Second Life? First, Tax
December 26, 2006 at 9:18 am
From today’s Washington Post story on Second Life:
Congress has taken note and is completing a study of whether income in the virtual economy, such as from the sale of gowns that Brown makes, should be taxed by the Internal Revenue Service. The Joint Economic Committee of Congress is expected to issue its findings early next year.
“There seems to be a lack of ground rules in an area that would have explosive growth in the next decade or two,” said Christopher Frenze, the committee’s executive director.
So here’s the obvious question — why not virtual taxes?
richarda said,
December 26, 2006 @ 9:29 am
Bite your tongue!
Taran Rampersad (SL: Nobody Fugazi) said,
December 26, 2006 @ 10:30 am
“First, what is it you want us to pay taxes for? Tell me what I get and perhaps I’ll buy it.”
– Robert A. Heinlen, The Moon Is a Harsh Mistress
That about says it all.
richarda said,
December 26, 2006 @ 1:06 pm
Taran: That’s what everyone wants to know about one state’s sales/use taxes imposed on web & mail-order purchases from another state!
Milt's Now A Freedman said,
December 26, 2006 @ 1:49 pm
why not virtual taxes?
Sure: if you can pay with virtual money.
Santiago said,
December 26, 2006 @ 2:18 pm
“Look, its a cash cow. Lets milk it for all its worth!”
Congradulations, America. This is now the kind of thing your government concerns itself with.
Dave said,
December 26, 2006 @ 2:20 pm
Why not virtual taxes? Because I don’t want to have to pay the IRS $2 every time I cross “Go” in monopoly.
If you can exchange virtual money for real money, getting the real money is “income”, not the accumulation of the virtual money. If you can’t exchange it for real money, then you shouldn’t have to pay real money for tax on it.
Kevin Murphy said,
December 26, 2006 @ 3:55 pm
IF you tax this, it should only be taxed at the point where it is exchanged for real money. Until then it’s just paper profit. Now the interesting question is “is it capital gains?” What is the basis? How are virtual expenses calculated? Is your real-world computer expensable? These are NOT trivial questions….
Adam Lipkin said,
December 26, 2006 @ 4:25 pm
Lindens, the currency used in Second Life, are exchangeable for US dollars, which is why there’s a tax consideration. If people are making and exchanging enough Lindens to support themselves in the real world, how is that any different from taxing their salary from working as an engineer or a plumber?
(Which isn’t to take a stand either way on taxes in general, but taxing income made via a game seems consistant with current tax policy).
_Jon said,
December 26, 2006 @ 5:04 pm
If the virtual monies are exchanged for real monies, then they can be taxed as income.
If the income exceeds the expenses, then a tax must be paid.
The most important point, however, is that the items - including Lindens in SL - are the property of the software operator. Read the EULA. While those objects are in use within the game, they do not belong to the player - they belong to the company.
The IRS can’t tax you for something you don’t own in that way.
Only when you claim ownership, then exchange it for a good, service, or dollars can you be taxed.
Magic: The Gathering did extensive research in this area.
Taran Rampersad (SL: Nobody Fugazi) said,
December 27, 2006 @ 10:49 am
@_Jon: “The most important point, however, is that the items - including Lindens in SL - are the property of the software operator. Read the EULA. While those objects are in use within the game, they do not belong to the player - they belong to the company.”
Huh? That is nowhere in the terms of service for Linden Labs. In fact, Linden Labs is the first to allow people to own their creations within a virtual world.
In this context, I suggest you read the Terms of Service: http://secondlife.com/corporate/tos.php
madned said,
January 4, 2007 @ 8:43 pm
terms 1.4 & 1.5
“Second Life “currency” is a limited license right…
Second Life offers an exchange, called LindeX, for the trading of Linden Dollars, which uses the terms “buy” and “sell” to indicate the transfer of license rights to use Linden Dollars. Use and regulation of LindeX is at Linden Lab’s sole discretion.”
if i’m reading correctly the “L$” are sole property of Linden Labs but their use is granted by limited license. by which players can scorekeep for transactions.
Kamen said,
January 22, 2007 @ 7:25 pm
OK, so then just how ARE Lindens traded/exchanged/redeemed for real dollars? The SL website doesnt seem to be too forthcoming on this. Is it through Linden Labs? Some third party? Player run organizations within the game? Where does the actual money come from?
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