Paying Taxes on Your Magic Wand

[Maleficent13]

So there was a story on the news this morning about gaming. Apparently, online gaming is so big that there are people who buy and sell "accessories" in the game. For example:

Person A needs a shield for this particular game, and can't manage to get one. So he goes on eBay and buys one from Person B. Apparently, this is actually happening. Now Person A has this shield, for which he paid $300.

The story was about how now, Person B must pay taxes on the $300 he just received from Person A. BUT...Person A must also pay taxes on the worth of the possession as well.

Paying taxes on an imaginary shield? The reporter in this story actually called the IRS to confirm and this is actually the case. It also extends to those who "trade" accessories...my shield for your sword.

They were talking about how it could also extend to those persons actually earning the shield themselves by playing the game. They now own a commodity that has real value and is taxable. He was talking about software companies having to send out 1099s every time some one wins a sword, etc.

I just found all this amazing.

 

[CheshireVal]

That's interesting! My brother is really into World of Warcraft, and he has told me that there are guys on there who make their livings buying and selling "imaginary" game items to other players. I never thought about the tax implications of that.

Games that are that all-consuming and immersive are a little scary to me.

 

[Tiggeroo]

this is craziness

(if you drive a car, car - I’ll tax the street;
(if you try to sit, sit - I’ll tax your seat;
(if you get too cold, cold - I’ll tax the heat;
(if you take a walk, walk - I'll tax your feet.

 

[Bob Slydell]

Person A needs a shield for this particular game, and can't manage to get one. So he goes on eBay and buys one from Person B. Apparently, this is actually happening. Now Person A has this shield, for which he paid $300.

The story was about how now, Person B must pay taxes on the $300 he just received from Person A. BUT...Person A must also pay taxes on the worth of the possession as well.

Paying taxes on an imaginary shield? The reporter in this story actually called the IRS to confirm and this is actually the case. It also extends to those who "trade" accessories...my shield for your sword.

I'm surprised that the IRS would care. I wouldn't be surprised, though, if the state would want their piece, however, depending on the state. Ohio's on a big use tax kick right now, so anything purchased over the Internet that wouldn't otherwise be charged sales tax technically needs to be reported on the state tax form and sales tax should be paid to the state.

 

[brerrabbit]

When I first read this I thought it was crazy, but it was because I misunderstood the concept. I thought the first person was actually buying the software and then turning around and selling the software as a used item. But if fact it is the skill of the game player that creates something that is of value that he then sells. That scenario would typically create value for which a person is being compensated which would certainly create a tax situation. It's no different than having the skill to write a program that another person can't and then getting paid for creating the program. The only tax free portion of the transaction would be no sales tax because as yet I don't think there are rules requiring the collection of sales tax for internet sales. However if you create something and sell it for value over the internet you would still owe the IRS income taxes. The seller could also reduce the amount of taxes by claiming all his costs i.e. the cost of the original game, any accesories he needed for his computer to solve the game etc. However it would seem that this truley is a taxable situation.