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US to tax virtual worlds?
Author: Joe MartinPublished: 26th June 2007
The taxation of virtual goods may have a profound effect on the popularity of games like Second Life.
Every day, millions of dollars are exchanged for virtual goods. Character swapping in World of Warcraft, Linden dollar purchases in Second Life; each transaction adds up whether approved by moderators or in frowned upon or illicit circles and the American government is considering just how they might get a slice of that big ol' money pie.
Dan Miller, a senior economist for Congress' Joint Economic Committee, has stated that the congressional report on the move to tax virtual goods will be released by August this year. He's not giving any hints as to what exactly the report will decide is the best route to follow, but when was the last time you saw a government of a country as big as the United States' miss out on a chance to make some sweet moolah?
It'll be a controversial move for the US of A if it does decide to tax the sale and traffic of virtual goods and general opinion suggests that that is exactly what is going to happen and a lot of people are wondering just how the sales would be monitored by the government.
It will also be interesting to note what effect the move may have on the popularity of virtual communities such as Entropia and Second Life and who exactly the US government will tax in the process - after all, one slip in the application process and you may find yourself marked as a US citizen.
If approved and successful, it may not be long before other countries make similar moves to tax virtual sales.
Ever tried Second Life? Do national governments have the right to tax non-physical, virtual identities and communities? Let us know what you think in our community.
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Comments (45)Stats: 0.134 seconds
One should remember however that it is far from unusal to see revenue from intangibles being taxed - you are taxed on intellectual property rights, despite the fact that from many viewpoints these are as nefarious and insubstantial as anything could ever be - virtual goods included.
However, it seems to me to put quite a large burden on the game producers to try and accurately establish the nationality of a player online - by the use of proxies etc. this can be made very difficult.
But I must admit, there have been times when registering on a website, while not an MMO mind you, I simply choose "USA" as my country (as its often the first in the dropdown box) and select my post code as 90210 -- just the easiest way to fly thru a website registration. Or if i dont feel like providing my real details.
I certainly don't like the idea but as konsta pointed out, it wouldnt be the first intangible object a givt puts a tax on. I just want to know how they plan to distinguish who is who and how they will manage to get foreign MMO providers to agree to tax "only those" who flag themselves as US citizens while not others.
Now another point, considering the majority of people who play MMO's are under 18, wouldn't that be considered taxation without representation? :P
hmm, all the LOTRO servers are located in US, tho we got players from around the world. i wonder how they can get around that. im sure it'll piss off a few lads....
either way, im not surprised, and it does makes sense to tax even intangible properties, but hell, i still dont agree.
i also have to wonder how they can even try to do it, as it would require pretty impressive monitoring
But as was said somewhere else, if its legal, its taxable (like prostitution in roman times)
If you earn any money from an online endeavour (Gold Farming, for instance, or selling a character) you are legally obligated to declare it as earnings on your tax forms, and pay income tax on it just like anything else.
The same thing applies to auction sites like eBay and the like.
They're not out to "get" online worlds, but merely updating the outdated tax laws that were written before virtual worlds. If you have an income, you need to report it. That's always been the law. I'm sick of the BU$H AMERIKKKA mentality. As much as I don't like this administration for other reasons, I'm not willing to take the stance that many of us are willing to take. The government is entitled to ANY money I make, online or not. If you're going to argue about it, argue about the tax system as a whole.
Ask yourself this question. Bob over there makes $1200 a month selling virtual goods in Second Life. He makes a full living off of this income and does not have a "normal" job. Jim across the street is a gas station attendant that makes $1200 dollars a month gross and on top of that has all of his income taxed and tapped by social security. Being a gas station attendant is Jim's only source of income and his only full-time job. Why should Bob be able to make all of this income completely tax free doing what is essentially his full-time job where as Jim's hit with income tax every single week?
The way the article is penned is that games will now come with taxes to make them MORE damn expensive, but not to tax the people who make money off of gold farming and the like. Technically, yes, you do have to declare those incomes, but i really wonder how many people do - or even bother to keep track of it.
