Yeah, it is lame that the government is looking into MMOs for more revenue. There has been extensive discussions on some of the legal and accounting blogs about this issue.
Before they tax anyone...the IRS has be able to address these issues?
1. Since your gains are taxed in MMO worlds, then can you declare your loses in the MMO world as well? I mean if your character or avatar had 10 Million gold and was killed, could you declare your loses against your income?
2. If you build a castle or entire corporation in a MMO world, can you depreciate the facility and the equipment against a normal depreciation schedule?
3. If you had minions (whether they are virtual or real players) in a MMO world, are you required to pay unemployment taxes if your character or avatar dies?
4. If you were to "Will" your assets over to another character or avatar are you still required to pay inheritance taxes?
5. Is your character or avatar uses mana or magic to obtain wealth, power or gold, do you file a schedule G for Franchise Tax Research and Development Credit?
Hey...if they are going to tax me...I am going to want every deduction I can get.
Ok, I can't imagine any way for the government to tax virtual income. First off, as Veronica pointed out in the show this is money that can be created or destroyed on a whim.
Secondly, most MMOs used to say in the EULA that nothing in game was the property of the player, it was the property of <game company here>. Now I know to a degree this has changed over the years. For example I think in Second Life you own whatever you make or buy in that, and they encourage the buying and selling of Linden (the game currency) for real money. Also I know on a couple of Everquest 2 servers they allow the buying/selling of virtual items for real money, and SOE even handles the transactions.
Third, if the government were to tax my virtual income and THEN tax it when I converted virtual goods/currency to real dollars, wouldn't they be taxing the same income twice? Isn't that illegal? Someone who knows more about finance law than me (which I think would be about anyone over 12) check me on that.
<silly> Also, shouldn't these worlds be considered other countries? I mean show me where on a map of America "Norrath" is. And what about the people playing in other countries? Is the US going to start taxing non-US residents for playing their games? And what about NPC merchants? Will Boomba the Big in Freeport have to claim the 100K platinum I paid for that really nice item someone foolishly sold him? Or will Sony have to claim that money they magically created? </silly>
Anyway, I think the whole idea is pretty absurd.