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The tax implications of Diablo III

One interesting and controversial aspect of Diablo III from Blizzard is an auction house where players can sell items they find in the game for real money. Players can put items up for sale and Blizzard will take a cut. Jamais Cascio notes that game prizes that have cash value must be counted as income, whether or not you sell them:

When you win a prize in a game that has cash value, that prize is taxable at the fair market value, even if you do not sell it. This is true in the United States, and (from my cursory Googling) appears to be true in the UK and India (and likely many other locations). So when you stumble across that Massive Staff of Infection or Red-White-Blue Shield of Copyright Infringement, items that could be sold in the Diablo III Market for $20, $50, or even $100, you’re legally supposed to declare those winnings on your taxes. While that might seem like common sense if you sell them and end up with a few hundred dollars in your PayPal account every year, it will likely come as a surprise if you’re just playing and avoiding the auction house entirely.

It’ll be very interesting to see how this shakes out.

1 Comment

  1. I have a feeling that making a ton of money at this will be very difficult. While some will get a few dollars here and there they will mostly be skipped by the irs. Though I am interested to see if that pans out as the Auction House in WoW has treated me very well.

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