Congress to look into taxing virtual worlds

For at least the past couple of years, one of the biggest questions in virtual world circles has been whether or not the U.S. government would ever get around to noticing the potential tax windfall of the multi-hundred-million-dollar virtual economies of "Second Life," "EverQuest," "World of Warcraft" and the like.

Some in the community have even gone so far as to try to get the IRS to weigh in on the issue.

Well now, reports Reuters' new "Second Life" reporter, Adam Pasick, Congress has finally gotten wise, and may be on the verge of taking some sort of action.

"Right now, we're at the preliminary stages of looking at the issue and what kind of public policy questions virtual economies raise--taxes, barter exchanges, property and wealth," Dan Miller, senior economist for the Joint Economic Committee, told Pasick. "You could argue that to a certain degree, the law has fallen (behind), because you can have a virtual asset and virtual capital gains, but there's no mechanism by which you're taxed on this stuff."

Of course, no one has ever questioned whether real capital gains from economic activity in virtual worlds is taxable. Thus, if a player makes a real profit by buying and selling digital goods such as weapons, buildings, vehicles and the like, they must, under the law, declare the income.

The bigger and so far, unanswered question, has been whether economic gain that is stored in virtual currencies and property is taxable. And that appears to be what Congress may be looking at.

For the time being, it's still way too early to tell what will happen. But for anyone who is digital-asset rich and cash poor, it might be a good idea to start saving a little for the taxman. Just in case.