You've probably heard of avatars - online virtual representations of computer users. They provide and buy online goods and services for one another at a price and some think that these economic interactions should be taxed because the transactions aren't just virtual - gamers can sell their online dollars for real life currency in organized exchange forums. Check out one currency exchange chart here
The debate surrounding whether these transactions rests upon whether the government may tax completely virtual events which result in a real profit. China, Sweden, and South Korea are all looking to clarify how their tax codes will treat virtual exchanges. Yesterday, the Yale Law Journal posted an online piece
about the probability that the IRS would get into the business of taxing virtual world transactions. It cited a 2006 Joint Economic Committee statement
the at "if [a] transaction takes place entirely within a virtual economy, then it seems there is no taxable event."
Source: BBC News