Nice Work Retrieving That Magic Sword... But Now You Need To Pay Uncle Sam For It

from the oh-please dept

We've discussed, at length, the many, many reasons why it's a bad idea to start taking in-game crimes and putting them in real world courts -- even if people are getting scammed out of things that have real value. Because the game allowed it, it's an in-game issue and should be taken care of within the game. Otherwise where is the line? Some games allow for stealing and crime -- or even encourage it. If that's the case, then what happens when a player in one of those games takes a dispute out to court? It seems silly since the point of the game is to set up a world where those actions are acceptable. In almost every case, there should be some sort of way that the issue can be handled within the game. However, as people continue to take such disputes outside of the game, while talking up how much value there is within the game, it has apparently attracted some interest of politicians who are wondering if it makes sense to tax in-game proceeds. By taking any aspect of the game and connecting it directly to the real world, the games have only brought this possibility on themselves. Note that the politicians aren't talking about virtual items in the game that have been converted to real dollars or other assets. That's already taxable as income. Instead, they're looking at actually taxing the items within the game based on the perceived value of those assets. This opens up a huge set of issues that aren't likely to go away very easily -- while also making it a lot more expensive to spend much time playing online games.

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  1. identicon
    Kevin, 18 Oct 2006 @ 11:44am


    I can see taxing someone when they convert their virtual assets to real-world cash via ebay or something, but taxing virtual items that haven't been sold for real-life cash? Are they kidding?

    So I just picked up a hot new sword in an online game, and now you want to tax me even though I haven't converted that "virtual asset" to real life money? OK maybe that's alright if you'll allow me to pay in virtual money. I mean, if that sword has real life value then so does the virtual money I would be paying the IRS with, right?

    Oh wait, I forgot. I play on a server that is based in Korea. So how are you going to verify that I actually own what you think that I own? More to the point, do you even have jurisdiction? Sure I'm sitting in the US when I play, but the activity that creates the items that have value take place (if indeed they can be said to take place in any physical place at all) in a server outside the country.

    Or how about the reverse? What about Korean players playing on an American server?

    Oh yeah, how do you actually link the account to the person who owns it to even determine what country they are in to begin with? If they play with a credit card, I could maybe see it. But what if they buy gametime codes via some other method?

    Or here's a good one. They want to charge you income tax on virtual income created in game. But what happens when a 14-year old plays 50 hours a week and then has to pay taxes on his in-game earnings? Is he playing, or is he working? Is he violating child labor laws?

    What happens if you fail to pay taxes on your virtual goods that are never monetized in the real world? Do they put a lien on your virtual house? Do they take it away from you and then try to sell it? How do you determine whether the virtual goods were acquired before or after the start of some effective date for taxes? How does the government propose actually collecting and enforcing these taxes? Are they going to set up different systems to monitor each individual server of each online game? If so, they're going to end up spending far more in enforcement than they would reap in collections.

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