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Could that Bioshock theme pack you purchased on Xbox Live be taxable? What about that World of Warcraft gold you surreptitiously bought from an overseas farming operation?

Good questions. A proposal before the South Dakota legislature could make such downloadable items subject to the same state sales tax that is levied on tangible goods. HB 1017 calls for:...a tax at the same rate as that imposed upon sales of tangible personal property in this state upon the gross receipts of all sales, leases, or rentals of any product transferred electronically.

The Hog House Blog, which tracks South Dakota politics, is puzzled by the proposal:The bill talks about taxing “products transferred electronically.” My first thought was, seriously, all those online video game extras that people actually pay cash money to obtain.

And then I wondered about online advertising. A closer reading of the bill hints that it might be Internet service itself, as there are references to “communications...”

No individual legislator is credited with proposing HB 1017. A notation reads that its was "introduced by: the Committee on Taxation at the request of the Department of Revenue and Regulation."

In other words, South Dakota bureaucrats are eyeing all that potential tax money from online transactions, and they want a slice. And if the taxman in Pierre is thinking about taxing DLC, can his counterparts in Sacramento, Albany and other state capitals be far behind?

Of course, we don't mean to single out Xbox Live in relation to this proposal. There are numerous instances of digital downloads and in-game item transfers taking place in game venues of all sorts.    
Article Source: www.gamepolitics.com.