New Congress Law

[M_D_K_48117]

The congress is pushing to tax for ingame items. So when you trade your Dragon Shield, a percent of that you will have to pay for in real cash, f2p or not. This is aimed at mainly console games, but many other computer games will feel the impact. Now when your playing counter strike, you will be taxed when you buy weapons at the start of a match, and while playing other games when you pick up a weapon you will have to pay real money for that to.

 

 

 

Discuss.

 

 

 

Link to Article

[foofoomagoo]

that isnt what they mean. They are talking about real world item trading not ingame trading

[M_D_K_48117]

"...taxing in-world commerce..."

[Stihl]

Pardon my fractured knowledge of economies and taxation (or don't, as I expect will be the case), but it seems to me that the taxability of assets relies on their liquidity. In other words, you pay property tax because the property could be legally exchanged for cash (at roughly market value) at any given time without terrible difficulty.

 

 

 

Now, for something like Station Exchange (a supported method of buying and selling EQ2 items and characters for real money on a few designated servers) it does admittedly make some sense to tax virtual items, or at least those transactions involving real money. After all, if my neighbor is making a living working 9-to-5 training and selling dark elves and orcs, I'd like to see his [wagon] pay some taxes.

 

 

 

On the other hand, I would think games like Runescape which actively punish real-money trading present a bit of a stumbling block: any sale of RS items or characters for real cash renders the value of involved accounts null and void because of the inevitable ban(s). To draw a parallel, Runescape items begin to look a bit like contraband - any traceable transaction to be taxed would lead to your leet stoof being confiscated anyway. If that's not poor liquidity, well, I guess I don't know what is.

[M_D_K_48117]

That's the main contreversy. It's not really the governments position to tax a companies game, it's their game and therefore the money you spend in it is theirs. And yeah, if someone is making a living selling dwarves, its against the rules already, but he should be taxed. I wouldn't mind being taxed for my xbox live subscriptions or runescape membership, but in-world money and trading makes no sense.

[Bobbington]

Bless the real world trading rule.

 

 

 

Thsi rule means the runescape cash holds no real world value, and as as such is worthless.... this means it cannot be taxed. Also you must remember thatw e own nothing our accounts and it's contents will always remian property of Jagex, and so we are just re araning how they store their data of whats where.

 

 

 

This tax is aimed at games such as second life where people can real world trade items.

[Ginger_Warrior]

Well, if this only applies to Real World item trading (which is against Jagex's rules anyway), then maybe it would actually force Jagex into dealing with this problem. Jagex claims that one of the main reasons is Chinese 'sweatshops', who continuously play the game and then sell RS GP to US-based sites, who then go on to sell the gold.

 

 

 

Think about it - the person who is taxed is the person that owns our property. Now, Jagex clearly state that all accounts, in-game items and anything to do with our characters in-game are their property, so if anything gets traded in the Real World, it will be them that pays the bill for it, not the people who are trading. If this is true, then it forces Jagex to actually take note of this problem, and deal with it at its source, instead of waiting for it to filter down into their game and then taking action against high-level accounts who buy the items.

[darkblade986]

As stated before, all of our items remain the property of Jagex, and we have no legal right or ability to sell it for real world money or services. Those who do so are not only breaking local Runescape rules, but potentially many legally binding Goverment laws, which could potentially land them jail time.

 

 

 

As for the issue of taxing a video game commerce, I think what it's referring to is games where you must pay money for extra content. Examples would be for things like with how Gran Turismo 5 (or one of the upcoming Gran Turismo games) for the Playstation 3 will work. For that, you will receive the disc, which already has everything on it. You will be required, however, to pay money to unlock some of the content. It's that transaction that I think they are referring to.

[King_Peter18]

Congress are a bunch of *sses, they are trying to impose taxes on illegal trades. I compare congress to a bunch of lobotomized people in one area. How the hell can you tax illegal trade of copyrighted items? Thats like, congress saying "Hmm, I say we should tax the DVD pirates for every DVD they sell." instead of shutting them down.

 

 

 

What fools.

 

 

 

Now, Maple Story, and Silk road. Sure. You can tax their items.

[Hi9im8Here7]

Congress are a bunch of *sses, they are trying to impose taxes on illegal trades. I compare congress to a bunch of lobotomized people in one area. How the hell can you tax illegal trade of copyrighted items? Thats like, congress saying "Hmm, I say we should tax the DVD pirates for every DVD they sell." instead of shutting them down.

 

 

 

What fools.

 

 

 

Now, Maple Story, and Silk road. Sure. You can tax their items.

