Why do I have to pay Secondlife's taxes?

[LaBits]

I received a letter from Tila telling me I was so successful in secondlife that the State I live in requires me to pay taxes on all of the Linden Dollars that Secondlife requires me to Convert to Cash to pay my Sim Tier.     Ironically, Secondlife does not take Lindens for Tier payments and I have no Option but to try and make enough Lindens in Secondlife to Convert to Cash so Secondlife can take it.   More often than not, Secondlife is taking money from my bank account in real life to cover the Tier.

This is a problem for me and tens of thousands of others who are not making hand over fist in lindens and simply wanted to build and enjoy the game be it through small commercial venture, roleplay or casual Regions.    Now I am being told I have pay taxes to play secondlife and it was demanded I provide my social security number so a 1099-K form could be sent of my " Income " aka... converted lindens to pay tier - that I would then be Taxed on, or... Secondlife would put a hold on my Account.    I'd also like to mention how Secondlife/Tila take a percentage of the Converted Cash right off the Top and also a percentage of anything sold on Marketplace.     The annual membership fee has also gone up.

This is forcing me to release my few Regions one at a time because I can not afford transfer fee's all in one hit, I only have four sims, make that three I gave one away last night.  My sims are also grandfathered, I had them from Class 4, that is how long and how much money I've given to secondlife.

In short, Secondlife gets my Annual Membership Fee, A percentage of anything I sell in Marketplace, A percentage of converting Lindens to Cash because Secondlife only takes cash, And Region Tier Fee for Virtual Land in my case $681.00 usd every single month.       After all that, I am being taxed on $681.00 a month for converting Lindens to Cash to pay Tier Fee.

Also, two of my sims allow me to only pay $66.00 a month on the third - its not like I am making money here.

Why?   Why cant Secondlife just take lindens for tier instead of running its long standing base out?   Most of us are disabled and that is why we came here in attempt to be productive in some small way, to focus on something other than reality and hardships.   Why am I being forced to pay taxes on Fake Money that Secondlife forces me to sell to Pay them?

Why, why do i have to pay taxes on the game Secondlife?

[Modulated]

The new IRS laws went into effect this year, which requires processors like paypal, venmo,cashapp and others to report any transactions at 600USD or above, so if you move at least that kind of money out of SL, it will probably be flagged I think.

https://www.cnet.com/personal-finance/taxes/fact-or-fiction-the-irs-is-tracking-payments-over-600-on-paypal-and-venmo-in-2022/

[Stevie Basevi]

On 1/19/2022 at 5:34 AM, Patch Linden said:

Howdy!  I have returned with an update, well overdue and I am sorry about that!  As someone else said, it took some wrangling of various contacts and experts to get a full understanding of the impact potential with this.

That said, as many know the prior 2021 Federal threshold requiring that you could be the recipient of a 1099 was set at $20,000USD and 200 transactions.  For 2022, the Federal threshold has been reduced to $600USD with no transaction limit.  This is quite the change from prior expectations, and it only applies to USD funds being withdrawn from Second Life to an external account.  Any L$ to USD exchange is not a part of the reporting if the USD remains on your account balance and is used to pay for land maintenance fees or for premium or anything else you want to spend it on as long as you don't cash out.

However, I also need to point out that the state or locale in which you reside may also carry further stipulations that will require reporting all the way down to anything above $0 and this as a variable has not changed.  Our recommendation is that you should always seek the advice of a tax professional, attorney or accountant about your specific situation ahead of time to understand what may be applicable to your situation.

I hope the information helps!
 

Thanks so much Patch.

 

[mjyothis]

Is this only applicable to US residents?

[Rolig Loon]

8 hours ago, mjyothis said:

Is this only applicable to US residents?

I am not a lawyer or a tax professional, so don't trust me.  My best guess, though, is that the U.S. Internal Revenue Service requires Linden Lab to issue a 1099 form to anyone who transfers more than the minimum amount out of SL, regardless of where the person lives. You will have to consult with a professional in your own country to find out what your own tax authorities will expect you to do with it.

