Taxation of Virtual World Economies: A Review of the Current Status


  • Jamie S. Switzer Colorado State University
  • Ralph V. Switzer Colorado State University



Real Money Trading, Taxation, Virtual Worlds, Virtual World Economies


The taxation of virtual world economies is uncharted terrain, one that both researchers and government officials are just beginning to scrutinize. Taxes are inevitable in any economy, but what about the increasingly lucrative virtual world economies? The market for virtual goods and services is estimated to be in the millions of dollars, so it is no wonder that governments are beginning to take notice. Experts are divided as to the feasibility of taxation of virtual economies. Most experts agree however that there is significant ambiguity in the current U.S. Internal Revenue Code with respect to virtual worlds. It is unclear if transactions occurring in a virtual world are taxable in the U.S., and the Internal Revenue Service has to date not offered any strong guidance regarding the issue.

In this article, we argue that virtual transactions are already subject to taxation under current U.S. law, at any point in time that the U.S. Internal Revenue Service should decide to enforce the current law, whether taking place in game worlds or unscripted worlds. This would include virtual-to-virtual transactions as well as virtual-to-real transactions, as the issue at hand is whether or not virtual activity is taxable, regardless of realization, because all goods and services have a fair market value.

Author Biographies

Jamie S. Switzer, Colorado State University

Dr. Jamie S. Switzer is an associate professor in the Department of Journalism and Technical Communication at Colorado State University (CSU). She received her doctorate in Educational Technology from Pepperdine University, and also holds degrees in Technical Communication from Colorado State University and Radio/TV/Film from Texas Christian University. She has over 23 years of experience in new media technologies and mediated communication.

Dr. Switzer conducts research on computer-mediated communication, new media technologies, virtual worlds, and online mentoring. She has published in The Internet Encyclopedia; The Encyclopedia of Multimedia Technology and Networking; The Encyclopedia of E-Collaboration; E-Collaboration: Concepts, Methodologies, Tools, and Applications; The Handbook of Research in Computer-Mediated Communication; The Handbook of Research on Virtual Workplaces and the New Nature of Business Practices; Mass Communication & Society; Feedback; the Journal of Media Education; Computers & Education; Teaching and Learning with Technology: Beyond Constructivism; The Encyclopedia of Distance Learning, Teaching, Technologies, and Applications; Interactive Educational Multimedia; Innovative Higher Education; THE Journal; and the Journal of Educational Technology Systems. Dr. Switzer is the founder and director of the Online Mentoring Program in the journalism department at CSU. She also founded the Center for Innovation in Learning Technologies in the CSU College of Business.

Ralph V. Switzer, Colorado State University

Dr. Ralph V. Switzer, Jr., J.D., CPA, is a Professor of Finance in the College of Business at Colorado State University; and an Affiliate Professor in the College of Veterinary Medicine and Biomedical Sciences at Colorado State University. He is a licensed member of the Colorado Bar Association and a member of the Federal Bar, Financial Management Association, American Association of Attorney - Certified Public Accountants, and the American Business Law Association. He is president of the Colorado Chapter of the American Association of Attorney-Certified Public Accountants and a past president of The Rocky Mountain Business Law Association.

Dr. Switzer has published several books, including The Research and Report Handbook for Wiley & Sons Publishers, as well as articles in Notre Dame Law Review, Notre Dame Law School, Journal of College and University Law, The American Association of Attorney






Peer Reviewed Research Papers