Digital Audit...

NPR Morning Edition | Digital Culture | Online Gaming, Money and Tax Law

I heard this fascinating story on NPR's Morning Edition today. I have been incredibly fascinated at the growing digital culture of money and how online gaming has created a whole separate economy which is currently become less and less separate from our own. This story basically delves in the implications of online gaming on your taxes.

It covers the obvious taxable income that would come (for example) from sitting and playing World of Warcraft and then selling your earned armor/weapons/items on eBay. [The story mentions some people making 6 figures doing this job...does that make my PS2, television, and WoW game a work-related writeoff? Freakin' sweet...] So yes this is as taxable as an artist's earnings from selling a sculpture.

Where the story becomes interesting is when you consider the fact that there is a barter law that is considered with the IRS taxing policies. I'm not 100% familiar or clear on how it is enforced, but apparently if an artist and a plumber (example taken from the story) decide to trade trades, it is technically taxable. By that I mean if the plumber fixes the artist's toilet and is paid by the artist with a painting valued at $500 (as opposed to cash), that does not avoid the IRS's taxable income regulations. Now again, I'm not sure how this is enforced, or how the IRS values works of art for that matter. The point is, that if this applies, then when I log on to WoW and offer to help a friend on a quest in exchange for one of his hard-earned swords, that is technically a barter and is taxable. Curious isn't it? The NPR story covers more of the nuances, so listen and learn more.

Of course this policy has yet to be verified by the IRS because the author of the story, did not want to file this question with them, for reasons explained in the broadcast. I do find this story interesting for the simple fact that it highlights another point of contact between the digital economy and the real. I am waiting for the day I can go to currency exchange and convert my US Dollar to WoW Gold.

Heck, with the going rate for Level 60 Epic PVP Warriors on eBay I may add them to my portfolio...

UPDATE 2/18/2006: The link to an ebay auction for a Level 60 Epic PVP Warrior character from WoW was removed. It is not clear if the auction closed b/c someone bought it, or if the seller/ebay removed it from the site. The auction was asking for a starting bid of over $400 for this charater, however at the time of my original post no one had bid anything for the character.