Experts are saying that it's a question of when, not if, the government will decide to start requiring game manufacturers to report in-game earnings of it's players to the IRS. Let me say that again to be extra clear: They're claiming that it is only a matter of time before the government starts taking steps to tax your WoW gold, your Anarchy Online credits, and your EverQuest platinum. That set of uber armor? Yeah, that'll carry some kind of virtual property tax too.
Why? Because it has value, of course. Because gamers can convert their in-game riches into real world dollars.
But what does this all mean to you and me? What's the picture really look like?
Obviously I can't say for certain, for one thing the anticipated laws don't yet exist, and for another thing I'm not an economics expert. I'm more of the armchair quarterback when it comes to virtual economies, and when you start tossing in tax law well. . . anyone but a Vogon would get confused there.
I can tell you this: It would change gaming as we know it. Maybe not the asteroid-that-wiped-out-the-dinosaurs kind of changing gaming as we know it, but there would be a very real and tangible alteration to the nature of gaming. Think about it: every thing you earn in-game represents a potential increase in your yearly taxes. Yeah. Not so much “fun and games" when you have to keep track of how much you've leveled in the last fiscal year, eh?
However, it will rock the game companies’ worlds too. How can you justify penalizing a player for converting their virtual holdings into real cash if the US Government is taxing them based on those virtual holdings? Can you say class-action lawsuit? Yeah, that's what I'm thinking. If virtual property is taxable, and a game company will not allow you to convert that asset into any other form of asset, how is that not essentially stealing? It'd be like having a car that you have to pay a monthly fee to drive, pay taxes on, but you're not allowed to sell it for anything other than another car from the same manufacturer.
See, if it's a taxable commodity the game companies pretty much have to permit players to trade it across the virtual/real border. If I'm being taxed real money, I'd better be able to sell that Sword of Server Slaying for some real cash if I decide the taxes are too much. Even if the law doesn't prevent the game companies from holding the virtual goods hostage and forbidden real world sales, there will be games that change this rule (or are created without it) and those games will inevitably win out over their Neanderthal brothers.
Taxation of virtual goods could wind up forcing a lot more equality into the industry, but personally I'm not anxious to see it happen. I'd rather have my recreation be recreational. If I want to spend my weekends down at the lake drowning worms and trying to catch fish, I'd like the government to keep their nose the heck out of it. Sales tax on my rod and reel? Fine. Charge me for a fishing license? Whatever. Start making me file taxes on the perceived value of the fish I catch? That would take all the fun out of it.
Personally I think the only time that taxes should come into gaming is when you're reporting your real world income from selling virtual merchandise. (Which everyone ought to do, since it's jail time if you don't and get caught. ) I don't get taxed for the things I write that aren't sold, why should I be taxed for the virtual goods I earn that aren't sold? If I have a closet full of clothes I don't have to pay taxes on them, but if I sell them I have to pay taxes on the earnings.
At least it probably won't destroy the concept of MMORPG's if the government starts taking a cut of the goods. Probably.
Besides, there's always the option of off-shore companies hosting servers outside the reach of Uncle Sam's tax arm. If there's one thing we know for certain about taxes, it's that enough money will buy your way out of most of them and the game companies are nothing if not wealthy.
This article is used with permission from http://www.gamingpays.com/blog and/or http://www.looterslounge.com
For current news please see these sources.