We are selling an in-game currency to be used to buy virtual objects that will be used and consumed in the game. How do taxes relate to this type of purchase as compared to selling physical goods online, and who do we have to charge tax from if our business is located in Ontario, Canada.

  • Are you asking with respect to sales tax/VAT/GST? It's an interesting question. In the US, I know Apple collects sales tax on iTunes purchases, which are entirely digital. (Amazon doesn't, but that's a matter of some dispute between them and many local governments at the moment.) Do they do the same in Canada? That would probably be a strong indicator. – Rick Goldstein Apr 17 '12 at 17:32
  • For EU apps sold via Apple appstore & Google play are subject to VAT. It might even be twice as it is for developers in Sweden (where there is first VAT at the selling country and then again in Sweden) – Jontas Jun 5 '12 at 20:15

Believe it or not, unless you directly contact an accountant with experience in this field or a lawyer, you may have a tough time getting a direct answer from a reputable source. The reason is two fold. First, legally defining in-game assets is exceptionally difficult from a legal/taxation stand point. Who really owns this data? You or the company that has built the MMO and manages the servers containing all of the data?

You can buy-and-sell what is effectively "data" on their servers but the truth is, they own the code, the servers, the data, your access rights, etc. and at any point in time could terminate everything within their systems. This would render the value of your accounts worthless!

As such, most countries have overwhelmingly avoided the taxation of in-game "inventory" because it's not really definable. Instead, in game goods are only taxed when they are exchanged for local currency. This is considered a general sale. There may be tax codes in your region for the sale of "digital goods". Otherwise, it should be taxed as sale a standard good with no special stipulations.

The bottom line is that you shouldn't expect to find much reliable information on this topic, on the internet. Law's haven't been welled defined, regarding in-game content worth and taxing of sales and if you want to know how you should pay your taxes on these transactions, you need to talk to a good accountant, a lawyer or both.

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