Taxing Virtual Gaming Assets 454
rijit writes " It appears very likely that taxation of online games assets is inevitable. Quote: 'That's because game publishers may well in the not too distant future have to send the forms — which individuals receive when earning nonemployee income from companies or institutions — to virtual world players engaging in transactions for valuable items like Ultima Online castles, EverQuest weapons or Second Life currency, even when those players don't convert the assets into cash.' "
Monopoly Rent IS Next? (Score:5, Insightful)
taxes on virtual goods? (Score:5, Insightful)
Paying taxes on virtual goods where you don't exchange for real money is stupid.
What, are they going to start looking through my character's inventory, evaluating how much my +10 Sword of Uberness is worth?
Re:virtual money (Score:5, Insightful)
Re:virtual money (Score:4, Insightful)
Gamers can't have it both ways, try to monetize their virtual assets, and then say it's not really worth anything. We know very well than many people make lots of money on this useless crap, so obviously, it's worth something. One way or the other, people. Taxes are a bitch, but they too exist.
Re:Taxes suck, but why not? (Score:5, Insightful)
The same reason a dogs licks their balls. Because they can.
As to your comment about the guns, taxes usually increase in a fairly consistent matter through a nation's history up until enough people with guns have had enough.
Hmm (Score:5, Insightful)
How can Game Currency be taxable? (Score:5, Insightful)
If I understand the article correctly, assets gained in a game would be taxable, even if they are never converted into "real" money. If I had a Second Life business that made 1 million Linden Dollars in a year, then I would be taxed at whatever the U.S. Dollar to Linden Dollar rate is, even if I never take the "money" out of Second Life. To me this is ridiculous -- that would be like me being required to pay taxes on properties won in a Monopoly Game. I may own the whole board, but that does not translate to any wealth in real life.
A better example might be the stock market. Stock in XYZ company that I bought for $10,000 may be worth $100,000 today, but I am only taxed on those "gains" if I sell the stock. After all, who is to say that the stock won't be worth $5,000, or even nothing if the company goes belly up. I think the same should apply with game worlds -- as long as the "money" stays in the game world it should not be taxable, but once the "money" is converted to real money or "real" goods and services, then tax is due. After all, if I have a million Linden dollars in Second Life and the Linden would go out of business (not saying that this is likely, but just as an example), then my million Linden dollars would be a valuable as Enron stock.
I can understand taxing businesses in these worlds that make "real" money, but I think it is a real slippery slope taxing "game" money made in an online world unless the profits are taken outside of the game world.
Re:virtual money (Score:5, Insightful)
If you find a handkercheif on the ground that you're going to claim was used by William Shatner should you be taxed for the supposed real world value? No, but if you sell said item on ebay, suddenly it has value, value that you should be taxed on if you're honest when filling out your forms.
Finding the phatest l00t ever in WoW isn't worth anything, the items not really yours, the character who found it isn't really yours, the server it exists upon definitely isn't yours. The second you sell it for real world money though, that is income and it should be taxed.
Most people are not asking to have it both ways, a line should be drawn. Virtual assets are virtual assets, real money is real money, you can tax the real money that someone gets for selling access to virtual items, you can't tax virtual items which in an of themselves have no real value.
We knew it was coming (Score:4, Insightful)
There's no such things as free money.
Re:Taxes suck, but why not? (Score:2, Insightful)
Wrong. Governments will tax anything that they can so long as the people let them. The government doesn't run the country, the people do. I think many people have forgotten this. And as for them having all the guns, that's the purpose of the 2nd ammendment -- to make sure they NEVER have ALL the guns. Gun control is the single worst thing a society can institute because then the government WILL have all the guns, and the people will have no last-resort measure to overthrow their government when it becomes Evil(tm). I think people have too much faith that their government is inherently Good(tm) especially fools who support complete gun control. They're just BEGGING to be dominated by their government.
Re:taxes on virtual goods? (Score:4, Insightful)
How is it any different than having to pay capital gains tax on the part of your nominal gains counteracted by inflation? You haven't gained anything! Take the extreme example -- You have certificates of deposit for gold (the metal), and you have to pay capital gains tax when the dollar loses value, even though the gold's purchasing power is virtually guaranteed to be constant in the long run!
I'm not entirely sure that logical ratiocination and taxation have ever been formally introduced. If they were, they probably decided pretty quickly that they didn't belong in the same room together.
