Linden Lab to Begin Charging Sales Taxes on Sim Tier, Other "Recurring Billings"

 

Yesterday on February 28, Linden Lab announced it would begin charging Second Life's residents in the US sales taxes. The Lab stated they had been paying the costs of what residents would otherwise owe for the past few years but "are no longer able to absorb them."

 Ever since Second Life’s inception two decades ago we have seen many local, state and federal governments impose new ways to collect tax revenue from internet-based businesses. The Wayfair Sales Tax case decision by the Supreme Court was when prior rules about sales tax really changed.  Since then, we have done our best to shield our residents from these taxes as long as possible, but we are no longer able to absorb them.

As of March 31, 2022 we will begin charging sales tax in the U.S. For the time being we will charge taxes only on recurring billings, such as premium subscriptions and land fees. The amount of tax charged will be communicated clearly in the receipt or invoice.

We will continue to absorb the taxes at point-of-sale purchases such as one-time L$ buys, first-time premium subscriptions, and name changes. At some point in the future we will need to begin passing those taxes on to you. We will make another announcement when those charges are phased in.

Your individual charges will be determined by your local jurisdictions. There are more than 13,000 sales and use tax jurisdictions in the United States, with great variation in their rules and tax rates. Tax amounts are also affected by other factors such as the type of goods or services being purchased. To determine the charges, we will be relying on an automated third-party system which closely tracks local tax laws, so the tax amounts are always up to date.

This is news we don’t enjoy sharing, but for the health of the business and of Second Life, we can no longer continue absorbing these tax burdens.

As stated, the Lab won't start charging until the end of the month, and will charge taxes "only on recurring billings." This means Premium accounts and sim tier. For now, things like name-change fees, Marketplace transactions, "first-time premium subscriptions," inworld purchases, and of course the buying of Linden dollars, won't be affected by taxes. But the Lab is saying " At some point in the future" they will begin passing down tax charges on those as well. The Lab will be using "an automated third-party system which closely tracks local tax laws" to determine how much tax a resident owes.

It was the South Dakota vs Wayfair case (of which Overstock.com and Newegg were also involved) in 2018 that allowed states to tax Internet transactions. It's unknown when states in the US first started telling Linden Lab they were owed money. But it is probable that the increase of Second Life's number of active residents in the Covid Pandemic put the Lab in a better position to absorb the costs. And lately, the number of new Covid cases has been plummeting.

In the official forums, response was somewhat muted, European residents saying they had been paying a Value Added Tax (VAT) on purchases for years, one saying, "I like our VAT system. We all pay in and we all get something back in return ..." Some were of mixed views, "This is neither surprising nor unfair, as European users well know. It does, however, perhaps represent a step backwards for the efforts to reduce the role of land cost in the SL economy." And some groaned, "They use this excuse to raise prices. Not so strange with the roaring inflation. But I guess they will use the inflation excuse for another raise later in the year."

In any event, while we've sometimes thought of Linden Lab's fees as taxes on our virtual experinces, real taxes are now coming to Second Life.

To check out the blog entry in full, Click Here. 

Source: Wikipedia

Bixyl Shuftan
 

Commentary: So, You Want To Be A Club Owner

Maybe you've been in a shiny club with lots of bright lights and lots of people and thinking to yourself how nice it would be for you to have something like this. Or maybe the club your community has had for as long as you've known has suddenly closed down and the owner gone from Second Life, and you're the only one with the time and the money who's willing to try to make another. So just what lies before you? How hard can it be? Actually, it can be much harder than you think.

Read the article in People.

Linden Lab Raising Fees to Buy Lindens, Will Raise Fees to Sell

By Bixyl Shuftan

Second Life is getting more expensive for it's residents. On the Linden blog yesterday, they announced that they were "making multi-million dollar investments in Second Life that will benefit Residents in the near and long term, while also ensuring that the virtual world’s bright future ahead is even more awesome than its 14+ year history has been. Exciting times!" This was followed by an announcement that there would be "Updates to LindeX and Credit Processing Fees."

Underlying SL’s user-to-user economy and the ability to buy and sell L$’s for real currency is a significant amount of ongoing work to ensure that everything remains compliant with applicable laws and regulations, while also preventing fraud and money laundering. This work comes at a cost, and we are adjusting related fees in order to help cover those costs and enable us to continue to invest in Second Life’s future.

Starting yesterday, the fee for buying Linden dollars over the Lindex rose from 60 cents to 99 cents per transaction, an increase of about two-thirds. Starting on January 3, the fee for selling Linden dollars will go from 1.5% per transaction to 2.5 percent, and the $25 USD cap on fees per transaction will be removed.

At least one Second Life businessman has responded to these increases. Oobleck Allagash, a co-owner of KraftWork and PocketGacha, commented in New World Notes that the Lab had "attacked those who work to create the SL economy by raising the fees to process payments nearly 67% overnight, but more importantly, removing the $25 cap which will, for larger brands, result in exorbitant additional costs." He questioned the reason for the increases, "what work has changed specifically that will require LL to generate millions more a year annually? Sounds a bit more like those that drive the SL economy are in fact now paying for the failure of Sansar."

The Lab did mention one way it had been trying to protect inworld businesses, "Recently, we closed an exploit that fraudulent gacha re-sellers had used. Our governance team can now catch them when they attempt the cheating method that we have already fixed." Though this alone isn't an explanation for why such a large increase.




To read the Linden's blog post in full, Click Here.

Bixyl Shuftan

Linden Lab Raising Fees to Buy Lindens, Maximum Fee to Sell

Second Life is about to get a little more expensive.

In the official Second Life blog on Tuesday, Linden Lab announced there would be an "update" to the fees for Second Life users to use the LindeX to purchase Linden dollars and the "credit processing" fees to sell Linden dollars for real money.

Underlying SL’s successful user-to-user L$ economy and the ability to buy and sell L$’s for real currency is a significant amount of ongoing work to ensure that everything remains compliant with applicable laws and regulations, while also preventing fraud and money laundering.

Investing in improvements to these processes and the ongoing compliance work required comes at a cost to Linden Lab, and we will be making some LindeX fee adjustments in order to share a portion of those costs with Residents active in the SL economy.

To buy Linden dollars, the fee on the LindeX is going from 40 cents per transaction to 60 cents.

To sell Linden dollars for real world currency, the current "fee structure" remains the same at one and a half percent with a minimum fee of $3 USD. But the maximum fee is going up from $15 USD to $25.

There was some debate about the issue on a thread in the official forums, some outright opposing it, others conceding the Lab probably had justifiable reasons to raise prices. One woman commented packing up and taking things to Opensim might not be a good ideas as on the Kitely grid "there is a 20% fee to sell on Kitely market and a 45 day wait to get your money to Paypal." and "there are many less BUYERS on Opensim so your chances of selling are possibly less."

If one takes the Lab's explanation at face value, their costs of making sure the transactions go smoothly while taking steps against "fraud and money laundering" are going up, either having to replace equipment, or get new equipment and employees as a result of new regulations or perhaps as a result of complaints about their service.  Hamlet Au of New World Notes suspected the latter might be a partial reason as he'd been hearing reports of some content creators suffering "financial crippling delays" in getting their real-world money from the Lab after selling them Linden dollars. So perhaps this is a case of the Lab responding to the complaints, but felt the users had to help pay for the costs. Hamlet also had another, sobering, explanation, "The Second Life economy is slowly but surely shrinking, so those who are still in the economy will have to pay more to keep participating in it."

In any event, the changes go into effect June 19.

Source: Hamlet Au

Bixyl Shuftan