Don't Pay Your Orcs in Cash

Jesse Walker | October 17, 2006

If you were thinking of pulling your secret stash of cash out of the Bahamas and storing it in the World of Warcraft, think again: Congress is "at the preliminary stages" of figuring out how to tax virtual worlds.

[Via Wendy McElroy.]

Comments

|10.17.06 @ 2:53PM|#

Please tell me that the staff of the Onion hacked the Reuters news server. Please.

|10.17.06 @ 2:55PM|#

can't escape the long, grubby n greedy arm of uncle sam

|10.17.06 @ 3:04PM|#

Well, if the "cash" on line is real enough to be taxed, then it should be tender legal enough to pay the IRS in. End of story.

|10.17.06 @ 3:19PM|#

grumpy realist has the right idea. Since most of us are "cash basis" taxpayers, why is this remotely an issue? If my "virtual" unrealized gains from on-line stock trading aren't taxable until I convert the stuff into cash, why should anyone think that the value of my virtual dragon-slaying sword is taxable until I convert _it_ into real-world cash?

And if I want to declare my on-line adventuring exploits to be a business, then maybe I can write off the cost of my game account and anything I invest in in-game armor/magic items/real estate to be business expenses up to the point they equal my earnings.

Of course, getting anyone to report these earnings is another matter, but no different than the sort of issues that eBay or dealing in used books on Amazon raises.

The only rationale for treating any of this differently is that the IRS figures that a big enough percentage of the populace isn't affected by it and won't raise a fuss -- The same principle behind inflating traffic and other fines to exhorbitant levels.

|10.17.06 @ 3:25PM|#

So what's next? Am I going to have to pay a tax on every free ball I get when I play pinball?

Grumpy has it right; these virtual dollars rarely have value in the real world.

|10.17.06 @ 3:30PM|#

Its been said before, but I will say it again here: I.R.S.

IT REALLY STEALS!

|10.17.06 @ 3:31PM|#

Screw it, Gandalf's right. I'm throwing the Ring into Mount Rainier, after all.

IRS: Infernal Reach of Sauron?

|10.17.06 @ 3:48PM|#

So if I manage to sell a frigging Ankle Lashings of the Boar for 15 silver pieces after putting it up for auction 5 times they're gonna take a piece of it?

Over my semi-immortal dead body!

|10.17.06 @ 3:49PM|#

"Grumpy has it right; these virtual dollars rarely have value in the real world."

Actually, you'd be surprised how much stockpiles of gold/items sell for on Ebay. There is a cottage industry in china dedicated to earning money by "farming" gold and items.

|10.17.06 @ 3:53PM|#

I take it that there are no gold piece/item/experience point cheats in World of Warcraft? If gold pieces/etc. can be translated into real money, I would imagine the incentive to conjure one up (if there isn't one already) would be profound. Pardon my ignorance about the details, but I haven't played the game.

Salvius|10.17.06 @ 3:57PM|#

Coming up next: Capital gains taxes on Monopoly money.

|10.17.06 @ 3:58PM|#

Incidentally, I give away money when I'm playing the light side in Star Wars: Knights of the Old Republic I & II. Can I deduct that as a charitable donation? Furthermore, as a Jedi, am I part of a not-for-profit organization and able to accept donations sans tax?

Tsu Dho Nihm|10.17.06 @ 3:59PM|#

If they're going to tax these virtual worlds, I expect they'll have representatives in Congress as well. So we can expect to add Ragnar the Smasher (D - WoW) to the House of Representatives.

|10.17.06 @ 4:00PM|#

And of course, if they start taxing it, it will be only a matter of time before they start regulating it. Just think of the fun the feds will have enforcing hostile workplace environment standards during raids, subsidizing gold farmers, banning buffs deemed too strong for use without a prescription, and breaking up guilds for anti-competitive practices.

|10.17.06 @ 4:14PM|#

Tsu Dho Nihm,

Ragnar the Smasher is a Democrat? Huh. That's surprising. Must be a union district.

