October 18, 2006

• Can I pay with a virtual cheque?
• "Play Money: Or, How I Quit My Day Job and Made Millions Trading Virtual Loot, But It's Anyone's Guess Why I'm Trying To Make Piddly Thousands With This Book."
• God forbid anyone exchange anything with anyone else without the gubment getting a piece of the action.
• Fuck 'em all. Fuck the government. Subvert & overthrow.
• If the goods and currency remain virtual, they're untaxable. As soon as you find some sucker fellow player who is willing to pay you real money for what you've got, then your profit becomes taxable. It looks like the government is simply trying to monitor these exchanges to catch those who aren't reporting their non-virtual profits. Which is as it should be.
• Seriously, though, I can see how a sales tax can apply to the purchase of these virtual dollars, and I can see how cashing out can attract a cap gains. But within the virtual ecomony, no money is being exchanged. You haven't made any money until you cash out. There's a parallel with the stock market, but there could just as easily be a parallel with hockey cards. You pay sales tax on the purchase of the cards, and trade them around within a confined community, and should you cash out and sell a particular card for however much, that would attract cap gains. But to be taxed on each trade within that limited economy -- an economy which does not use dollars as its base would logically imply that the goods being traded (be them hockey cards or virtual dollars)are equivalent to U.S. dollars. At that point, you have non-governmental private sources creating legitimate currency, sanctioned by the U.S. government. Which opens up a whole whack of problems, such as unbridled inflation, rampant speculation on goods with no inherent worth, etc., etc. Not only that, but you would have to open up the model to real-world alternate economies as well, such as casinos or Walt Disney World. I don't think they've thought this through.
• Another way to think about this is how you deal with a bank. It's easiest to think that you have so much money on deposit with the bank, but strictly speaking, legally, that's not the case. You only have the exchange of real money for certain contractual rights. A virtual economy would be no different. You put real money in, get contractual rights in exchange. After that, you're trading in rights, not money -- it's just easier to think of those rights in terms of dollars. Once you exercize such contractual rights to exchange them for real cash, that's when tax can apply. You just have to remember that it's not actual dollars being traded back and forth between you and the bank, but the rights to actual dollars. Such virtual economies would be no different.
• I haven't read the book yet, but from what I've read about it, the title of the book Play Money is inaccurate as the author did not make millions, but rather was hard pressed to make his initial goal of tens of thousands of dollars (I think the number I read was $55,000, but I may be wrong). The title sounds like one of those get-rich-quick books like, "I made millions working from home and you can too!" but reviews i've read make it sound more like investigative journalism. Regarding taxes in virtual worlds, there's no way the USA would impliment a sales tax since there is no national sales tax. If you make money on it, then you are supposed to report it regardless of where the money came from (talk to Al Capone about that). Property taxes aren't nation either, are they? So I'm not sure what they could tax except earnings which are already supposed to be taxed anyway. The Second Life game is tied to US dollars (and perhaps currency in other countries? I've never played it, so I don't know) and you can buy in-game currency and also convert in-game currency to US dollars.
• I just happened to be listening to 10/17/06 edition of Buzz Out Loud and they made a good point that perhaps the government is worried about people making a lot of virtual cash, but then never converting it back to US dollars. So I could have a billion Linden Dollars that I've made from selling in-game items, but if I never turn it into US dollars, the government can't get their hands on it because I haven't yet converted it into taxable income? In that case, I suppose that it is something like the stock market or something. So capital gains taxes then I suppose? Any accountants in the house?
• path is a retired accountant, i think.
• Capital gains are only taxed when you redeem them.
• Ah well, there go my days of scamming noobs by selling them shit gear for inflated prices.
• They'll get onto this one once they figure out how to charge postage on emails. Never happen.
• Though taxes were never my specialty (the regulations in the US are batshit insane, from my perspective and I spent all my time in tax courses in a rage,) I can say that, at least within the rules most of us encounter, rocket88 and Capt. Renault are correct. (I think rocket88 is an accountant, and the Capt. has knowledge of the legal stuff.) Gains and losses are only recognized when they are actually cashed out. An example would be a property which was purchased decades ago for $20,000 and appreciated over the years, then could have sold for $350,000 at the top of the real estate bubble, but actually sold for $300,000 when the market cooled off. The taxable gain would be $280,000. And, yes, sales and property taxes are the baliwick of the states. (Well, the Feds do have an excise tax on some items, and it looks a bit like a sales tax.) My impression, from the article, is not so much that "they" are planning jump on taxing virtual money so much as trying to get a handle on the shape of the virtual economies. The article indicates that they are addressing issues about ownership and property rights, as well as when income becomes taxable. I would add that questions of jurisdiction (which government has authority over any specific transaction) could be knotty, and can think of some questions only an accountant would care about.
• I think rocket88 is an accountant I didn't have the personality to be an accountant, so I had to settle for engineer.
• Shh! I was trying to give you credibility for the right answer. Also, don't engineers know everything?
• No, that's us librarians! *hides in the stacks*
• This seems really silly on its face, but there are some interesting issues here. It seems silly, on its face, to pay taxes on items that can only be used within the virtual world -- why would the govt get a cut of that helicopter/car/house you bought with in-game money ("Linden Dollars" or "L$" in Second Life)? Sure, it's stupid to tax the in-game transactions. Pay taxes when you cash out; seems pretty cut and dry. But what happens when people start trading virtual currency for real good & services? I'll give you 500,000L$ for that mountain bike. Host my website for me and I'll kick you 100,000L$/month. It's free money -- "free" as in beer and "free" as in speech. There's an actual issue here, an awesome li'l loophole, and it will be interesting to see how it's addressed. (Is it legal to trade casino tokens or Disney Dollars for actual goods and services?? Seems this bridge must have been crossed before...) I'm also curious to see how criminal law deals with virtual worlds, specifically virtual property rights. What if you get killed or scammed in-game and somebody steals your in-game swag that's worth actual money? You got mugged in WoW and they steal your Sword of a Thousand Truths, worth $500+ on eBay. Has real theft or fraud actually taken place? Or is it "all part of the game"? What if it's as a result of a script exploit in Second Life -- i.e., not intented to be "part of the game" at all?? Hell yes -- interesting times! I didn't have the personality to be an accountant, so I had to settle for engineer. Funniest thing I've read all day! (I didn't have the personality for engineering (MSME), so I went into computers.)
• FBI investigators have visited Second Life's virtual Internet casinos at the invitation of the virtual world's creator Linden Lab