[ARTICLE] SL being taxed?

"American gamers aren't likely to face dictatorial decrees to limit their play time, but within the next few years the courts will begin to examine how laws relating to taxes, copyright, and speech will apply in virtual worlds. In the near future, the IRS could require game developers to keep records of all the transactions that take place in virtual economies and tax players on their gains before any game currency is converted into dollars. "It's utterly implausible that it won't happen," says Dan Hunter, who has coauthored law review articles like "The Laws of the Virtual Worlds." A trickier issue is whether an avatar can be defamed: Will we see potion merchants suing for in-game slander, much like eBay sellers have litigated over negative feedback?

In the United States, virtual worlds could eventually have the same legal status as another lucrative recreation industry: pro sports. The NHL isn't exempt from federal legislation like labor, antitrust, and drug laws. But inside the "magic circle," on the field of play, sports leagues are given great latitude to make judgments, even though jobs, endorsement contracts, and the value of team franchises hang in the balance.

For example, the government lets referees police behavior in a hockey rink that would normally be the purview of local prosecutors. (Try high-sticking your mail carrier to experience the difference.) But the government still reserves the right to get involved. It should be the same in games. If your thief character picks the pocket of a nearby avatar, the local district attorney won't prosecute. But if you hack into the player's account to loot his virtual goods, you end up in the slammer."

Ok, here's short break from all the forum whore's posts. An articled from wired states:

So it's not so specific about SL itself, but here's the original article: http://www.wired.com/wired/archive/14.04/law.html

It certainly looks like a job to me. How is it going to look to someone outside of Second Life?

I can't wait until OSHA gets in-world.

Forget OSHA. Imagine the Consumer Product Safety Commission people inspecting SL's toys.

Probably like a hobby.

Edit: I think the most interesting part would be, if they do tax it, how would they handle casinos? Would they be considered online gambling?

When you sell things, someone's eventually going to want sales taxes, etc, etc.

I would certainly consider it on-line gambling because it *is* on-line gambling.

There are a lot of real world issues that SL has managed to dodge so far because of it's small size and low profile. But as it gets bigger and MMORPGs enter the public awarness more (As they're already starting to do.) they're going to have to be faced.

When you hire people for jobs, and there's something with a real world value being exchanged, eventually there are going to be issues of income taxes, minimum wages, payrole taxes, sSocial Security taxes, etc. When you sell things, someone's eventually going to want sales taxes, etc, etc.

As far as I know, Anshe is already doing it.

She's paying taxes after her SL->RL profit, but of course deducting any fees (tier and such) as expenses, before calculating the amount to be taxed. But she's in Europe.

I guess the USA must be a bit behind

No, it's online entertainment. There's a difference. Gambling is fairly specifically defined in most jurisdictions. Buying a shirt in $L is not considered gambling. Selling a shirt in $L is not considered gambling.

Hell, probably running a casino in $L in SL isn't considered gambling, because it's "not real money".

notice the keywords in that article.. could, maybe, perhaps, in the future.

"I'll believe it when I see it.".

No, it's online entertainment. There's a difference. Gambling is fairly specifically defined in most jurisdictions. Buying a shirt in $L is not considered gambling. Selling a shirt in $L is not considered gambling. Hell, probably running a casino in $L in SL isn't considered gambling, because it's "not real money".

I've said this in another thread in Land and Economy. LL needs to decide once and for all if Ls constitute real money or not.

Hell, probably running a casino in $L in SL isn't considered gambling, because it's "not real money".

Not really. Everything gets deposited into a Paypal/credit account with no data attached to it; it's just "money from here to here." From there, you are responsible for reporting your earned income from this hobby. You can declare it as hobby income or as a small business or whatever, but it's your obligation to report it to your tax preparer, the IRS, and all that rot.

Have you ever been to a real-life casino? Those funny coloured chips they give you to make your bets with aren't "real" money either.

But they most definitely have a real value. The exchange rate doesn't change while you're in the casino, and they must be backed, by law, by an equal amount of money inside the casino. SO if there's $100 million in chips, $100 million in money must be within the casino to pay all outstanding bills.

Do you really want LLAb to have to keep $US 100 million on hand to cover all the money running around?

Not relevant.

This site presents the gambling laws applicable to the state of California. Note the definition:

L$ are representative of value. Whether they have value in and of themselves is irrelevant. I can cash them out through LL. I can use them to pay for goods and services. It's really just a matter of time before the U.S. government catches on and LL is opened up to a world of liability.

A Tale in the Desert? What's the currency there?

So the IRS is going to track every piece of gold in every MMORPG? A Tale in the Desert? What's the currency there? How about EVE Online? Project Entropia? All of these currencies have "value", in much the same way a gold sword has value in Everquest. So do they have to track all gold swords?

All of these games print money on demand, in various ways. Does the IRS have to now regulate the printing of said currency, due to tis perceived value?

Coupons have perceived values at grocery stores. Do i have to claim those on my tax returns?

furthermore, and probably finally, the only legally-recognized tender in the United States is the USD. LLab facilitates the exchange of money *between* players for the $L, much like eBay facilitates the exchange of goods for USD. eBay sellers must report their income as taxable income. The IRS doesn't have to monitor the feedback of every eBay seller to make sure everything's on the up and up.

Arguing that virtual currencies are going to be regulated is about as likely as the IRS stepping in to regulate Monopoly games.

So the IRS is going to track every piece of gold in every MMORPG? A Tale in the Desert? What's the currency there? How about EVE Online? Project Entropia? All of these currencies have "value", in much the same way a gold sword has value in Everquest. So do they have to track all gold swords?

All of these games print money on demand, in various ways. Does the IRS have to now regulate the printing of said currency, due to tis perceived value?

Coupons have perceived values at grocery stores. Do i have to claim those on my tax returns?

furthermore, and probably finally, the only legally-recognized tender in the United States is the USD. LLab facilitates the exchange of money *between* players for the $L, much like eBay facilitates the exchange of goods for USD. eBay sellers must report their income as taxable income. The IRS doesn't have to monitor the feedback of every eBay seller to make sure everything's on the up and up.

Arguing that virtual currencies are going to be regulated is about as likely as the IRS stepping in to regulate Monopoly games.