Law Commons^™

Real Taxation Of Virtual Commerce, Steven Chung

Steven Chung

In virtual worlds, people participate in fantasy adventures or socialize in a visually immersive online environment. Popular examples include World of Warcraft, Second Life, Entropia Universe and Ultima Online. As more people are reportedly earning real money through their virtual world activities, governments are looking into whether virtual world transactions are subject to real taxes, even if the participant does not convert his virtual income into cash. However, the application of U.S. tax law has led to unclear and sometimes conflicting interpretations.

This paper instead looks into the virtual world's economic environment to determine whether in-world transactions should be taxable …