Re:Oh, I know. (Score:5, Insightful)
Taxation (Score:1, Insightful)
The real problem here is I doubt the government will be able to tax this unless it is converted to real money. There are two major road blocks in the way. First, they need a set exchange rate. It as if the currency is the money of another country, so even if the value fluctuates, the key will be the value on the end of the tax year (calendar year for people). Second, I doubt they will tax it until it is actually exchanged into real currency. Frankly, it would be like a stock in that you don't pay for any gains until you sell it.
That's all I got.
Bullshit (Score:3, Insightful)
I'm sorry, but who is this homogenous "gamers" category where everyone says the same thing, does the same thing, etc? Has it ever occured to you that maybe two different people can actually have two different goals, two different ways to play, etc?
As far as I can tell, and supported by the backlash against Sony's sanctioning such transactions, most MMO gamers are actually _against_ trading in-game items for real cash. For a variety of reasons, including, but not limited to, the facts that:
- it seems to bring with it not only virtual crime, but real crime as well. (Breaking into someone's RL computer is a RL crime.) See for example the recent instances of keyloggers that, among other harm, stole WoW passwords for the purpose of striping those people's characters of all gold and equipment. So believe it or not, even if the other issues didn't exist, a lot of us would still have a problem with (A) buying something stolen from a fellow gamer, and (B) encouraging the script kiddies to infect even more computers.
- it devalues the achievements of those who actually worked and quested for that
- it fucks up the virtual economy, as in some cases it becomes tuned and balanced for the idiots who buy gold by the thousands instead of for the honest players
- it fills the world with farmers and farm-bots, to the point where in some areas you have to spend an hour to complete even the simplest quest, because the needed NPCs are farmed non-stop by a small horde of farm-bots
- buying a ton of ganker-grade equipment and level 60 characters attracts a certain kind of insecure loser who makes the game worse for everyone else.
- plus, as the lesser problem of whole armies of characters who just don't know how to function at their level, what to do, or what to use. You could group with, for example, a Kheldian (prestige classes unlocked by having 1 max-level character) on COH and they don't even know the elementary basics of playing the game. How'd they get through the whole game once without even learning how it works? Oh, wait, they didn't.
Etc, etc, etc.
So, basically, fuck off. Most gamers do _not_ support transforming virtual assets into real gold, and it's even against the TOS in most games. So you're telling me, what? That because a minority of idiots already ruin the game for the majority of us, let's all be taxed for it? That governments should just assume we're all doing something illegal, and tax it? Well, then how about we assume that you use your car as a taxi (some poeple do, so by your logic it applies to everyone) and tax you per mile, according to how much you _could_ have charged if you actually used your car like that.
Re:No Taxation without Representation! (Score:3, Insightful)
That ideal is already so far gone it is not funny. Think of all the taxes now that people who can't vote have to pay.
all the best,
drew
The article is a Troll (Score:5, Insightful)
This Miller guy is nothing but a troll
Death of Taxes (Score:3, Insightful)
So taxes on virtual goods are a way for the government to fund its operations that enable real players to spend time inline. While in the virtual world it might seem like we're not consuming the real world services, but of course we are, though we don't notice. Those have to be paid for.
Though taxing income is a terrible way to pay, compared to others. I prefer a sales tax on all sales transaction. Somewhat lower rates for wholesale (goods resold), to keep transaction costs low and the economy less frictiony. Total exemption for some subsidized goods to protect the poor (and ensure people aren't penalized for not being poor). Like no taxes on raw food, raw cloth, the lowest percentile expenses on public transportation, primary shelter and energy consumed there, and essential healthcare including nutrition and prevention. And a very low rate on pure minority equity transfers, like 1 or 0.01% the full rate on stock trades, unless transferring control of the corporation. That would encourage people to save rather than consume unnecessarily. Which offers more money for investment, by them or by their banks. And actually correlates taxation amounts to the amount of benefit people derive from the country, beyond the crudest basic protections that everyone should have. While making the tax collectable from a much smaller population of vendors, who already keep transaction records without increasing the costs of reporting, and who are much more controllable with the threat of interfering with their business than are the hundreds of millions of humans, many of whom cheat on income taxes. And without invading the privacy of every American, collecting from the aggregate without tying transactions to identites without a court order.
