Let me tell you how it will be…

SL Reuters

Don’t ask me what I want it for, (ah-ah, Mr. Wilson)
If you don’t want to pay some more. (ah-ah, Mr. Heath)
‘Cause I’m the taxman,
Yeah, I’m the taxman.

So, the IRS wants to know how to tax items in virtual worlds, including Second Life. A whole article on this over at the SciAm. But isn’t there already a metaphor there? It’s already been used in some of the articles. When you work in Second Life, you sometimes “send money home” to the real world. If you send it home, shouldn’t that be the part that is taxed? Isn’t that the obvious solution? After all, it’s not like you are going to replace your place in Malibu with a beautiful house in Second Life, and move into a U-Store-It in real life, is it?

The only place this starts to break down is when you start to look at what Second Life “stuff” replaces real life “stuff.” Not surprisingly, it is in the realm of virtual goods. I might go to Second Life to see a movie, for example, and that might replace my viewing in RL. Heck, maybe I keep my “cable” TV in Second Life and only watch it in my Second House. Does that mean that it is tax free? (Yes.) Or maybe I have virtual drinks with virtual friends at a virtual club–should I be taxed on the money that I will eventually pay for this? Or maybe I just go there to get the news.

I’ll admit, John Perry Barlow’s Declaration of Independence of Cyberspace, which seemed more than a little quixotic at the time, seems to gain more traction when it comes to taxing Second Life. Couldn’t they just pick up a flag of convenience? Say, Switzerland?

(Thanks to any world for the heads up.)

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One Comment

  1. Posted 10/17/2006 at 3:49 pm | Permalink

    Death and Taxes I’ll say… it’s ironic because Second Life developers wanted to impose a sales tax for in-game trading, which lead to a user revolt and the idea was later tossed away. I tend to agree that popular virtual worlds lead to currency exchanges where we get taxed in the “real-world” end, so why tax again? This sucks… the more taxes I’ve to worry about, the shorter my lifespan.

One Trackback

  1. […] You can’t be serious… right? It’s no surprise that the IRS now wants to figure out how to tax virtual items. Indeed, with virtual property increasing in worth, what happens when say your server hard drive crashes? That’s where insurance companies come in… Nationwide Insurance already covers digital media such as your iTunes audio files, so there’s really nothing to prevent them from insuring your Second Life inventory if they ever felt like taking that business. […]

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