Linden Lab to Start Charging Sales Tax on U.S. Second Life Users This Month

Well this is a bit of a bombshell for Linden Lab to drop on a Monday:

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... Your individual charges will be determined by your local jurisdictions.

Sales taxes vary quite a bit across the United States, and can be extremely high. On the very top end, major cities Los Angeles (hey that's me!), Oakland, Chicago, and Seattle charge around 10%.

So as an example, if you own a private sim and you live in Seattle, where tax rates are 10.3%, your yearly sales tax hit will come out to about $283.

Which is quite a lot! I have to think this will have a huge impact on the Second Life economy and the community culture as a whole. Then again, SL users in the European Union have been paying a VAT on many Second Life services for years. And yet then again, Americans tend to be much less tolerant to paying taxes. There a whole virtual tax revolt in Second Life modeled on the original American tax revolt over this!

Another interesting aspect of this: I believe this is the first time that the Second Life virtual world will be directly impacted by a US Supreme Court decision:

South Dakota v. Wayfair, Inc., 585 U.S. ___ (2018), was a United States Supreme Court case in which the court held by a 5–4 majority that states may charge tax on purchases made from out-of-state sellers, even if the seller does not have a physical presence in the taxing state. The decision overturned Quill Corp. v. North Dakota (1992), which had held that the Dormant Commerce Clause barred states from compelling retailers to collect sales or use taxes in connection with mail order or Internet sales made to their residents unless those retailers have a physical presence in the taxing state.

Curiously the 2018 decision was not split along the usual partisan lines, with the conservative justices Thomas, Alito, and Gorsuch voting in the majority, along with center right justice Kennedy and... beloved liberal icon the Notorious RBG!

Comments

[Adeon]

Called this one back in April as soon as the IRS said Vbucks were taxable, and you can’t even cash those out.

[Jacquelyn Morie]

I thought it was classified as a service, not a taxable sale.

[henry]

well im guess SL is DEAD

[sirhc desantis]

The World - well taxes are a pain but they do provide things like education, health care, defence, infrastructure, safety and a myriad things that make up civilisation - we just need to keep an eye on those who spend it for the overall health of society. And we can vote to reflect that. PITA but good, basically, although there are those who try to play the system. See 'keep an eye on'

Yanks - TyRaNnY ! Dress up and throw tea into harbours ! etc ad nauseam

Must say over on the official forum it has been quite restrained. So far.

=^^= also plus vote for the Notorious RBG

[Pip python]

Soooo now we're paying sales tax on non tangible goods, AND we're paying "fees and taxes" if we earn enough lindens to cash out? They tax us on the money we earn to buy the L, they tax us on the purchase of the L, the tax us on the "returned L" if we cash out.. how long before they start forcing the sales tax to be added to every single in world purchase with L? I don't know about everyone else but I just dont have an extra 200 a year on top of what I already spend. I budget very very carefully to be able to afford my tiny share of space in SL and keep making clothes. I already spend more than I should. Now I'm going to be spending even less... Nice way to put me out of business.

[Joey1058]

I understand that the feds are forcing their hand. But why must it happen now? The default world is in turmoil, and the government wants to suck us dry. And right now, I'm seeing no viable representation in the US government that isn't in crybaby mode and mudslinging and stealing each others toys. This is pathetic.

[Lenny]

Going to be a lot of sim sold and a lot of people logging in with no home

[Shin]

Well LL makes so much profit off land they could be nice an drop prices a bit so the tax hit isnt nearly as hard. it would be better for them to keep the people they have instead of making them quite cause they cant afford it anymore.

[Han Held]

“I like to pay taxes. With them, I buy civilization.”

― Oliver Wendell Holmes Jr.

[Montecore Babcock]

I don't buy anything when I have a sim. I already paid for buying a sim. I pay a fee to keep the sim. So why would a fee be taxed.

[Sun Seale]

My Liberal Brother...

"That sounds like SL is doing it to raise money. because they have to get better servers, and migrating over to new servers is a long process and very expensive.".

Me: IF IF IF.. SL uses the money for upgrades... That's a Big IF... (I just just nod and agree, it reduces fights 😂)

[candy]

sure we wouldn't want you to have to give up any of that 45 million profit you made last year hate to see you give up another car or jet or house

[RoseSilverShadow]

IDK where that person got their math but 10% of $67 is not $23 a month in taxes, 67x12=804 x 10.3% = $82.18 divided by 12 is $6.84 a month that is almost $200 difference.

[Tina]

Shrug... I've always had to pay VAT on my Lindens for as long as I can remember anyway so I suppose it's only fair except when you consider their profits 🙄

[fuzzy wuzzy]

Lol, taxation without representation is illegal in the USA, with that, those that say LL is paying for upgrades to servers, you are idiots, LL has clouded the entire game on amazon servers!!!! what upgrades? this is just california taxation model. think its time to go to the open sims and leave sl behind.

[Berkle]

I hate to do this but all I'll be giving up all 86 Sims. And switching to open simulator. I think its time for people to make the change.

[Serge]

SL merging into the metaverse. Taking some created stuff to blockchain is expensive.

