12/21/2010

Real sales tax, in virtual worlds

University of Minnesota law student J. Robert Schlimgen has written a Note titled Virtual World, Real Taxes: A Sales and Use Tax Adventure Through Second Life Starring Dwight Schrute. The article was prompted by this fact:
As virtual economies, such as Second Life, have grown, academic speculation has begun as to the tax ramifications. Although federal income tax consequences have been addressed by academics, and even caught the attention of Congress and the Internal Revenue Service (IRS), state and local taxes have been largely ignored.
Schlimgen's article adresses that gap, and it comes to this conclusion:
Given the growing budget problems of many state and local governments, it is time for such governments to start looking at options to expand the tax base. Digital consumption is only going to increase in the coming years, and it presents the perfect opportunity for state and local governments to expand their tax base in a fair and equitable manner. Although there may be roadblocks . . . , a framework can be constructed to make such a tax enforceable without discouraging a mobile work force.
Hat Tip: TaxProf Blog