Electronic games: How to keep your eyes on the prize
Electronic games are a lot of fun, but they are not cheap.
A new report claims that for every $1 spent on a game, another $2.50 is lost to taxes.
The Tax Foundation estimates that gamers spend $6 billion a year on video games.
That works out to $3.5 billion in lost revenue, according to the report, which analyzed data from the Electronic Entertainment Merchants Association.
The biggest losers are the video game retailers, the report said.
Retailers that sell digital games to consumers typically pay $2 per unit, but many don’t.
Video game retailers can’t profit from video game sales by simply taking a cut of each purchase.
They’re taxed, and that can add up quickly.
“If you have a lot more money than you need to spend, you have to sell more stuff, and you can’t have that kind of money,” said Michael Schoenberg, a partner at the law firm BakerHostetler who is the report’s lead author.
“There’s a lot less value to the consumer than if you’re just selling a single copy of a product,” he said.
The report estimates that $3 billion is lost each year to tax due on sales of digital games.
The largest categories of losses are in software, where video game companies are taxed at about 20%, and merchandise, where digital game companies pay about 50%.
The biggest culprits of this loss are companies that offer games for mobile devices.
Those companies, like Amazon, Microsoft and Apple, are the primary buyers of digital video games, and they have more than enough money to absorb the lost revenue.