 

 

 

Government bodies do that all the time to get more money. They get so worked up with the profit they're going to make they don't realize the moral implication (though I seriously doubt this bill was actually intended for illegal trading).

[King_Peter18]

I wouldn't be surprised if it did. Lol.

 

 

 

Gimmie your oil, oh, and your video game profits. Whahaha. :twisted: :twisted: :twisted:

[King_Peter18]

NEW YORK--If you are a hard-core player of virtual worlds like World of Warcraft, Second Life, EverQuest or There, IRS form 1099 may someday soon take on a new meaning for you.

 

 

 

That's because game publishers may well in the not-too-distant future have to send the forms--which individuals receive when earning nonemployee income from companies or institutions--to virtual world players engaging in transactions for valuable items like Ultima Online castles, EverQuest weapons or Second Life currency, even when those players don't convert the assets into cash.

 

 

 

Most governments are only beginning to become aware of the substantial economic activity in online games, but the games' rapid growth and the substantial value of the many virtual assets changing hands in them is almost certain to bring them into the popular consciousness.

 

 

 

"Given growth rates of 10 to 15 percent a month, the question is when, not if, Congress and IRS start paying attention to these issues," said Dan Miller, a senior economist with the Congress' Joint Economic Committee, who is also a fan of virtual worlds. "So it is incumbent on us to set the terms and the debate so we have a shaped tax policy toward virtual worlds and virtual economies in a favorable way."

 

 

 

Miller's comments came during a Saturday panel called "Tax and Finance" at the State of Play/Terra Nova symposium, the fourth annual gathering at New York Law School of academics, lawyers and other scholars to talk about the legal, social and economic issues surrounding virtual worlds.

 

"Given growth rates of 10 to 15 percent a month, the question is when, not if, Congress and IRS start paying attention to these issues."

 

-- Dan Miller, senior economist

 

 

 

The panel was formed in the context of recent questions--first raised by author Julian Dibbel in his book Play Money and in an article he wrote earlier in Legal Affairs magazine--about whether the transfer of virtual assets, or players' acquisition of virtual loot by, for example, killing monsters, creates taxable events.

 

 

 

"If you haven't misspent hours battling an Arctic Ogre Lord near an Ice Dungeon or been equally profligate spending time reading the published works of the Internal Revenue Service," Dibbell's article began, "you probably haven't wondered whether the United States government will someday tax your virtual winnings from games played over the Internet. The real question is: Why hasn't it happened already?"

 

 

 

And while Miller's committee began examining these issues in October, his comments Saturday suggested there could be wider future congressional oversight and a revised IRS tax policy. That's in spite of the fact that Miller said his committee, and Congress in general, is not out to gouge virtual world players.

 

 

 

"The Joint Economic Committee is not seeking to impose a new tax on virtual economies," Miller said. "We have a very clear record of supporting lower taxes in free market."

 

 

 

Meanwhile, Miller's fellow panelists also weighed in Saturday on Dibbel's question, and came at it from several different perspectives.

 

 

 

First up was William LaPiana, a wills, trusts and estates professor at New York Law School. He approached the question by examining whether estate taxes would accrue on the transfer to an heir of a sizable collection of valuable virtual assets.

 

 

 

LaPiana said that there is little question that the transfer of such assets could be taxable, since it is property. However, he did say that the taxes would accrue only if the total value of the estate's assets, at the time of death, exceeded the limit set by the state in which the deceased had lived. In most cases, he said, that amount is $2 million, though some states, like New York and New Jersey, have lower limits.

 

 

 

There are not that many instances in which someone has that level of virtual assets, although the recent reports that Second Life land mogul Anshe Chung had amassed $1 million in virtual land and other holdings certainly suggest her heirs might have some interesting inheritance tax issues if she dies.

 

 

 

Page 2:

 

 

 

More problematic, LaPiana said, would be laws that require estate administrators to take on responsibility for the proper transfer of assets to beneficiaries. Because most virtual assets are locked behind password-protected accounts, it would be incumbent on the administrator to try to figure out how to get access to those accounts.

 

 

 

"Whoever is going to run your estate...has an absolute obligation to collect all your property and make sure that it goes to the (proper) people," LaPiana said. "How do I make sure my trustee has access to this stuff after I die? These are all problems we're going to have to face."

 

 

 

Next up, Texas Tech University School of Law tax professor Bryan Camp addressed Dibbel's question with a warning.

 

 

 

"Be careful what you ask for," Camp said, "because tax is always behind the corner. Tax is the shadow life" to many issues.

 

 

 

Camp said that that section 61 of the U.S. tax code, a 1913 provision, stated clearly that all income, "from whatever source derived," is taxable.