More than that - just how many american gold farmers do you think there are? Just take a look at EvE online - farmers usually sell a billion isk for around $70. A billion takes a good while to get. You're not going to be casually leaning back on your oak chair, watching waves idly lap the beachfront beyond your marble tiled pool, laughing as you use a single finely manicured hand to observe your ongoings "good show gentlemen, i've just made another 10 Million dollars off of my farming! And all the none the wiser to uncle sam!
Yeah, no. 90% of the farmers i've seen are from nations around the world - where the states has no claim, reason, or right.
So to cut back to the chase - the ONLY just taxing here is on people making cash money from the games. Else, fail.
Fozzy and Neogumbercules have a good point. It is a bit too easy (and possibly a cheap shot?) to dismiss this policy as just another example of American greed. There are people making a tidy little income from virtual world business. Good on them, but it is a (occasionally substantial) source of income. And although their earnings from virtual business is made in the virtual world, the public health care, services and benefits (such as they are) that these people enjoy are definitely in the real world, funded by real tax payers' real money.
And make no mistake: this is bigger business than you think. Julian Dibbell, a contributing editor for Wired magazine, challenged himself in 2003 to spend a year making a living as a retailer in the massively multiplayer game Ultima Online. Dibbell sold in-game items, currency and real estate on eBay, eventually making almost $4,000 a month in profits, translating into roughly a $36,000-a-year salary. And Dibbell says that his income only qualifies as lower-middle class among virtual businessmen.
"There are people making six figures," Dibbell as been quoted. "One-man operations, basically, doing seven figures. It's not hard to make money doing this."
Blizzard, the publisher of World of Warcraft, banned over 30,000 gamers who were using automated processes to harvest gold, and removed over 30 million gold pieces ($4,048,582, according to GameUSD.com's latest exchange rate) from the game's economy. Everquest, if it was a real country, would be the 77th richest in the world.
The most bizarre manifestations of the phenomenon are small companies that set up sweatshops of (sometimes illegal immigrant) workers to play Ultima Online or World of Warcraft all day to generate virtual money for them.
The worlds may be virtual, but the business is all too real.
Woah, you hold up, my friend. I am from Missouri and I didn't read anything that set me off like it did you. Far too many USinites( ) are way too sensitive to words that aren't the most endearing to the US of A. Read, think, absorb or discard, chill. ;)
OT: I can see the ligitamacy of taxing substancial dollar earnings through virtual avenues, even if you had to pay taxes up front when you bought the game. Buy a tractor, get taxed - cultivate and sell a crop of corn, you get taxed again, right?
Sham of a nation? It's the greatest nation in the world and I'm not going to go into why. BUT NO they wouldn't tax you or even try to. There would be no taxes for people out of the country that's a ridiculous thing to say. Also people farming gold aren't doing it themselves they are running multiple bots on multiple accounts 24/7 usually while working a regular job. In the Diablo 2 era I had a friend who raked in $10,000 in one month. Even at $10,000 that's an income and It should be taxed. I even told my friend this. Also this is not going to be added into the developers hands but the people selling stuff from the game. The game industry is already taxed. But you already know that because you live in the USA, have read the constitution, Follow up on political subject, and have voted for a senator and a president to represent you.....ohh wait, you haven't because your a stupid "bloody" Brit or some other euro that sit's back and think's he's so goddamn glorified behind his keyboard. Know your facts idiot.
Thusly, in rersponse to these three errors (greivous? Maybe) We note the facts:
Fact 1: Norway, according to the United Nations is the greated country to live in (Wiki: http://en.wikipedia.org/wiki/Human_Development_Index)
Fact 2: See Fact One, Google, or the fact that 99% of my posts are based on prior knowledge, or helpful notts.
Fact 3: I have a nice little thing under my post counter, i believe it is. That says Location. I don't think there's a Canada, England. Nor, a Canada, Euro. (EU, for symantics sake)
And on the note of vote based politics - it never sat well with me to try and let somebody else "represent" me when the most they'll use my ideals for is a rag to help wipe off their agenda. Not saying that a good leader can't make a good nation though. Just saying that when millions put out that first vote at the start of the first term, boy-oh-boy didn't they expect what they were about to get into.
