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
    Rob, 19 Oct 2006 @ 9:24am

    The value of in game objects is already taxed

    Our tax system has no problem dealing with non-physical objects. Consider stock in a corporation. It has no physical existence, and it's only worth what people are willing to pay. When you sell a stock, you are taxed on the difference between the selling price and the purchase price. If you make a profit, you report it and pay taxes on it. If you take a loss, the amount is deductible. Either way, the profit or loss isn't realized until the actual sale.

    So, if your super-rare magic sword increases drastically in value, it makes no difference to you until you sell it on ebay. If, after expenses, your sword selling/gold mining/crafting/whatever business is profitable, you can then deduct your monthly game fee, your internet connection, your computer(s), your office furniture, etc. as business expenses.

    The system is already flexible enough to handle this. I don't even think it's relevant whether the TOS allows sales. The consequences of not having it explicitly written into the tax code are:

    - No recourse if the sword is lost, stolen, or devalued. (If you bought it on ebay, you can still deduct the loss) So EO players can breathe easy.

    - You don't have to add the sword to your Schedule D.

    - No recourse if the game company takes your sword and bans you for violating their TOS.

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