Mar 17th 2010 10:05AM lokitx, I agree with you. I especially like the phrase you used, "non-convertible virtual currency." Is that a term of art, or did you just come up with that? It captures the author's fallacy perfectly.
Mar 17th 2010 9:58AM I agree that there are no bizzare tax implications. Selling gold, standing alone, is like the sale of any other in-game item. It's income for Blizzard, it's subject to sales tax, and it affects Blizzard's profits. Just like the plushie/mounts or pets.
The author's amusing conjectures are all based on the premise that Blizzard would also *buy* gold from players, or support RMT between players, a'la Second Life. That's a different discussion altogether.
Mar 17th 2010 9:53AM Blizzard would not have to give you tax documents unless THEY paid YOU as a contractor or employee. Nothing about them selling gold would create an obligation to send a W2 or 1099, any more than them selling you your subscription or pets.
Mar 17th 2010 9:51AM You are falling into the same fallacy as the author. Merely being capable of converting warcraft gold into a dollar amount does not make warcraft gold taxable. I could sell bell peppers for a dollar a piece, but if I grow peppers in my backyard and eat them, I am not taxed for that.
Additionally, accepting your logic would mean that grinding out dailies is *already* a taxable event. The IRS could easily determine how much your gold from dailies is worth by checking out the prices charged by existing gold sellers. Like my bell peppers from my garden, however, you aren't taxed on the gold you make from dailies, but you would be taxed on any sales of that gold.
Mar 17th 2010 9:40AM Here's the thing -- It wouldn't be different. The author uses the example of Second Life to argue that Blizzard would experience the same potential lawsuits as Linden Labs. The problem with her assertion is that Linden Labs advertizes, and provides, a means for users to convert their Second Life money into real money, i.e., you can freely sell your Second Life "income" for dollars. That is the fundamental premise that, once debunked, makes the author's analysis go completely astray. Assuming (and I think rightfully so) that Blizzard does NOT go further than sales of gold to customers, like the sales of vanity pets today, then there is no taxable "income" in Warcraft gold from other sources like quests.
Now, lets look at the author's argument that Blizzard would somehow be more responsible for "safekeeping" user account "assets" if they merely sold gold. That argument likewise fails. In the current situation, Blizzard already safekeeps assets sold to players, such as the vanity pets and mounts, and the account itself. A market in user accounts already exists on third party websites. Any user can find out the market value of their account, and if Blizzard is at fault for the loss of that account, that user could sue. Today. Even without gold sales. The comedic scenario that the author uses to suggest that gold sales would result in a lawsuit by some kid and his grandmother is already possible. As unlikely as it is today, it is equally as unlikely in a world where Blizzard sells gold.
Turning to taxes on *users* virtual income from normal activites in the game, which the author suggests is a major reason why selling gold would not happen, we see that it is equally unlikely to occur if Blizzard merely sells gold, and in fact is already possible under the author's logic. Keeping in mind that the premise is that Blizzard merely sells gold to users, the user would experience no taxable income event (excepting sales tax on the purchase itself). Blizzard, however, would have to pay taxes on the income from the sale, just like any other sale. The user will realize absolutely no taxable income from in-game activities because it is a one-way street. Now, the author suggests that having a dollar amount associated with an amount of gold would naturally lead to the potential for taxation on in-game gold even without any conversion (sale) into dollars. This is sensationalism at its best, "oh no! I will have to declare the gold I made from the icecrown dailies!" Not true. Think about it, if the author were correct, then we could *already* be taxed on the virtual profits we make. A market already exists for both Warcraft gold and Warcraft accounts. When you grind out dailys, you are creating something (gold) that has the potential to be sold. In fact, it already is sold. As the author rightly notes, sales of anything, whether in violation of a third-party contract or not, are taxable. The problem with the author's logic is that creating something of value is not a taxable event -- selling it is. You do not pay taxes on the vegetables you grow in your backyard and eat at your own table, even though a dollar amount can be attributed to the vegetables. You only pay taxes if you sell the vegetables. Likewise, if you were to sell your Icecrown daily profits to a gold farmer today, you would be responsible to report that as income (assuming it meets the threshhold, and after deducting the costs of your account). However, the potential to tax a sale of an item, like your vegatables, does not lead to a tax on the creation of that item.
Now, if Blizzard were to both sell and purchase gold from users, then yes, the situation could change and become more like the Second Life situation where Warcraft gold would become more like a virtual currency. However, merely selling gold would not bring about the radical legal consequences that the author suggests.
Mar 16th 2010 8:54PM funny how I was able to make my point without calling anyone names. Tool/troll, etc. Seriously, if you actually *read the post I made above, you can see that I do express opinions. My opinion happens to be that the article itself is law student hyperbole.
I understand that you don't agree, and that you've voted it down, but seriously there is no real need to suggest that there is something wrong with me as a person because you don't like or agree with my opinion.
Mar 16th 2010 6:43PM really. If you click on the name "Jafari" on my post you can read everything I've posted. My posts speak for themselves.
I just think that this is not a well-written article and does not bring up any realistic points regarding selling virtual goods.
Mar 16th 2010 5:30PM I hate to troll, but this type of analysis is exactly why the article should be written by a lawyer and not an "issue-spotting" student. Investment advice? really? Is that what is going on in the other real-life examples of gold selling?
Seriously, to get the legal scoop on how this stuff shakes out *in the real world* and not in the mind of a law student, look at other models for how this has been done and critique those.
Small Worlds, Second Life, any of another myriad of "Free to Play" MMOs on the internet are already doing this, and many of the potential "issues" listed here are just the musings of someone looking for a legal problem for an excuse not to do something. Good thing businesses don't like lawyers who find problems with their plans and instead find ones with solutions.
Blizzard, circa 2003 - "Hey we want to make a game where people pay a subscription to the content and can't play at all unless their subscription is current. We also want to sell the underlying software."
Issue spotting lawyer - "well, you know you could get sued because people will have purchased the software. You locking them out of it without an ongoing commitment could be confusing to them and they might sue you for deceptive sales practices. Imagine poor timmy and his grandmother on the stand crying about how they can't play. What will a jury think?"
One of these lawyers keeps their job, and the other is relegated to pitching movie plots to customers at the restaurant they work at.
Mar 16th 2010 3:32PM Like the Zelda game, A Link to the Past.
That would be really, really neat.
Mar 16th 2010 2:21PM ... except that spells have no minimum range. Point blank frostbolt? Check.