What to Know about eSports and Taxes in Georgia in 2021

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Gamers beware, what has always been said about the only certainties of life, including taxes, is still accurate. Currently, the global eSport industry is valued over $1.08 billion and is projected to grow to $1.62 billion by 2024. With an industry boom, Georgia and other states are taking a closer look at how they’re responding to the income and revenue generated by the eSports industry and professional players.

Georgia, specifically Atlanta, is considered the eSports capital of the country for the following reasons:

• Georgia has a robust ecosystem that includes players, developers, publishers, teams and investors/sponsors, and has a strong infrastructure to host large digital entertainment events, such as competitions and festivals.
• Atlanta is home to three franchised eSports teams, including the Atlanta FaZe (Call of Duty League), the Atlanta Reign (Overwatch League) and Hawks Talon GC (NBA 2K League), and three varsity collegiate teams, including teams from Georgia Southern University, Georgia State University and the Savannah College of Art and Design.
• Georgia is one of five states with an official high school eSports league.
• The overall industry is now estimated to be worth $1 billion in global marketing revenue, and there’s no sign of a slowdown. Specifically, for every upcoming year, Georgia projects a $550 million economic impact.
• In Georgia, the state’s film tax incentives help production companies earn deductions of up to 20 percent of qualified production credits.
• Atlanta is one of the hotspots for eSports events, according to the Georgia Tech Innovation Institute’s eSports Industry Assessment, and arguably the eSports capital of the country. Namely, DreamHack, one of the world’s largest digital gaming festivals, is hosted in Atlanta and attracts almost 40,000 attendees to the city.

In the January 2020 Washington Post article, For eSports Players, the Tax Man Cometh, Ellen Zavian discussed the “jock tax” and how it has affected professional athletes for decades. “Jock tax” laws allow states to collect taxes on the income earned by non-resident eSport players when they earn money in the state. Prior to the pandemic, many U.S. states were weighing their options on how and when to impose taxation on eSports league and franchise players, whether it be during an intown tournament or for residents engaged in virtual play. As a result of the pandemic and explosion of gaming, state tax authorities are looking for additional ways to derive revenue and scrutinize corporate and individual income; income earned by eSport players are ripe for the taking. For individuals, the state does not currently impose the “jock tax,” which is an attractive feature for hosting professional gamers at events and tournaments here.

Another important tax consideration relates to how eSports teams are organized and how players are classified; specifically, whether players are properly treated as employees or independent contractors of the team. While the preference may be to have players classified as independent contractors, misclassification of such players can have unintended legal and tax consequences.

What’s Taxable for Gamers?

When pro gamers want to know what part of their income is taxable, the answer is – almost everything. From tournament winnings to streaming sponsorships and appearance fees to in-app sales, there are layers of monies to disclose for an active eSports enthusiast. What makes the situation more convoluted is the travel involved – even virtual play out of state. Each state, country or territory has the right to impose taxation on all income earned within their state when contractors exceed $600 in earnings. The implications add up. Each competition, event and partnership bring its own unique set of business and legal documentation to wade through before signing on the dotted line.

So, while economic leaders in Georgia are doing their best to incentivize eSports production companies, venue owners and franchise teams, the IRS continues to collect and impose rules and regulations for professional players.

We’re Here to Help

Bennett Thrasher’s entertainment industry accountants have become experts on how the ever-evolving tax laws affect the growing eSports industry here in Georgia and nationwide. Let our team provide creative solutions to help you navigate the financial opportunities that come with being a developer, publisher, caster, influencer, athlete or team, investor or sponsor. To learn more, contact DiAndria Green by calling 770.396.2200.

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