Document Type

Article

Publication Date

2007

Publication Title

Communications of the Association for Information Systems

First Page

134

Last Page

141

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.

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