Has the Time Come to Start Taxing Online Game Currency?

Has the Time Come to Start Taxing Online Game Currency?

If you’ve been making out like a bandit playing Farmville or Second Life or any other online game that awards prizes in the form of virtual currency, the IRS may want to talk to you.

Although the idea of taxing virtual currency may seem to make as much sense as trying to tax people’s winnings in the board game Monopoly™, tax experts are now saying that a virtual income tax may be in our future. The reason is that virtual currency, unlike Monopoly™ money, has come over the last few years to have value in the real world of dollars and euros. Online auction sites let people bid on real world items with virtual currency, and sites like eBay treat Second Life as a real merchant, allowing users to exchange its virtual “Linden dollars” for items they buy or sell.

Thus virtual currency can be exchanged for items of real value, including actual currency, and this is a big business, with estimated global profits of $14 billion a year. China already taxes the virtual currency of Internet users, the U.S. Congress has looked into the idea, and in 2009 Sweden’s Financial Supervisory Authority granted a banking license to a subsidiary Swedish virtual game developer. As AllGov reported almost two years ago, four players of Second Life sued the game’s creator, Linden Labs, for taking their virtual property. Taxing virtual wealth may just be the natural next step in the ongoing “virtualization” of society.

http://www.allgov.com/Unusual_News/ViewNews/Has_the_Time_Come_to_Start_Taxing_Online_Game_Currency_120304