Skip to main content
Article
It's Just a Game, Or Is It? Real Money, Real Income, and Real Taxes in Virtual Worlds
Communications of the Association for Information Systems
  • William D. Terando, Butler University
  • Brian E. Mennecke
  • Diane J. Janvin
  • William M. Dilla
Document Type
Article
Publication Date
1-1-2007
Disciplines
Additional Publication URL
http://aisel.aisnet.org/cais/vol20/iss1/
Abstract
Virtual worlds like Second Life offer players opportunities to earn real-world income through their activities in the game. It will not be long before governments begin to establish policies and regulations regarding the income generated by players of these game environments. This paper examines the issue of taxes in virtual world games. Two alternative places for recognizing income could be established by regulators: 1) at the point when in-game transactions take place; or 2) when players convert game assets into real-world currency. We argue for realization of income, and therefore taxation, at the exchange. We expect that burdensome policies such as requiring game operators to monitor and report taxable activities to the authorities will dissuade game play and likely result in the collapse of these vibrant economies. Therefore, our recommendation is that the IRS should establish specific rules that inform players about how they should calculate income and work with game operators to inform participants of both the rules and consequences for non-compliance.
Rights

This article was archived with permission from Association for Information Systems, all rights reserved. Document also available from Communications of the Association for Information Systems.

Citation Information
William D. Terando, Brian E. Mennecke, Diane J. Janvin and William M. Dilla. "It's Just a Game, Or Is It? Real Money, Real Income, and Real Taxes in Virtual Worlds" Communications of the Association for Information Systems Vol. 20 (2007) p. 134 - 141
Available at: http://works.bepress.com/william_terando/2/