It is somewhat common for developers/distributors to give away PC games for free. EPIC does this weekly. Others do it on occasion.
It may seem like no big deal but I probably get $1,500 (very rough guess) in free games per year. Should I pay taxes for them? Does it matter if I never play most of them (I mean, if the IRS wants taxes I will happily delete most of those…then do I still have to pay taxes on them?).
Since we’re both in Illinois…
If an Illinois customer downloads computer software for free from an out-of-state retailer’s web site or server that is also located out of state, the retailer, even though it is donating tangible personal property to the customer, has exercised no power or control over the property in Illinois. In this instance, the donor would not have made any taxable use of the property in Illinois. The customer, the donee, would incur no Use Tax liability for the retailer to collect and remit to Illinois
Source: This 2021 ruling from the IL Dept of Revenue (PDF)
I’ll let someone else investigate the federal liability, if any.
That’s sales/use tax.
Federal or State income taxes wouldn’t apply either unless you are doing something in exchange for the software/games. Like providing feedback or doing beta testing. And even then the value would be way below any purported “retail” value. Probably low enough that de minimis non curat lex applies.
Why would you think you’d pay tax on something you get for free?
Because it’s a thing of value and therefore might be considered income. (It appears in this case it might not.)
In 1991 got $7,201 in cash and various other prizes “for free” for being on Jeopardy!, and you better believe I paid taxes on them.
It might be more akin to getting a logowear sweatshirt for volunteering at a fundraiser or community event. Sure, it might have some kind of nominal retail value like $50, but the market value is probably under $10.
Unless you’re doing it every day, it’s just trivial.
I keep a strict account of the tasters I get at Costco and remit the sales tax to my state authorities each year.
More like weekly and an average retail value of around $40
If I understand correctly these are promotions from these companies that for a limited are giving away their product to anyone who wants to download it. Its not part of a contest, or something that is given to a select few in return for some service. If that is the case I don’t see how it would be taxed.
They are effectively just dropping their price to free. If my grocery store offers a 23 cents a pound turkey I don’t have to figure out the fair price for the turkey and pay taxes on the rest. Now if I sold the turkey to someone else for at a higher price I would have to pay taxes on my profit.
But since, I assume, that these games can’t be resold, so they effectively have zero market value. Enjoy the games and relax.
In this case, I would say no. those are Gifts.
Same reason Amazon Vine members started having to pay taxes on items they received for free in exchange for reviewing them. The Vine program had gotten bad enough by then I just dropped out rather than receive a 1099 for the value of free stuff.
Except in that case, Vine members select the items, they are not sent as free gifts. But even there the tax part is a maybe since the FMV of the items is “ordinary & necessary” to reviewing them.
And whoever made that ruling (not the the amounts are taxable, but that Amazon has to do a 1099) didnt think of the fact that book reviewers, like at the Times, get thousands of books sent to them, and that has never been taxable- nor can it be.