If we're imposing tax laws on virtual worlds, what about other laws? Am I gonna get sued for all the cars that I've destroyed in GTA - Vice City? And, what about the hundreds of people that I've shot in the same game? In addition, I'm sure that I have on the order of ten thousand traffic violations. Uh, oh.

|10.17.06 @ 4:18PM|#

Wait a second, aren't Wow and Second Life sovereign states? Why the hell should they fall under the purview of the U.S. Government? Do we tax currency exchanges between Euros and Dollars?

Paul|10.17.06 @ 4:20PM|#

Actually, you'd be surprised how much stockpiles of gold/items sell for on Ebay. There is a cottage industry in china dedicated to earning money by "farming" gold and items.

So what, dr? If you reap cash, regardless of its origin, then its taxable income. We don't need a special 'rule' to cover cash gains from World of Warcraft. This isn't an issue of virtual worlds, it's an issue of someone not reporting income.

And in case you missed the recent new, Mr. sam (he's not my uncle, anymore) is already looking at Ebay transactions because technically, they already fall under U.S. tax law.

I know one thing for sure, after I read the article, I realized it's time to start fondling the firearms again...

Thomas Paine's Goiter|10.17.06 @ 4:28PM|#

So what, dr? If you reap cash, regardless of its origin, then its taxable income. We don't need a special 'rule' to cover cash gains from World of Warcraft. This isn't an issue of virtual worlds, it's an issue of someone not reporting income.

What happens when you've bartered for that object?

|10.17.06 @ 4:30PM|#

Paul, when is it not a good time to fondle the firearms?

PintofStout|10.17.06 @ 4:37PM|#

If they can tax income from virtual items, there should be a mechanism for writing off losses for virtual items. Perhaps this means we can convert from real government to virtual government! Why not, we already have taxes on virtual currency.

|10.17.06 @ 4:38PM|#

If the government wants to tax role-playing game assets they should collect in RPG currency. Runes or whatever.

|10.17.06 @ 4:48PM|#

"Where did you get all that sungrass, boy? Going to trade it for some heavy runecloth bandages.....yeah, right, hand it over."

|10.17.06 @ 5:01PM|#

If the government wants to tax role-playing game assets they should collect in RPG currency.

I'd be happy to pay them in rocket-propelled grenades.

Paul|10.17.06 @ 7:27PM|#

"Where did you get all that sungrass, boy? Going to trade it for some heavy runecloth bandages.....yeah, right, hand it over."

HAA! Poser! Dreamfoil is worth way more than Sungrass.

oh man, I'm busted...

|10.17.06 @ 10:38PM|#

I fail to see how the IRS is going to be able to collect one blessed cent from my level 50 Jedi Master. In fact, I'll just use Force Persuade on each tax collector to make him turn on and attack the IRS. If they won't turn, then I'll just let my saber do the talking.

|10.18.06 @ 12:36AM|#

My new WoW character

Rocknars, of the Accounting Clan

|10.18.06 @ 12:38AM|#

Brings up some interesting questions. One of the problems on Star Wars: Galaxies was rampant credit duping (virtual counterfeiting). Would the dupers be prosecuted for counterfeiting? Would we have anit-dumping laws to keep unscrupulous guilds from trying to price competitors out of business? The whole thing sounds a little stupid to me. Although I do remember that at some point in time they had to charge European players a 14.5% VAT, so I guess anything is possible.

|10.18.06 @ 4:12AM|#

So depressing...

|10.18.06 @ 10:09AM|#

On this topic, I just got this link from Reddit.
Not only are the taxmen coming for WoW, the Public health types will be there soon. It is inevitable.

|10.18.06 @ 11:09AM|#

mk:

That is exactly why I never bought that game. I already spend enough time at my computer. I would have cracked out on WoW. I know my weaknesses.