updated 05:46 pm EDT, Mon August 26, 2013
Next Xbox Live sign-in will greet user with the conversion notification
After nearly a decade of using Microsoft Points on Xbox Live for purchase currency, Microsoft has discontinued the practice. Following a user's next login to the online gaming service, the company is automatically converting the points to a cash equivalent of roughly $0.013 per point, rounded up to the next increment of $0.25.
The process is not without caveats, however. The currency added to the Microsoft account expires on June 1, 2015. Additionally, purchased made with the converted points will not have sales tax applied, but any future Microsoft points added, or funds deposited, into the Microsoft account will see sales tax applied to digit purchases, if applicable in the user's state of residency. This may lead to double taxation, where the user may have purchased a Microsoft Points gift card (which are still available at retail), and be taxed on that purchase, then again for a future online purchase using the converted currency.
The FAQ dealing with the minutae of the conversion notes that Microsoft will still accept purchased Microsoft Points cards until further notice. Converted funds derived from a retail-purchased card expire one year after the code for the points are redeemed on Xbox Live.