E-sports is now the industry where a person can build a career, and thus, people are now hoping to join this industry as it’s the new way through which one can make a professional career.
In this industry value chain, some organizations are building games for the e-sports market, then comes the players who are playing such games, and finally then comes the gaming organizations that hold the teams and participate in various tournaments and events.
When it comes to regulation and taxes, all the participants in the different parts of the industry’s value chain need to observe those laws and find ways to deal with each one of them.
In this blog, we will look into this matter and look at how each of the organizations, gamers and gaming teams are handling the regulation and taxation of the e-sports industry and what are its impact.
How IRS Tax the Gamers The “Jock Tax”
Like the other professionals who are athletes of the state, the same tax rate on personal tax is applied to professional gamers. Under federal law, the tax rate is the same as that of other professional athletes, and that means that all the gamers who earn revenue from that activity need to file for income tax.
Gamers who fail to file for taxes can come under serious consequences; thus, they must hire lawyers for tax returns who can guide these gamers to file in the right way. Now there is the jock tax which is the tax liability the athletes face from their respective states.
The jock tax claims that the income which has been made from the salary sponsorship deals and other endorsement contracts will all be taxed under the law of that state’s legislation.
Taxes on the Tournament Winnings
Now, when it comes to tournament winnings there are multiple ways taxes are being applied. For example, tax payments and obligations such as from tournament winning are applied when the prize pool exceeds a certain limit.
Then, in that case, the winner will receive the remaining amount after the tax cut from the prize pool. When it comes to the organizers of the tournament, the tax will be there as a business tax from the profits of organizing such events.
Role of Team Salary and Its Taxes
Team salaries are something that is disbursed by some game organization companies that manage players. Now, they are in the business of talent management and, therefore, liable to pay the commission and taxes on several platforms and the IRS where the player is playing. These companies can hire IRS audit attorneys from Los Angeles, and they can find the best possible ways to file tax returns to the IRS.
When these organizations put players from their platforms to channels of Twitch or YouTube, then the earnings which is happening from that medium are also taxable. Therefore, companies like Google prepare a “1099” form that will document the streaming income of the org.
These are some of the tax rules of the e-sports industry when it comes to the United States and similar types of laws in other European and ASEAN countries.

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