But it depends on their architecture. With Ebay I have a variety of payment options OUTSIDE of their system. I pay a seller directly via Paypal, direct deposit, credit card, cheque, COD, etc. All those systems do is report a payment back to Ebay as having been made.
With DIII, EVERYTHING is handled by Blizzard (Paypal is just a cash out option). If they have not architected very carefully an audit may actually show that when I buy an item from you the flow is actually me paying Blizzard, then Blizzard paying you. That could be disastrous for Blizzard.
Of course, that’s assuming a gamut of experts did not advise them correctly, which again, would surprise me greatly.
Blizzard, “Remember superman2? We want to facilitate transactions between two parties and skim off the top without being liable for taxation.”
Tax Guru, “Wouldn’t it be easier to just print money?”
Blizzard, “We’ve been doing that for years but we want more.”
Reldan
6563
The problem here is that you are perceiving “income” as something that only exists when it is in cash form. Either Blizzard is paying you when you cash out or Blizzard paid you when they gave you the item that had a real world value of $250. Either way, Blizzard provided you something with a monetary value that you did not have before, and that’s income.
EBay at no point owns or is in possession of any of the goods exchanging hands when you use their service. EBay is not the source of the goods being sold, and the amount paid doesn’t count as income anyways unless an actual profit was realized where the good sold for more than the seller original paid for it (which is somewhat rare).
It’s hard for Blizzard to argue that the digital items they are creating have no cash value when that’s the core basis of their entire RMAH concept.
There’s probably something about blizzard retaining actual ownership of all items that complicates everything. What you are buying is a lease of sorts.
I’d imagine that Blizzard would argue that what they provided to you has no value until you took possession of it. After all, you set the price in the RMAH and someone else accepted the price. At that point the value of the digital item is whatever price you set. The income you realized is yours to keep (minus the AH fees, which I’m sure Blizzard pays taxes on).
I dunno, I’m no tax expert. Presumably Blizzard has competent tax attorneys on staff who’ve advised them well.
I can’t imagine how this is different from any other physical thing in the market place. Nothing has a “actual” value unless and until the market a value on it but once you have the economy going you have to pretty good idea what a “fair market value” is and you should get taxed accordingly.
Point. Mm…law on subscription services then. But what…
Reldan - It’s the same thing as gambling websites. You only pay on withdrawn profits.
Reldan
6568
There an entire industry of assessors whose sole job is to judge the fair market value of things for tax and insurance purposes. They do so by taking into account a number of factors, but primarily it’s a matter of looking to see what other people are paying for similar items under similar conditions. If you actually just sold said item for a set amount of cash, then the fair market value of that item is pretty damn cut and dry, and it would be amazingly hard to argue that it was $0.
Since Blizzard is the sole provider and owner of the items and the marketplace, it would be quite difficult for them to claim ignorance of the value of the items they create. It’s like a Pachinko parlor trying to pretend that they don’t know the cash value of their “prizes”, but the exchanges are being done under their roof and they’re taking a cut and writing all the receipts.
I’m still not sure what your quibble is. The IRS is fairly clear that the burden for reporting is on the person realizing the gain: http://www.irs.gov/businesses/small/article/0,,id=215593,00.html
It’s pretty easy to track on Paypal what money came from where using their reporting tools. At least, it used to be. I don’t use it as much as I used to.
Quaro
6570
I think they get around this by only letting you transact to PayPal at the time of a purchase. If your dollars go into Blizzard Bucks, you can’t get them out again?
What does that look like in your paypal account? Is that money from Blizzard or direct from the person who bought the item?
This very much depends on the details of the country in question.
I thought I was done but the game has teased out just enough positive feedback in Inferno to keep me going. I’m up to the Butcher and farming better gear to take him down. I wouldn’t have thought this would interest me, but a few touches have helped. The Nephalem Valor buff has a surprising psychological effect. Once I get it stacked up, there’s a strong incentive to let it ride and keep playing. Every gold drop over 1k gives me a tiny brain jolt. And I’m still having some fun playing around with different skill combos in a section I have on farm.
I doubt all of this will keep me for long, but so far I’m not tired of it quite yet. The game has completed its transformation into a slot machine, and it’s a pretty fun one.
So the real question is if you can report the purchase of Diablo 3 as a business expense…
Or the “cruel blade of cruelty” you bought for reselling but no one is interested in.
You can’t report losses on a hobby.
An activity is presumed for profit if it makes a profit in at least three of the last five tax years, including the current year (or at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses).
If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations.
Assuming you haven’t made a profit on virtual good sales in three of the last five years.
Reldan
6576
There are no US companies operating gambling websites. Any that do are overseas, in violation of US law, and would most certainly not be reporting anything to the IRS. Pretty much anything could happen internally within such sites with there being nothing the IRS can do, since their jurisdiction doesn’t start until the money comes back into the USA. Not the same situation Blizzard is in.
Reldan
6577
That link pretty much confirms that the IRS would consider any profit made through Blizzard’s RMAH to be taxable income. Businesses that pay taxable income to individuals must report that income and provide a 1099 if it is excess of $600 per year.
Well, alright then. Blizzard has made it pretty clear they won’t be providing 1099’s so I’ll be looking out for the article about the Fed’s raiding Blizzard HQ for tax fraud.
Marcus
6579
So like what .0001% of players are actually going to make over $600 a year?
I’m guessing Blizzard probably hires lawyers to advise them on the tax stuff. Just spitballing, but maybe they used the money they saved not hiring writers.