 

 

 

Thus, the question of whether the transfer of virtual assets is taxable boils down to determining if there is a profit afterward.

 

 

 

As an example, he explained that if two people were to exchange copies of books, one of which is worth $30 and the other worth $24, the person ending up with the more expensive volume would have acquired $6 of taxable income.

 

 

 

Another example, he said, was Kyle MacDonald's much-publicized quest to trade up from a red paper clip to a house, which was ultimately successful.

 

 

 

"He has massive tax issues," said Camp of MacDonald. "He started with (the value of) a paper clip and ended up with (the value of) a house."

 

 

 

MacDonald is Canadian, though, which puts him under Canadian tax law, which Camp did not address.

 

 

 

His point is well taken, though: in determining tax liability--regardless of whether the IRS would likely try to collect--it is necessary to figure out how much profit has derived from a transaction.

 

 

 

However, Camp also said he is working on a legal journal article in which he will argue that at least some profits from transfers of virtual goods are not taxable.

 

 

 

For his part, Miller--who spoke last on the panel--said the Joint Economic Committee is expected to produce a report early next year that will address three goals.

 

 

 

First, he said, the report will address the areas, such as tax, cybercrime and education, where virtual worlds connect with public policy and will therefore educate the committee's staff members about such issues.

 

 

 

Next, the report will seek to identify future uses of virtual worlds, including those by commercial, nonprofit and governmental bodies.

 

 

 

And lastly, the report will specifically investigate the tax issues raised by virtual worlds.

 

 

 

"We will look at factual technical questions," Miller said, "like what is a taxable event in a virtual world."

 

 

 

And that's where the answer to Dibbel's question is likely to come into clear focus, he suggested.

 

 

 

"The key takeaway for the people" at State of Play, Miller said, "is that congressional and IRS interest in this issue is simply a matter of time."

 

 

 

This is going to open up a can of worms that every one will hate.

 

 

 

If the virtual assets can be taxed, that means the government then recognizes/acknowleges that it has value.

 

 

 

This fundamental idea HAS to be understood as the following WILL occur ONCE taxation occurs.

 

 

 

As an asset, it could force insurance companies to have to insure said assets. Are they going to want to do that? They may not have a choice as the government may regulate them to do so.

 

 

 

Once this is done, that means if said assets are lost, the insurance companies may come in and either ask that the software companies either restore said assets or pay up as their environment may have caused said loss unless said loss was caused by a virtual tornado or flood (as is the case in some sims game) but then that will open a really big can of worms since the companies program caused said tornado/flood...

 

 

 

Software companies are NOT going to want to have to put any more into a game than they have to.

 

Restoring items, etc, may cause a whole change to the back end so that tracking can be done on items just to be sure that claimed losses were indeed just that and not some person selling the item then claiming a game glitch took the item.

 

 

 

 

 

It never ceases to amaze me what the IRS or our govt will come up with next.

 

Taxing virtual assets? So how do we pay this tax, with virtual money? So does that mean we will have a virtual tax form to be filled out online? Will there be a virtual IRS as well? Who will govern this virtual IRS, a virtual govt? So does that mean we have to have virtual elections and what about a constitution? Watch out for those virtual chadds!

 

 

 

How does one put a real life monetary value on something that is virtual? More importantly what if the game crashes and I lose all my virtual assets? Will the virtual IRS still tax me on those lost assets? Will I be able to purchase virtual insurance on virtual assets? Hmm perhaps I should look into starting a virtual insurance company to cover virtual assets, anyone want to join me in a virtual partnership?

 

 

 

Could I have virtual children and they would count as deductions on my virtual tax form? Hmmm what would virtual pregnancies be like, or better yet virtual labor! Clearly the possibilities are endless.

 

 

 

The real danger here is the IRS taxing personal websites as property. I purchase or rather rent a domain name, and then I pay for housing. My web site is for information and/or pleasure; there is no monetary gain from the site. Why should I pay property tax on my website?

 

 

 

I dont really own the domain, I rent it! I am paying someone else for hosting the site; they are in the finical gain not me. We read these articles and laugh off the possibility of a virtual tax, but this notion of virtual tax has many roads, we need to very cautious about this virtual tax idea.

 

 

 

 

 

 

Could this happen? With Congress the way they are today. Probably. The IRS is, a monster at best. But thats probably an understatement.

 

 

 

First and foremost, let me pose this question:

 

 

 

Do I pay taxes on my Monopoly earnings? If someone lands on Park Place with a Hotel, do I send Uncle Sam a pink fifty?