I'd say that since our $12T GDP currently spends about $4T annually on Federal, state and various local scopes of taxation, we could collect about 33% total tax, probably 25% Federal and 8% state/local. States/localities could of course change their own rates. The increased efficiency of the system, including shrinking the leviathan IRS while collecting more of what's due (on a monthly/quarterly basis, rather than annually), would probably afford lowered rates, maybe down to 15-20% Federal. Which extra money would be available for investment. While welfare and other social subsidy expenses could be shrunk, at least the administration which currently processes their income tax as a noncollectable exception, rather than just not bothering with them at all. And those rates balance the budget, without debt, while paying off the huge outstanding debt we've created the past 230 years. Though the vast majority of that debt has been spent the past 6 years, while (not ironically) cutting taxes on those most able to pay them, who benefit the most from our country's expenses.
Note that I'm talking about ripping out the income tax by its roots, and totally replacing it with a simple sales tax.
In virtual worlds, the taxes would be collected only on real money taken in exchange for services. The arbitrary (and impossibly complicated) basis for taxation today, "pay what we say approximates what we spend, or go to jail and/or surrender your property", cannot deal with anything like our modern economy. After military spending, we spend more on debt service than on any other government service, clear demonstration that our revenue system is totally disconnected from our economy and government, while remaining its most essential core.
The US economy has now changed to one unrecognizable to the economists who institued the income tax less than a century ago. It's time to revolutionize the government's income to free the rest of the economy to exploit the opportunities while solving the problems of this new age.
What's new here? (Score:3, Insightful)
Re:Taxes suck, but why not? (Score:3, Insightful)
Canada has crime too. But if I want to rob a gas station, I just put on a ski mask, and demand all their money. I don't need a gun since the clerk will either hand me the money or try and beat the shit out of me with their own hands. But in the states, the same low paid clerk is likely packing heat, so I'll shoot first then take the money.
Any self-defense class will teach you that once someone enters 20ft of you your firearm is pointless since it'll take more time to pull it out then them to shoot you (provided you're taken off guard). So if I'm going to mug you while walking out to your car, your gun, even in a holster on your hip, is likely not to do you any good.
Cops were guns because they often ENTER situations where they need them. You can easily mug a cop and get their gun from them, or worse yet, shoot them unprovoked. Once you break the 2 second (20 ft) barrier, you're fucked.
Note: Again disclaimer: I don't pack heat or have any intentions of doing anything violent. Just trying to bring some reality to the discussion. As much as I like firing weapons too, I'm not crazy enough to carry in the name of defense.
If you really want to avoid being victimized just be smarter. Don't carry a lot of cash, don't showboat your expensive loot, don't leave doors unlocked, etc, etc, etc...
Tom
Re:Be careful if you live in FL (Score:5, Insightful)
If you buy 1,000 shares of stock for one penny each, and those 1,000 shares zip up to 5,000 dollars a piece, you don't owe a dime of tax (unless you receive dividends). If they drop back down to 1 cent each, and you sell, you owe tax based on the amount of money you made when converting the shares back to cash, which, in this case, would be 10.00.
You do NOT owe money based on how much that stock was worth at it's peak, because you didn't sell it at that value, and it would be grossly unfair to tax you based on the 5,000 dollar a share value, when you sold at 1 penny a share...That'd be on the order of a million dollars tax owed on a ten dollar sale.
Since WoW gold, etc, is valued at different values on different servers, and since that value fluxuates on a daily basis, it would seem to be impossible for the IRS to tax "gains" of WoW gold/items that have not been converted to actual currency...At what value would they fix those assets? It's be like taxing your penny stock at the 5,000 dollar mark...You don't have that money, and there is no guarantee that you'll ever have that money, so how can they tax it?
Now, if you sold gold/items/characters, that would be completely taxable, but I wouldn't think it would even fall under capital gains, but rather unreported non-work income, just like any other money gained from where people don't do your tax witholding for you.
Just stupid.
Re:Oh, I know. (Score:4, Insightful)
Re:virtual money (Score:2, Insightful)
Re:Taxes suck, but why not? (Score:3, Insightful)
As to the the "20ft" rule, I suggest you try this experiment. Close your eyes, put your hands in a relaxed position (not around the holster), open your eyes and shoot as quickly as you can. See how long it takes between "seeing the target" and actually accurately putting a hole in it.
On average it'll take you ~2 seconds or more. Which basically means if I have the element of surprise by pointing a gun at you before you know what's what, you're totally fucked because you won't get a round off in time.
If your defense class didn't teach you this idea, you should ask for your money back. Because you're just going to needlessly escalate a violent situation and get yourself shot.
I'd rather be robbed than robbed and shot. (well of course I'd rather not be either, but if I didn't have a choice about the robbery...)
