Either way, if you're using Paypal for anything outside of RMAH, the $600 rule still applies. Doesn't matter anyhow, as long as the merchant services are required to keep you honest, Uncle Sam will be on top of it already because they'll get a copy and will eventually inform you that you didn't declare it, so you get whacked with penalties. Of course you should be taxed, as should ANYTHING you do on the internet. I know, this is where the community that's all for taxes gets upset, but I too enjoy roads and defense. Don't like it? Move to buying wow gold Canada or China where all of the gold sellers are based, they're untouchable there from many directions.
This is something we talked about waaaay back when I took econ in college in 94. Internet was an infant then, but online games were just starting, it was nothing like mmo are today. Technically they can tax any money we receive, and you can not write off said money unless you itemize your expenses. And the level to itemize is so large a number, it impossible to do it. According to the government, we are suppose to claim all income. But few if any don't. That why if the IRS really did want to bust your balls, they can. Yardsale from years ago, your busted.
People don't understand how much the gov do tax us. Lets say you work for a company that makes Clumpers. The company is taxes when they buy the materials, They are taxed for the tools/machinery to make the clumpers to sell wow accounts, they are taxes when they sale it. You are taxed when they pay you, you are taxed from the amount pay. Then they tax the savings or what you spend it on. Then the company is taxed for any profit. Then when anyone gets a dividend, it is taxed again.(that is why dividens are taxed so low, they are taxed atleast 4 times already)So that dollar you made is taxed 5 times before you either spend or save it. And it's taxed again unless you burn it. And then you are jailed because you are not allowed to destroy money.