 

 

 

The taxation of a virtual economy is pointless, because the taxes would have to be paid in the universal medium of the economy. Okay, I gained 350 gold last week when grinding Timbermaw Reputation. If you really want to tax it, you can have your 75 gold. What are you going to do with it? Save it up and buy your own mount?

 

 

 

This entire thing is a great idea, I personally believe. Because I personally believe that the sale of online virtual property is both immoral and illegal. The items and gold are properties of the companies who run the virtual world, not yours to trade. That's like writing "Microsoft" on a piece of paper and saying that you're selling shares of Microsoft.

 

 

 

The form is likely (and I'm basing this purely on conjecture) a means to force degenerates that ARE selling virtual property to report it to the IRS. This should be done anyway. If you make twenty thousand dollars in a fiscal year by selling virtual property, you're damn right it must be documented and taxed. That's the way the world works. If people aren't documenting it and paying taxes on it like they should, then the IRS should be getting involved.

 

 

 

Once they DO start documenting it, it will be easier for law enforcement to site the bastards for making money off of someone else's intellectual property.

 

 

 

In summary, taxing the virtual economy will not, and cannot happen. There are way too many variables, such as the age of children playing the games. Are you really going to charge a 7 year old boy because he got 30 gold for selling a BoE Blue?

 

 

 

However, taxation of personal gains due to the sale of virtual properties can, should, and will happen. So stop selling gold, stop selling items, stop trading accounts. This is all in violation of the Terms of Use that these games sets forth and you are breaking contracts. The IRS will find you, and they should take your livelihood for your crimes against Video Game Economy.

 

 

 

Most EULA's specify that all the items in the game, and accounts, belong to the company running the game. Therefore, in these cases it is not income to an individual, but a relocation of existing assets internal to a company to different 'managing units', in this case users.

 

 

 

Additionally, most accounts are non-transferrable, so in the case of death, there would be nothing for the heirs. The only way the estate could benefit would be if the items were sold on 3rd party auction sites (which most games prohibit)

 

 

 

 

 

Lol, had to post this one comment.

 

 

 

They eavesdrop on your conversations, arrest and shoot at you for no reason. When they get caught, they just use the term "terrorism" as their defense and their criminal acts are swept under the rug.

 

Face it, they are the real terror threat to American citizens.

 

 

 

 

 

The title is a blatant fear-mongering attention grab. Taxation of virtual assets is by no means "inevitable". I'm surprised a banner ad for tinfoil hats isn't included with the article.

 

 

 

LIAR! LIAR! LIAR! You blatant liar, you boar. Oh, do you like my hat? Its made of tin foil.

[Ginger_Warrior]

You can't tax an illegal trade... because that in itself legitimises it. Therefore, I don't actually see how anyone could tax the Real World Trading market, since as the property being sold is effectively stolen from Jagex...

[ChickyBee32]

Thank god I'm Australian and that Jagex is a British company. American laws will not apply to my account.

 

 

 

 

 

First up - I'm getting the impression they're talking about the pretty gold pixels. Not real world trading. So that's what my post is about?

 

 

 

Now seriously... how do they expect to enforce this? US based accounts only? How will they decide where an account is based? From the IP? From what you put as your country of origin?

 

 

 

Will it be where the company is based? So if I'm playing a game which company is based in America, I can be taxed no matter where I live?

 

 

 

I'm also curious about how they expect people to pay for this, especially considering the majority of RS players are teenagers and probably wouldn't have a regular income. (I know, generalization, no need to get mad). Then of course, how would they be able to check someone's worth?

 

Log into their account? Ask Jagex to do it? Would Jagex, as a UK based company be obliged to share names and details of player accounts?

 

 

 

I know it's all very stream of conciousness, but I'm only half awake atm.

[Hi9im8Here7]

Those idiots in Congress have obviously never played an MMORPG. This is the stupidest idea i've ever heard of. And to think until now I actually didn't mind the IRS... :?

 

 

 

If this bill passes we might as well rename america stupididiotsville. O and Peter, can you post a URL from the site you got those quotes?

[King_Peter18]

You can't tax an illegal trade... because that in itself legitimises it. Therefore, I don't actually see how anyone could tax the Real World Trading market, since as the property being sold is effectively stolen from Jagex...

 

 

 

 

 

Replace the word Assets with game currency. Hypothetically, the GP you earn in RS would be taxed by the IRS. But, since RS is UK based. RS gets out of it. Unless the IRS starts banging on Andrew and Paul's front doors and threatening them. We should be ok. :uhh:

 

 

 

 

 

Thank god I'm Australian and that Jagex is a British company. American laws will not apply to my account.

 

 

 

I wish I was.

 

 

 

 

 

First up - I'm getting the impression they're talking about the pretty gold pixels. Not real world trading. So that's what my post is about?

