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The Taxman Cometh to Virtual Worlds
By: Terri Wells
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    Table of Contents:
  • The Taxman Cometh to Virtual Worlds
  • Yes, They are Interested. Why?
  • So What Might Be Taxable?
  • Death, Taxes, and Bureaucracy

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    The Taxman Cometh to Virtual Worlds

    (Page 1 of 4 )

    Hes probably more feared and hated than any nasty giant or orc horde to meet the might of a player character or guild. Like a dragon, hes attracted to treasure; like a vampire, hes been accused of sucking the lifes blood out of his victims. Hes the tax man, hes real, and he just might be the unavoidable addition to MMORPGs that no player can defeat.

    I'm not talking about a monster; I'm talking about the Internal Revenue Service. If you think the IRS can't tax virtual assets because they have no inherent value, think again. The situation is a lot more tangled than you might suppose at first glance.

    The whole idea of the IRS taxing virtual goods probably hit most people's radars a few years ago, when journalist Julian Dibbell stated in his blog that "On April 15, 2004, I will truthfully report to the IRS that my primary source of income is the sale of imaginary goods, and that I earn more from it, on a monthly basis, than I have ever earned as a professional writer." He didn't actually reach this goal, but the fact that he thought he could is enough to make many of us pause and think, non-gamers and hardcore adventurers alike.

    In Dibbell's case, he was referring to Ultima Online. He believed he could turn that much of a profit from selling goods he obtained by playing the game to other players for real currency, not game gold pieces. As of this writing, a search for Ultima Online on eBay turns up more than 700 items, including gold, accounts, a singing crystal ball (or most of the shards anyway), a barbed runic sewing kit for making virtual armor, and many more. A search for EverQuest turns up nearly 400 items. Search for the insanely popular World of Warcraft on eBay, and you get a list of related searches plus suggested refinements (including "world of warcraft account," "world of warcraft character," and "world of warcraft gold"). It's no wonder, too; you wouldn't want to scroll through all 5000+ WoW-related items now, would you?

    All of these people are literally making money from something that doesn't exist in the real world except as "ones and zeroes on a database we're allowing you to play in," reflected game designer Sam Lewis, who has worked on Star Wars Galaxies. "The tax laws don't know how to behave because these are virtual items."

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