"Even if virtual items constitute virtual property that participants own, drops should not be taxed on receipt because the effort involved to earn them makes them 'taken' property," Lederman writes. "Taken property, such as fish pulled from the ocean, is not taxed until it is sold."
Though many people have absolutely no interest trolls or their treasure, some 10 million people around the globe participate in online virtual worlds and accumulate potentially salable virtual wealth.
In 2006, the massively multiplayer online game market reached $1 billion in the West, according to a recently released study from Screen Digest, a market research firm. World of Warcraft, the most popular massively multiplayer online game, generated $471 million last year, a figure that doesn't include the gray-market sale of game accounts and items. By 2011, Screen Digest projects the massively multiplayer online game subscription market will exceed $1.5 billion.
Perhaps unsurprisingly given the amount of real revenue virtual worlds generate, the U.S. Joint Economic Committee of the U.S. Congress said last October that it would begin looking at the policy issues surrounding virtual worlds.
"Based on existing law, if an individual generates cash income in U.S. dollars from transactions in virtual economies, the question may arise whether a tax is due on that real-world income," the JEC said in a statement issued last year. "However, if the transaction takes place entirely within a virtual economy, then it seems there is no taxable event. Such distinctions should be addressed and resolved in a commonsense manner."
To date, officials like Rep. Jim Saxton (R-N.J.) have advocated a cautious, laissez faire approach. How long that will last remains open to question. If virtual currency, for instance, proves popular with organized crime -- Lederman suggests there's a "risk that intentionally commodified worlds could be used as the 21st century's equivalent of hiding funds offshore" -- the government's light touch may get heavier.
The Business of Going DigitalDigital business isn't about changing code; it's about changing what legacy sales, distribution, customer service, and product groups do in the new digital age. It's about bringing big data analytics, mobile, social, marketing automation, cloud computing, and the app economy together to launch new products and services. We're seeing new titles in this digital revolution, new responsibilities, new business models, and major shifts in technology spending.
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