kidmercury

First, for those of you in the business of virtual currencies, I highly recommend this research paper on taxation of virtual commerce. Here are the quick points I got out of the research paper:

1. Redemption of points can be taxed as earned income. There is precedent for this, and it seems to be a trend that will continue.

2. Accrued points, meaning points that have been earned but not yet spent, are not taxable income -- and signs suggest that it will not be made taxable income in the US in the near future. Taxing accrued income would open the door to too many nebulous areas (i.e. should the dollar value of accrued airline miles be taxable income? and what exactly constitutes real value?). This is an extremely important point, and a legal area that all participants in virtual worlds/online games should seriously pay attention to.

3. There is an opportunity to shape law here, and courts in the US do seem to recognize this situation. In other words, this is a bit of a new frontier. Personally, I find this exciting, and look forward to the opportunity to be a part of the process in shaping the rules and regulations surrounding virtual currencies/game points.

I hope other business people involved in virtual currencies will share their thoughts on the legal and tax situation. The more we can work together to shape public policy the better off we'll all be. If you'd like to discuss this issue with me, feel free to contact me here, or if you are uncomfortable contacting me via this site, you can also contact me via my trading site, where I act like a normal person and conform to social standards.

The song for the post is "Hello" by Oasis. This is because of the lyrics, "Nobody ever mentions the weather can make or break your day // Nobody ever seems to remember life is a game we play." Because in the not too distant future, when niche social networks have proliferated and have blossomed into their own virtual economy complete with a points system and a gaming culture, life will literally be a game we play -- just as it always has been.