IRS advocate likes taxes for virtual goods

3:30 PM on 01.12.2009   |   Jim Sterling

49 comments

The whole "should virtual goods be taxed?" debate has been a matter of concern for quite a while now, and while I doubt many of us are keen on the idea of giving the government even more money to misuse, at least one person thinks that politicians should get a slice of that downloadable Horse Armor.

"Economic activities in virtual worlds may present an emerging area of tax noncompliance, in part because the IRS has not provided guidance about whether and how taxpayers should report such activities," claims IRS taxpayer advocate Nina Olson. Of course, it's dressed up in a way that makes it attractive to the taxpayer -- with guidelines on how to declare income from virtual goods, you don't run the risk of getting into trouble.

At the very least, this isn't so far being presented as sales tax, but just as an extension of claiming one's own personal income. Since every scrap of cash you make is expected to be reported, it makes sense that the IRS ought to issue guidelines on how you can do that with money made online.

That said, however, slopes can be slippery, and I'm sure this one is covered in soap. I personally feel that sales tax on virtual goods is inevitable in America. It's far too big a cash cow for the government to ignore, and I can see the IRS licking its lips over joining China and Australia when it comes to virtual taxation. It's bound to happen, although we're not all bound to like it.