 

 

 

I believe so. How they will make it work, who knows.

 

 

 

Now seriously... how do they expect to enforce this? US based accounts only? How will they decide where an account is based? From the IP? From what you put as your country of origin?

 

 

 

Dunno, glad they have proxies. \

 

 

 

Will it be where the company is based? So if I'm playing a game which company is based in America, I can be taxed no matter where I live?

 

 

 

I hope not. I'm not sure though..

 

 

 

I'm also curious about how they expect people to pay for this, especially considering the majority of RS players are teenagers and probably wouldn't have a regular income. (I know, generalization, no need to get mad). Then of course, how would they be able to check someone's worth?

 

Log into their account? Ask Jagex to do it? Would Jagex, as a UK based company be obliged to share names and details of player accounts?

 

 

 

I know it's all very stream of conciousness, but I'm only half awake atm.

 

 

 

I assume it is talking about the amounts of Currency accumulated in-game. Because, players do not amount real money from any game, if they were talking about membership prices, already have those. If its talking about a sales tax on you buying items from games that sell items for real money, I don't know. I'll look into that.

 

 

 

Those idiots in Congress have obviously never played an MMORPG. This is the stupidest idea i've ever heard of. And to think until now I actually didn't mind the IRS... Confused

 

 

 

If this bill passes we might as well rename america stupididiotsville. O and Peter, can you post a URL from the site you got those quotes?

 

 

 

Sure, http://news.com.com/IRS+taxation+of+online+game+virtual+assets+inevitable/2100-1043_3-6140298.html

 

 

 

The article is almost a year old, congress has more 'pressing' things to worry about I assume.

 

 

 

America already is, that place. Lol, sadly. :wall:

[King_Peter18]

Ok, I did some research on 'Second Life'

 

 

 

US $ Exchanged on Lindex (in Millions)

 

 

 

 

 

 

 

 

 

 

In that now infamous article I concluded that Second Life's supposed economy wasn't a whole lot more than a typical pyramid scheme, where most of the money paid in by new recruits ends up realized by the organizers and a handful of early entrants. I was promptly assured by any number of the Second Life faithful that I was wrong, and that there were literally thousands upon thousands of real, financially valuable businesses making money, providing jobs, growing at astonishing rates, and redeeming their virtual Linden dollars (L$) for real money.

 

 

 

Second Life Stats

 

 

 

People basically pay to play, and get payed to play. I am beginning to understand the IRS and their thing now, I'll look over some of the other games that are listed.

 

 

 

http://randolfe.typepad.com/randolfe/2007/02/intersecting_tr.html

[Hi9im8Here7]

Ok, I did some research on 'Second Life'

 

 

 

US $ Exchanged on Lindex (in Millions)

 

 

 

 

 

 

 

 

 

 

In that now infamous article I concluded that Second Life's supposed economy wasn't a whole lot more than a typical pyramid scheme, where most of the money paid in by new recruits ends up realized by the organizers and a handful of early entrants. I was promptly assured by any number of the Second Life faithful that I was wrong, and that there were literally thousands upon thousands of real, financially valuable businesses making money, providing jobs, growing at astonishing rates, and redeeming their virtual Linden dollars (L$) for real money.

 

 

 

Second Life Stats

 

 

 

People basically pay to play, and get payed to play. I am beginning to understand the IRS and their thing now, I'll look over some of the other games that are listed.

 

 

 

http://randolfe.typepad.com/randolfe/2007/02/intersecting_tr.html

 

 

 

Since that company sells ingame money for real currency, I guess it makes sense to tax them. But it certainly wouldn't make any sense in runescape (that is, as long as rule 12 is observed : ). I really don't get what's going through someone's head when they're thinking of starting a virtual business in a game.

[Zuit]

one problem with this is Congress is usa only while runscape and jagex is in the uk so i dont see how this would ever happen

[King_Peter18]

Runescape doesn't apply to this bill. So, nothing to worry about.

 

 

 

I really don't get what's going through someone's head when they're thinking of starting a virtual business in a game.

 

 

 

People with bad Person to Person skills. :XD:

[M_D_K_48117]

I have come to the conclusion, I'm going to be a pimp. This way I can be a legal pimp, and pimp virtual hos. w00t, and I'll do it illegally and not pay the tax. o.O

[Ginger_Warrior]

:?: I think the only thing proven by this topic is how stupid such a bill would be...

[Alg]

so now ingame items have actual value? that could go wrong in so many ways...

 

 

 

if this does come to pass, and affects runescape...

 

rs player: "sw33t d chain!!!11!!!!"

 

IRS: that will be $5