Only a complete assclown thinks it's brave to wander around with a gun in the guise of protecting yourself at all times. Unless you're actively looking for trouble it won't do you any good. And when the mugger/robber/etc does drop you like a sack of potatos, they'll just steal your gun and have yet another to hurt people with.
Tom
Re:Be careful if you live in FL (Score:5, Insightful)
For any kind of real economic recognition, unless the IRS and the state department feels it's a good idea to essentially hand a money printing permit to the MMORPG companies, with the associated real-world currency inflation, the virtual worlds economy engines would need to be under SEC and/or central bank control.
How many dupe bugs, run-amok sysadmins, random item rarity changes, and outright company _sales_ of the virtual items would it take before we'd get Sarbanes-Oxley for MMORPG's? New profession coming in the new expansion; Accountant. No players may loot items without an Accountant in the group...
"it's not as though dollars actually represent any stable tangible assets anymore."
A particular dollar in your bank account does, however, represent a physical dollar payable to you. If the bank allowed a teller to multiply your account balance with a billion, that bank would have a problem, as they themselves, unlike the MMORPG vendor, cannot simply print more to give you.
Re:Taxes suck, but why not? (Score:2, Insightful)
I can't recall an example where a corrupt government has stepped down even in the face of massive civil unrest and rebellion. Is isn't until the architects are in direct mortal danger (the french king and queen were executed before they abdicate and Cornwallis only surrendered when his army was surrounded and had no other choice but to be destroyed) that Changes will happen.
Re:Be careful if you live in FL (Score:4, Insightful)
A physical greenback hardly qualifies as a "stable tangible asset." How many Euros will a USD net me tomorrow? How about the day after? In July it was 0.8 USD, but right now it's closer to 0.75. A dollar merely represents a particular value, but as with many other things fiscal, that value is quite fluid.
Re:Taxes suck, but why not? (Score:3, Insightful)
But I'm happy to let you hold such infantile views on the way these things go down as long as you don't try to force me to live the same way.
Barter exchanges (Score:2, Insightful)
But if they are going to enforce this, they'd better be prepared to go the whole route: if a character gets PK'd and the other player loots the corpse of a valuable item, then that is theft. Depending on the value of the item it may well be grand theft. The government had better be prepared to prosecute these crimes and make room in the prisons for the 12 year olds that they are going to be sending up the river for 20+ years.
Of course, if you're going to tax virtual income and prosecute for virtual theft, then you may need to consider the possibility of prosecuting PKers for virtual murder.
Oh man, I think I'd better start law school. I see where the employment opportunities are going to be in 2010.
Reality Check (Score:3, Insightful)
At the moment, the only virtual goods with any intrinsic potentially taxable value are those in Second Life and other worlds which grant actual ownership of objects to players. In these kinds of situations, there may be barter consequences, but only if there is a way to actually determine the $US value of the object. Consequently, it is possible to incur a deductable expense in the creation of such object, and in general it will behave like any other intangible capital asset, including the existence of a basis, if such can be properly documented.
In 'more traditional' games where the EULA says 'we own your character, your stuff, and your little dog too', then the in-game objects are worthless. This has two consequences. First, sale of such an object for real cash results in a taxable event as a source of ordinary income rather than capital income. Second, in-game exchanges are non-events, as everything involved is worthless.
Bear in mind that these are all potential treatments, and that the IRS position is currently of the 'wait and see' variety, since the Second Life style of object ownership is currently an aberration, and Congress is quite visibly trying to make up its mind on the topic.
Which brings me to a point that a lot of /.ers seem to miss, and a lot of American people in general also seem to miss. The IRS is a part of the Treasury, which is a Cabinet-level department of the Executive branch of the US government. the IRS does not write or approve the tax law (though the IRS General Counsel includes tax writers who are called upon by the Congress from time to time to produce language intended to have some stated effect), they admisister and enforce it. The people at the IRS are doing as the law directs, and the horror stories you hear over the next few years should be laid at the feet of Max Baucus rather than Mark Everson. Of course, anyone thinking of breaking Godwin's Law at this point should be ashamed of themselves.
Re:virtual money (Score:3, Insightful)
Re:Be careful if you live in FL (Score:5, Insightful)
I think what you would ultimately see is a drop in the number of casual MMO players like myself, and the constant complaining from the hard core MMO crowd.
Re:Be careful if you live in FL (Score:2, Insightful)
So I guess the point is that a physical greenback does qualify as a "stable tangible asset" relative to your tax bill, which is of course the point of the discussion.
Re:Americans don't pay enough tax (Score:3, Insightful)
You obviously didn't graduate from Yale. :-P