virtual economies represent an area where technology has outpaced the law. The goal of the forthcoming JEC study is to help lawmakers understand the issues involved and head off any premature attempt to impose a tax on virtual economies.”

“…if the transaction takes place entirely within a virtual economy, then it seems there is no taxable event.”

That seems like good news for people who trade within the MMO space, but does it have similar implications for, say, Microsoft’s micro-transactions on Xbox Live? Will major corporations be spared tax liability on those profits?

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