Posted on 12/04/2006 6:15:19 PM PST by Pantera
NEW YORK--If you are a hard-core player of virtual worlds like World of Warcraft, Second Life, EverQuest or There, IRS form 1099 may someday soon take on a new meaning for you.
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.
Most governments are only beginning to become aware of the substantial economic activity in online games, but the games' rapid growth and the substantial value of the many virtual assets changing hands in them is almost certain to bring them into the popular consciousness.
"Given growth rates of 10 to 15 percent a month, the question is when, not if, Congress and IRS start paying attention to these issues," said Dan Miller, a senior economist with the Congress' Joint Economic Committee, who is also a fan of virtual worlds. "So it is incumbent on us to set the terms and the debate so we have a shaped tax policy toward virtual worlds and virtual economies in a favorable way."
Miller's comments came during a Saturday panel called "Tax and Finance" at the State of Play/Terra Nova symposium, the fourth annual gathering at New York Law School of academics, lawyers and other scholars to talk about the legal, social and economic issues surrounding virtual worlds.
The panel was formed in the context of recent questions--first raised by author Julian Dibbel in his book Play Money and in an article he wrote earlier in Legal Affairs magazine--about whether the transfer of virtual assets, or players' acquisition of virtual loot by, for example, killing monsters, creates taxable events.
"If you haven't misspent hours battling an Arctic Ogre Lord near an Ice Dungeon or been equally profligate spending time reading the published works of the Internal Revenue Service," Dibbell's article began, "you probably haven't wondered whether the United States government will someday tax your virtual winnings from games played over the Internet. The real question is: Why hasn't it happened already?"
And while Miller's committee began examining these issues in October, his comments Saturday suggested there could be wider future congressional oversight and a revised IRS tax policy. That's in spite of the fact that Miller said his committee, and Congress in general, is not out to gouge virtual world players.
"The Joint Economic Committee is not seeking to impose a new tax on virtual economies," Miller said. "We have a very clear record of supporting lower taxes in free market."
Meanwhile, Miller's fellow panelists also weighed in Saturday on Dibbel's question, and came at it from several different perspectives.
First up was William LaPiana, a wills, trusts and estates professor at New York Law School. He approached the question by examining whether estate taxes would accrue on the transfer to an heir of a sizable collection of valuable virtual assets.
LaPiana said that there is little question that the transfer of such assets could be taxable, since it is property. However, he did say that the taxes would accrue only if the total value of the estate's assets, at the time of death, exceeded the limit set by the state in which the deceased had lived. In most cases, he said, that amount is $2 million, though some states, like New York and New Jersey, have lower limits.
There are not that many instances in which someone has that level of virtual assets, although the recent reports that Second Life land mogul Anshe Chung had amassed $1 million in virtual land and other holdings certainly suggest her heirs might have some interesting inheritance tax issues if she dies.
Preposterous
What if I cash in overseas, say on a Cayman vacation?
After prostitution, tax collecting is the oldest profession.
Fair Tax please!
They can tax my +225 Claymore when they pry it from my cold dead claws.
With all the virtual gold it collects, the IRS will be able to strut around pwning n00bs at an incredible pace.
DORKS!!!!!
Honestly, the amount of real money that floats around these games is incredible (although I'd argue it's already being taxed). Check eBay.
This isn't from "The Onion"?
Not really... Do a search on ebay and you will find people selling online character accounts for thousands of bucks. What`s ridiculous is how people find the time to do this stuff, but then again the highest earners on this planet are those involved in entertainment. People have an obsession with escapism. I think this is one of the reasons why the arts have so dramatically declined in recent years, why music, writing, movies, painting etc ect have gone down hill. The same focus and interest that drove artists in the past has now been diverted by the computer. This is why you have so many remakes of old movies, because nobody is writing original scripts and why you haven`t heard any great new songs. If I had any talent I`d be going ape sh*t because the art field is wide open right now in practically every area.
They play their games we play ours.
I am a bit alarmed that I thought this was pure "Scrappleface". I think there are too many IRs agents spending waaaaaaay too much time at work playing virtual games.
Dorks is an understatement.
When they figure a way to tax oxygen we are all in trouble.
I had an IRS revenue officer (official title) tell me that she could do more with one phone call than other enforcement agencies can do with a court order....and she proved it to be so.
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