/spadassin/

1.07.2006

Are Virtual Goods Taxable?

Arstechnica has an interesting artice asking if goods in MMORPGs are taxable. As more and more people make money by trading online goods for offline cash, some are wondering if they should be reporting that to the IRS, and what laws apply.

In short, no one seems to be sure.
The local tax office employee was puzzled by the issue, and referred Dibbell to the IRS's Business and Specialty Tax Line, where another public servant attempted to unravel the mystery, and suggested that Dibbell seek authoritative judgment from the IRS. Despite the fact that no official conclusion was reached, each IRS representative along the way agreed that MMORPG bartering is probably taxable, but the absence of a clear regulatory policy means that the status of MMORPG trading will not change in the immediate future.
Given the controversy over sales tax on the internet, it could be years before anyone ever starts addressing this issue. Unless some jurisdiction decides to apply sales tax to in game sales, that is.

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