Virtual Worlds Could be Taxed

Imagine Pac-Man coming home from a busy day eating dots and dodging ghosts. He greets Ms. Pac-Man with a kiss and pats the lesser-known Jr. Pac-Man on his little propellered beanie-adorned head, then he begins going though his mail. He’s shocked to discover he’s received a W-2 form — he earned a high score of 1,650,000 points in 2006, and he owes 15,000 Power Pellets in taxes to the United Federation of Ghosts.

This scenario might not be too outlandish in the future of gaming and virtual realities. At last month’s State of Play/Terra Nova Symposium in New York, researchers, scholars and thinkers debated the future of virtual worlds.

One of the symposium’s panels, “Tax and Finance,” considered the economics of virtual communities and the likelihood of whether such worlds ever could be effectively taxed by the federal government.

The conclusion the panel reached was that it’s inevitable — people already have been paying taxes on virtual items sold via eBay, and Congress began investigating the issue in 2006.

A report on the issue is expected to be submitted to Congress by the Joint Economic Committee (JEC) in the first quarter of this year. One of its authors is Dan Miller, senior economist for the JEC, online gamer and a participant in the State of Play/Terra Nova Symposium.

Under U.S. law, real income generated from the sale of virtual assets is subject to taxation, naturally. But as the federal government develops a better understanding…



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