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Entropia reports that MindArk’s Chief Information Officer, Marco Behrmann, met with members of the U.S. Congress Joint Economic Committee and the U.S. Internal Revenue Service earlier this month to discuss the taxing of income generated in virtual worlds and MMO games. Mindark is the company behind Entropia Universe, a virtual world / multiplayer game with currency pegged to the U.S. dollar. 3pointD observes, “Congress has been looking at issues of taxation related to virtual worlds since at least last October, and the Joint Economic Committee is long overdue with a promised report.”

It is interesting that it was Mindark’s Chief Information Officer who met with government representatives, because it implies they wanted to talk about the mechanical nuts and bolts of money transfer and extraction rather than ask general questions about finances. To me, that’s a hint that the government may be further along with an enforcement plan than I suspected.

I’m not a tax lawyer, but everything I have read on this leaves me completely convinced of two things: 1) you own tax on profits you make running businesses in virtual worlds, at least at the point when you extract money from the world, and 2) the IRS is going to start enforcing this, maybe by requiring virtual world and game providers to issue 1099 MISC forms on withdrawal of profits above a certain threshold, relatively soon. Anybody out there with a tax background want to weigh in?

My advice: if you are making money in virtual worlds — and particularly if you are making significant money — you should already be keeping records and paying taxes on the profits just like you would for any other business. If you aren’t, now is an excellent time to start.

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5 Responses to “Mindark’s CIO Meets with U.S. Government Officials on Virtual World and MMO Game Taxation”

  1. on 27 Aug 2007 at 10:55 amJoey Seiler

    Congress, at least, isn’t that far along. This meeting was one of many that Dan Miller, JEC Chief Economist, has been conducting with virtual worlds platform providers and experts in the process of preparing the report that people have been talking about for a long time.

    That report, it should be noted, is only from the Republican side. When I asked the Dems in the JEC about it, they said they were probably a year out from their own report. No word on where exactly the IRS is.

    We spoke with Dan and Marco about the meeting. You can check it out here:

  2. on 27 Aug 2007 at 11:04 amBenjamin Duranske

    Thanks Joey – great information. If I had found your writeup of the talk with Dan and Marco I’d have definitely linked to it here. Readers – it’s well worth the click.

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  4. on 31 Aug 2007 at 5:24 amMichael Altendorf

    I would agree with your opinion that taxing at the point where you change the money is right.
    I just righting my thesis about this and would recommend to read 2 essays
    one from Leandra Lederman

    and one from Bryan Camp
    (Both professors)


    PS: i will try to collect more news on this topic on my blog during my research on this topic

  5. on 16 Jan 2008 at 10:06

    [...]Mindark’s CIO Meets with U.S. Government Officials on Virtual World and MMO Game Taxation | Virtuall… not directly related to ipo-ship, but interesting [...]

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