The Ethics of Taxing MMORPG Trades

[Lemur]

Ars Technica is running an intresting article about whether or not the IRS could tax online RPG trades and income. (http://arstechnica.com/news.ars/post/20060106-5923.html) The essence:


The IRS has well established policies regarding barters, and businesses that engage in barter transactions are expected to declare the fair market value of traded items as taxable income. When players trade items within a game, the transaction is theoretically subject to barter tax policy regardless of whether or not real world currency is involved. Does that mean that Blizzard should be submitting a Form 1099-B, "Proceeds from Broker and Barter Exchange Transactions," for every World of Warcraft player?

And in case you'd like a bit more context, here's the original aricle by the astute auctioneer. (http://www.legalaffairs.org/issues/January-February-2006/feature_dibbell_janfeb06.msp)

[Kaiser of Arabia]

lol won't happen. That's just rediculious.

[lars573]

I really don't think that would work. I haven't read all the details, I'm going from a cost/benefits ratio. The IRS would only be able to tax trade in MMO's that had the physical servers located in US territory. The IRS would only be able to tax legal residents of the US. Unless they were going to charge a trade tariff on people trading from outside the US with someone inside the US. The only way to determine who in a particular server is from the US is too track the IP's of everyone who joins. Then they'd have to determine who is liable for taxation.

I could go on but the ammount of money they'd have to spend just to tax you selling a loaf of E-bread in Azeroth is just not worth it.

[Al Khalifah]

That's the stupidest thing I've ever heard.

If that happened, all the nerds would just move to the Isle Of Man to avoid taxation.

[Leet Eriksson]

That's the stupidest thing I've ever heard.

If that happened, all the nerds would just move to the Isle Of Man to avoid taxation.

Hey why not?

They could socialise now that most of them are pretty close. ~;p

[Fragony]

And this isn't in the Netherlands????

[Soulforged]

The IRS has well established policies regarding barters, and businesses that engage in barter transactions are expected to declare the fair market value of traded items as taxable income. When players trade items within a game, the transaction is theoretically subject to barter tax policy regardless of whether or not real world currency is involved. Does that mean that Blizzard should be submitting a Form 1099-B, "Proceeds from Broker and Barter Exchange Transactions," for every World of Warcraft player?
Unethical and extreme. It won't happen, and if it happens you all should go to court and complain about abuse of rights, if that institution even exists in the common law.

[R'as al Ghul]

When players trade items within a game, the transaction is theoretically subject to barter tax policy regardless of whether or not real world currency is involved.

I have a logical problem with this. (might be cause I know nothing about tax law)
If a value X is subject to tax, you pay a percentage of X's value.
If X has no definded monetary value, then what (how much) are you paying?
There would need to be a fixed value for such items or the legislation
would need to categorize these values into value-groups!?
Are there real-world examples?

[A.Saturnus]

The IRS has well established policies regarding barters, and businesses that engage in barter transactions are expected to declare the fair market value of traded items as taxable income. When players trade items within a game, the transaction is theoretically subject to barter tax policy regardless of whether or not real world currency is involved. Does that mean that Blizzard should be submitting a Form 1099-B, "Proceeds from Broker and Barter Exchange Transactions," for every World of Warcraft player?

Trading WoW items or characters is a violation of the terms of use of WoW. In fact, any item and any character stays at any time the property of Blizzard Inc. Consequently, in-game trade is no real trade because no values are exchanged.