Side Note: Excuse any typos, please (IE7 doesn't have a filter, and i'm too lazy to open word, FF)
Side-Side Note: Done yet Fozzy? This is getting boring. I was just riling, I don't much like overzealous Americans. Sure, your country is good and all, but let's face it, showing that index, you'd best be with me in shaking fists at Norway for being the best. (no offense to the Norweigans, mind you).
Edit In Reply:
Aye, tax is a fun little one. And for the things that some love to do, but are ever so horrible for you, us Canucks are taxed many times - take for example liquour - $35 for a 40 anyone? Taxed on import, taxed on sale. Tobacco? Taxed on the raw goods, taxed on the products, then GST+PST/HST (depends on province). Hell, it's like taxing it twice or thrice is the Canadian way ;) (since don't forget, goods coming to your retailers will be hit with sales tax on every supplier along the way too!):)
and the stupid things too. However, it looks like that has been done for me
by people on both sides of the ocean. So instead I'll simply summerize my
one big "ditto" with: Since when do we own the internet? (Gore doesn't count... :p )
Hey! I live in America, and even I can see that what the government is currently trying to pull is Bullsh**.
If you judge a country by what it does, America is getting pretty damn Authoritarianistic these days.
The people in the Whitehouse just scream "OMGZ TERRORISTS LOL!1!!" and expect everyone to do what they say without thinking.
It would be great if corporations would consent with the community before doing this. If the vote is a landslide "get lost" (which is inevitable), then they should take a hint: http://www.kidsolo.com/forum/style_emoticons/default/gtfo.gif.
An amusing fact I read yesterday, without meaning to imply anything or give bias, is that if you apparently remove place names from a globe, but leave borders intact then around 70% of Americans will, when asked where America is, point to Russia because it's the largest continent.
Sorry if you felt my post was insulting, but I explicitly stated it wasn't meant to be. You can make statistics say whatever you want and the UK has enough problems of its own (teen pregnancy, binge drinking etc)
Still, on the other hand people do have a right to express a point of view opposite to yours and, as long as it's in the boundaries of good taste and not hatefully based, they're allowed to do that.
As for the Taxing. I don't see why some of you think the U.S. wants to Tax those outside of it's borders. How could they? They are (to my knowledge) talking strictly of those in the U.S. who make quite a hefty living on virtual worlds and pay nothing into the government they draw resources from. My money is taxed before it even reaches my bank account, why should someone else be rewarded with their entire gross income (probably more than I may gross) while I have to pay into something they could be potentially drawing from (Welfare, Social Security, ect..). It's not fair, and their "jobs" be it virtual or not, needs to be taxed just like the rest of the work force if they are making a substantial income from it.
That sums it up quite nicely. If you live in the US, your income should be taxed, irregardless of where it comes from, end of story. They could never put property tax on a virtual world, you cannot tax something that isn't tangiable. You can and should, however, tax income.
*sorry. Went to a meeting and lost my train of thought:? Will continue this post when I figure out where my thoughts left off...*
Even though it may only affect businesses/individuals with substantial income, the taxed revenue would amount to nearly nothing (they'd be better off just printing the money themselves). If anything, I see this as an alibi to penetrate ( no allusion to goatse intended) into the online community for a future agenda.
While I can't even imagine what sort of secret agenda might be involved in penetrating virtual worlds, I can see where they (lawmakers) might wave their arms around because they are seeing a sector of American culture (world culture, admittedly, but one in which americans are involved) they have indefinite influence on, and for good or ill, we grant them the power to look after that sort of thing for our own protection - if we denied them influence on say murderers, then we would have nowhere to turn should murder enter our lives.
However, other than voluntary declaration of funds accrued in this way, I don't see a practical method for them to monitor it. At worst, all it would mean to our international brethren would be the restriction of Americans to be involved in such online worlds, which I imagine would suit you folks fine. You'd have the online worlds you built ...hurm..okay maybe there is a flaw there....