[KimmieLuv]

Open simulator? This is insane.. too many people out of jobs and won't be able to throw in more money.its going to kill SL

[Soap]

Regions are already sold at huge profit margins to the end user. Now they will be even higher. The monthly upkeep cost of a region to linden lab is someplace in the neighborhood of 25 or 30 dollars but they charge the end user 200+

[daquari Stawberry]

First of all to the math guy.. they said based on a WHOLE Sim.. that is much higher than $67 a month...
Secondly... do you all realize that this is NOT Linden's choice to do this, it is the Government doing this. The Dems are greedy people...

I don't think it will ruin SL, but I do think sales will go down on many things and people will stop purchasing land and congregate at the help islands.
I wish you all a lot of Luck this is just getting crazy.

[Iggy 1.0]

One wonders if LL might not just drop tier to keep residents? I'd own a full sim and build a RP region or add it to another I like, but I want it at $30/month. That's the price-point for me. Plus taxes.

[More money spent]

It's caused my greed but not a dem greed. The Repub controlled Supreme court gave it the go ahead. We already pay taxes on everything now it's worse.

[TS1]

I will personaly stop paying for premium membership but that will hardly affect their decision, the game was already diying this will force the devs. To upgrade their game a bit hopefully... They might find a way to bring back gacha since it was removed but gambling lindens is still legal, gambling for loot should be allowed a well. Prim needs to go and revamping of the game is more than necessary if they want to keep it alive

[GingerSnapz]

If premium goes up & I'm not getting a raise in L$ by at least 2k L$ or 800prims for my LL home I will be discontinuing my premium membership. Because it's barely worth it at 12$ def won't be worth having if it goes up & there's no actual benefit worth having which would consist of more LL prims or L$ as stated above.

[Ex Sc]

What a bunch of whiners. I've been paying 21% for years.

[0xc0ffea]

As I posted on the forums ..

Presumably we have been paying this sales tax for years already.

So really, this is a price hike with finger pointing.

[Bunny Bosco]

Oh yeah Delaware, no sales tax lol

[Dee]

*eye roll* at those predicting doom for SL. Get real already!
Taxes and death are the only sure things in life, anyone surprised that there are going to be taxes to be paid hasn't been adulting well enough or paying adequate attention IMHO.

IF, as they said, LL has been dealing with the taxes for us up until now, but they start pushing that along to us instead, it would be nice to see a 5-10% decrease in their charges across the board! It would be great PR if nothing else.

[Witchy]

SL already taxes us to death so If they wanna go by a city tax based on your location that's going to cause a mass of lawsuits against them, taxes are far different based on location and you can be charging sales taxes because items in Sl aren't rel and do not exist. As a business person in Sl and a co-region owner this just may be the time to pull the plug for good. SL make billion's of dollars and this doesn't effect their pockets at all.

This is BS, ludicrous labs can take this idea and their lies and shove it.

[Chic Aeon]

Late to the party but a couple of thoughts.

This change will not affect me personally as I rent my sim and I am no longer a premium member (this due to Tilia's TOS and privacy statements).

I have noted a marked degree of lands for rent and for sale. Some are as always ridiculously priced, but a number of them are much lower than the previous "market" value". Rentals (not all of course) seem to be coming down markedly.

Someone did research and posted finding on the SL forum thread about this move. It suggested that we are not actually getting the whole story.

Here is the link to that comment on the SL forum post: https://community.secondlife.com/forums/topic/483878-us-residents-to-begin-paying-sales-tax/page/6/#comment-2423372

I am still hoping that LL will decide that they will accept Lindens for payment (this mentioned by Patch a few years ago -- maybe three). I could see no real reason WHY they were considering the move at that at the time as they would lose the fees from Linden dollars to USD exchange. But NOW depending on the cost of third party services that they have hired, the costs might be equal or in their favor. Since I have no idea what the cost actually are, I can't say but I do know that many 3rd party web services are pretty darn spendy.

Letting people pay their premium fees and their tier via lindens would most likely stop the exodus from the land -- and even premium status. That could help the oh so very empty mainland.

As I said, this doesn't affect me personally but that said, if I could use my vast amount of linden savings to pay premium or premium plus fees as well as tier I would be inclined to buy a mainland sim or two. I can't believe I am the only one that thinks this way :D.

Also there seems to have been an exodus to Opensim already as my Kitely sales are way up from the norm. I am not "there" any longer but I still sell on the Marketplace which happily sends my money to Paypal each week or so. Easy Peasy.

Will be interesting to watch how this filter out over the next couple of months.

[jasmine cliodhna]

well I have an avatar in SL and opensim I had clubs in SL and i had a half sim this got to expensive to keep going now we have a small sim with 1200 prims just for a home. I have found now for the last 12 mths it has got more and more expensive so i decided to really look at opensim that i had left dormant now i have the equivalent to 120 regions or sims for 75 usd per month i have full control and there are no more costs it is free to obtain things i got a mesh avatar to start with now I and my team run a huge city with many attractions and free homes so far people have loved what we offer that they have started donating to a paypal account in USD this is at this stage covering our monthly tier this is not mandatory but its there if they like to do it as for SL well i go there but its not my preferred place to be anymore

[Sweet]

The thing is like real life we don't own the sims we are renting them just for a higher price from LL and in Real life, my landlord does not charge me tax on my rent so I am confused on this one. we not buying the land every month we just paying a rental/maintenance fee that should not be taxed..this is crazy. I feel fon chung she got tons of land. they should grandfather us in or something. now I don't now I had it budgeted it in.

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