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The Tax Man Cometh, online

You know all that gold you stored up playing virtual world games online? Someday soon, you may have to hand a chunk over to the IRS.

The Tax Man Cometh?

An article in Legal Affairs considers the concept of whether virtual goods won in massively multiplayer online games are taxable.

There are already established economies for buying and selling goods won online for real dollars. So it's not that hard to put actual values on goods won through the games. Legal Affairs writer Julian Dibbell decided to test the tax question by reporting income he made from selling virtual goods on eBay.

Then he began querying the IRS on the value of the goods he hadn't sold for hard cash: If he bartered another player for a Golden Runic Hammer, for instance, would he have to pay taxes on the value of the hammer?

The IRS didn't come up with a final answer ("That's so weird," one official said.) But given that the agency already taxes things like the value of stolen goods, can a virtual tax man be that off?

Blog community response:

"Will the government come up with a fair and reasonable solution to the complex problem of MMORPG bartering, or will our elected officials employ their usual heavy-handed tactics to the detriment of gaming and gamers everywhere?"
--Ars Technica

"Okay, the upshot of this is that after he contacted the IRS, they didn't really care. Ultimately you're safe for now. But as MMORPGs become more of a money earner for more and more people, this could in the long term be another source of income for the governments that wanted to go this path."
--Steve's Ramblings

"This may sound ridiculous on the face of it, but because virtual world goods now have real-world market values, there is a legal argument here (albeit an unsettling one for anybody who plays online multiplayer games or hangs out in SecondLife). The good news is that, when he pursued the question with IRS officials, they cocked their heads to the side like dogs hearing a high-pitched noise, i.e. don't expect to see 1099 forms shipping with multiplayer games anytime soon."
--Web Wisdom