[ARTICLE] SL being taxed?

If Chip makes a texture in photoshop, does it have value? I'm sure it does. If you spend time and effort to build a house, does that have value? I'm sure you would argue it does (otherwise, why don't you give them away to all and make them full perms while you're at it?). So, if you trade a house for one of Chip's textures, that's a taxable transaction. Intermediating it through the use of a local currency doesn't magically absolve that transaction from being taxable.

If people are creating value and transfering it between themselves then, yes, the IRS could (and, arguably *should*) be tracking every in-game transaction. Or, at the very least, the company running the virtual world should, upon demand, be able to provide to a regulator an accounting of mediated transactions.

Anyway, you agree that LL is running a community with a local currency. That phenomenon is not unheard of. Ithaca HOURS, and several others exist, are well-regulated, and considered taxable transactions by the IRS.

In fact, *any* trade for something of value, whether intermediated by a "currency" or not is considered taxable by the IRS. If Chip makes a texture in photoshop, does it have value? I'm sure it does. If you spend time and effort to build a house, does that have value? I'm sure you would argue it does (otherwise, why don't you give them away to all and make them full perms while you're at it?). So, if you trade a house for one of Chip's textures, that's a taxable transaction. Intermediating it through the use of a local currency doesn't magically absolve that transaction from being taxable.

Now, for most people the in-game transactions will have sufficiently small USD (or EUR, GBP, whatever) value to be considered inconsequential. A few, however, will be generating income in the range where it would be interesting to the taxman, regardless of whether it is converted into USD or not.

If you think that's not likely to happen, you're fooling yourself.

Now, for most people the in-game transactions will have sufficiently small USD (or EUR, GBP, whatever) value to be considered inconsequential. A few, however, will be generating income in the range where it would be interesting to the taxman, regardless of whether it is converted into USD or not.

If you think that's not likely to happen, you're fooling yourself.

I have to agree with Ricky on this. The taxman is coming to the internet, sooner rather than later. The tax base is far too large to let it continue to go untaxed. Currently in the US tax slushfunds like Cigarette taxes are drying up, then need a replacement, internet might be a nice place to turn.


A friend of mine that I grew up with has a father who is an IRS investigator. He used to read through the paper to find new people to investigate. I am sure the IRS is paying attention to SL. LL since they are facilitating currency exchanges may at some point have to issue 1099s to peple cashing out. Currently everything is on the honor system, but this isn't some cash business, there is a prefect paper trail, someone is going to follow it.

It isn't going untaxed. It gets taxed when it's converted to US$.

The taxman is the man. He could pass a law to tax my underpants if he wanted to. But it's very unlikely. So lets just stick to probablities please.

Thing is, value-for-value transactions like the ones that take place in SL are currently covered by the U.S. tax code, so no new legislation needs to be passed.

I'm not sure why people aren't getting this. If I trade something of value for another thing of value, it is a taxable event. Tutor the kid down the street in exchange for him cutting my lawn? Taxable. Trade a computer-generated image for another computer-generated image? Taxable. It doesn't require a great leap of intellect to bridge that gap.

And, Lordfly, if you're killing enough rats to generate sufficient in-game income to push you past the 'hobby' level, then absolutely you should be keeping track of it. As I said, at the very least the game service should be able to give you detailed transaction information.

Really?

The U.S taxman wants to know if you've mowed the lawn for cookies? There is space on your tax form for such events? Will the taxman then ask you to give him a bite of your cookie too?

Really?

The U.S taxman wants to know if you've mowed the lawn for cookies? There is space on your tax form for such events? Will the taxman then ask you to give him a bite of your cookie too?

This is insane. I hope Ricky makes careful note of everything he barters, if he wants to be taken seriously in this discussion any further.

The IRS wants your cookies, citizen.

Insane? Not at all. Without such rules *everyone* would take *all* their income in "in-kind" services and the like. Then you would have to sacrifice your schools, roads, and other publicly-funded infrastructure. Is that really the best outcome? Or can you suck it up and admit that your labour conceivably has some value and contribution to the economy, some portion of which should be fairly put back for the public good?

"Salary? No. I just volunteer. And in exchange, the company gives me a house, car, and groceries. Nice of them, huh?"

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

I'll believe it when I see it.

The IRS only cares about it once you convert it to real money. That being your PayPal funds. I did that this year, as should anyone else making more than tier due to playing SL.

It's a taxable income just like anything else, only classified as "hobby" or "small business".

but then United States Law does NOT apply to the international internet... No matter where the servers are located.

Uh, fascinating, but the company is based in San Francisco. Therefore US laws most definitely apply.

Let me be more clear... No nation at all should have control of the internet, or tax it. The Internet is International...