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  1. #1
    Join Date
    Sep 2004
    BG Level

    Interesting, taxes on mmo items?

    http://www.npr.org/templates/story/stor ... Id=5199966

    From NPR, a lawyer/player recently inquired to the IRS if mmo sales, barter, and winnings (loot) are taxable. Basically since RMT has established that items have a real world fair market price can it be taxed? For example if you go and sell your boots of leaping, or your gil online and receive money for it, by law you have to pay taxes on the income you receive.

    But it does not end there, the IRS also has laws on barter. To take an example from audio, if you're a plumber and I'm an artist and in exchange for fixing my plumbing I trade your services for one my paintings worth $500 dollars fair market value we both have to pay taxes on the $500. This can extend to the virtual world, basically any trades would be taxable.

    To take that a step further, if you win a prize on a game show you have to pay taxes on the cash or value of the item you won. Theoretically this can apply to loot as well since it can have a real world value.

    The lawyer actually got in touch with someone in the IRS barter department and after some deliberation the person at the IRS said that yes that this would apply, but to seek an official ruling.

    Listen to the audio I think it's an interesting train of thought, I don't personally agree that anything will happen. But as mentioned in the audio it would effectively kill the entire mmo market if the IRS got involved. Thoughts?

  2. #2
    blax n gunz
    Join Date
    May 2005
    BG Level

    So if an earthquake wipes out Square-Enix and all my virtual property is wiped out and unrecoverable, does that mean I can write it off on my taxes as a loss?

  3. #3

    Loot in-game has no "real" value per the dev's ToS, just like those coupons which disclaim their monetary value to be 1/100th of a cent, even though the discount they enable you to redeem could be substantial.

    On the flip side, when purchasing "services" (in this case, the service of collecting virtual game money) from a place such as IGE, that purchase should be taxable just like purchasing other services online. Similarly, when selling your "services" to IGE you should technically declare this as "other income" on your taxes.

    However, a lot of these quasi-business transactions go largely untaxed. When was last time you paid taxes on a babysitting money transaction? Or for a non-corporate cleaning service?

  4. #4
    Renegade Philosopher
    Join Date
    Jul 2004
    BG Level

    Aurik's pretty much right. Basically the chances of it happening are extremely unlikely, however...

    If the amount of taxable money ever became enough to be worth it to the IRS, and let's say the person was suspected of underreporting their income: the IRS is still allowed to collect taxes on any kind of income, legal or illegal (even though RMT isn't illegal federally but it breaks the FFXI TOS). But it just goes to show you, when it comes to taxes the IRS can pretty much take what it wants if it's worth it to them unless the income is specifically tax-exempt somewhere in the 10,000 pages of tax code we have now.

    On a side note, about $300 billion goes uncollected in taxes each year and the IRS only recovers about $55 billion in those unpaid taxes.

  5. #5

    "The IRS: We got what it takes to take what you've got!"

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