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  1. #1
    Join Date
    Dec 2008
    Posts
    1

    Default Virtual Currency and Taxation

    I currently run a website that sells MMORPG gold (I'm located in the US). I've recently started having a good amount of success with it, but am very confused about taxes.

    http://en.wikipedia.org/wiki/Gold_farming quotes "The U.S. Congress, too, in a turn-around on its views in 2006 is now contemplating once again applying a tax on virtual goods which are traded for real world money, similar in a sense to the tax applied to goods traded online" but what's this mean exactly?

    I've read that you don't have to pay taxes on an income from selling virtual in-game currency, but I really can't see how this could be possible... you'd have to show for the money you have someway, right? But since it's virtual and there's no way to really account for it, the whole thing just confuses me.

    So what do I need to know?

    Thanks so much.

  2. #2
    Join Date
    Jan 2008
    Location
    Toledo, OH
    Posts
    16,307

    Default Re: Virtual Currency and Taxation

    I've read that you don't have to pay taxes on an income from selling virtual in-game currency, but I really can't see how this could be possible... you'd have to show for the money you have someway, right?
    You're correct - you need to account for your income and pay taxes on it regardless of how you earn it. Even hookers and gamblers have to account for their income, people selling "virtual goods" are no different.

    Keep good records and make certain to consult a good tax professional.

  3. #3
    Join Date
    Jul 2007
    Location
    Florida
    Posts
    2,344

    Default Re: Virtual Currency and Taxation

    Income includes cash and any non-cash compensation. Anything of value accepted as payment for goods or services is income. Barter transactions are also subject to the income tax and there are specific rules for how to report the income from barter.

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