Will virtual worlds be taxed?

Daniel Margolis, a good friend of mine from Raleigh, has written an interesting article on whether the federal government will eventually tax economic transactions in virtual worlds. The question is especially pertinent in light of the recent news that Anshe Chung's Second Life character has become the world's first virtual millionaire.

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 of how the economies of virtual communities function, it might apply taxation within that space.

“It’s a question of ‘when,’ not ‘if,’” Miller said. “The key question is, ‘When do virtual economies become big enough and the dollar value becomes large enough that the IRS says ‘Wait a second, we want to pay attention to this.’?”

"Virtual Worlds Could Be Taxed" [Certification Magazine]