Read His Lips - No MMO Taxes

In October last year, gamepolitics.com reported that Joint Economic Committee Charman Rep. Jim Saxton (R-NJ)went on the record to say that it would be a mistake for the IRS to tax virtual economies within games like Second Life or World of Warcraft.

Before you get too excited about this, his exact statement reveals that this sentiment is only meant to apply to transactions that take place solely inside the virtual world - e.g. using virtual coins to buy a virtual sword: “…if the transaction takes place entirely within a virtual economy, then it seems there is no taxable event.”

This approach is sensible with respect to the principle of preventing double taxation. For example, you get taxed on the virtual gold you sold online for real USD, but if you also got taxed on the virtual gold profit for selling a magic sword inside the game, then you would essentially be penalized - er, taxed - twice for exercising your economic acumen.

Now, maybe someone will come up with a game that has its own governments and taxation systems, but I'm not sure that would really be an attractive feature - well, yes I suppose for the people who would seek the positions and roles in the game world where you receive and control the incoming taxes. That's just a little too much in the "real world" direction for me. I like "escapist" games as opposed to ending up in a virtual world with all of the same hassles of the real one.