Edited January 23, 2022 by Rolig Loon
typos. as always.

[SpiritSparrow Skydancer]

On 12/16/2021 at 12:49 PM, Coffee Pancake said:

You're not wrong.

The solution to this is to sell your regions, cover the tax bill, and then enjoy SL by hanging out at someone else's place without any of the stress of trying to make this into a land based financial thing, (which as you're discovering) isn't viable with individual region pricing as it stands and the methods required to pay for those regions.

There are many things @Linden Lab could do about this, from dropping region pricing to allowing payments in L$ which they can sell back to residents on the exchange themselves. But we all know they wont do either of those things.

 

I am not trying to make it a land based financial thing, I just use my region for building and photos, none of which generate any money wahtsoever. So, I am NOT making a maxable income on it. Second life is however and the tax is on them to pay and since when is the cloud taxable?

My state: Florida has no statutes or regulations regarding the sales or use taxation of cloud computing or SaaS. The state's Department of Revenue also determined that membership fees to access cloud computing and on-demand software are not taxable as there is no transfer of tangible personal property.

It is not taxable as well in California, so a generalized list of effected states would be nice so the mass exodus of secondlife does not begin.

 

 

 

 

 

[Paulsian]

i should read this first before asking or wondering if sl will update build tool for updated point of sale via objects and if so adding object rating and multi link system built in scripting options? auto tax calculator built in? wonder what the sales tax rate is? 

[bigmoe Whitfield]

LL should be on the watch for certain types to be throwing fits over this, the type that does not blink at paying amazon the taxes, but will have a cow over SL and the taxes.

[MoiraKathleen]

SL isn't the only one...  in looking at the Pro prices for Flickr last week, I noticed that the USD prices are "$ amount, plus tax" whereas for the currencies in areas with VAT, it's "$ amount, VAT inclusive".    It's been a couple of years since I had a Flickr Pro account, but they weren't charging any tax on top of the subscription rate back then, at least not for the U.S.

[Wulfie Reanimator]

11 hours ago, MoiraKathleen said:

SL isn't the only one...  in looking at the Pro prices for Flickr last week, I noticed that the USD prices are "$ amount, plus tax" whereas for the currencies in areas with VAT, it's "$ amount, VAT inclusive".    It's been a couple of years since I had a Flickr Pro account, but they weren't charging any tax on top of the subscription rate back then, at least not for the U.S.

When this thread was started, the context was different.

The new thing that's happening now is caused by a new law that requires all US companies to collect sales tax even in states where they have no physical presence, because previous law was outdated and the compliance-rates of consumers self-reporting their tax was "notoriously low."

And Wayfair, the company that challenged the previous law, advertised its products with "one of the best things about buying through Wayfair is that we do not have to charge sales tax," which was considered a "subtle offer to assist in tax evasion" (court's words).

https://www.supremecourt.gov/search.aspx?filename=/docket/docketfiles/html/public/17-494.html
Quotes from pages 1 and 16: https://www.supremecourt.gov/opinions/17pdf/17-494_j4el.pdf

Companies were allowed allowed to collect sales tax before this, but in that case it was the customer's duty to report and pay the tax, which a significant number of people don't.

Edited March 29, 2022 by Wulfie Reanimator

[Love Zhaoying]

21 hours ago, LittleSparrow Skydancer said:

My state: Florida has no statutes or regulations regarding the sales or use taxation of cloud computing or SaaS.

My state also. But if I buy stuff on Amazon, I pay tax for a long time now. That could be due to Amazon having a physical presence here. That predates the current requirement, I guess. But either way, I'm used to paying taxes on internet stuffs (whether real or virtual).

[LittleMe Jewell]

On 3/28/2022 at 1:36 PM, Paulsian said:

i should read this first before asking or wondering if sl will update build tool for updated point of sale via objects and if so adding object rating and multi link system built in scripting options? auto tax calculator built in? wonder what the sales tax rate is? 

Just in case you didn't know -- that bit about paying sales tax on purchases only applies to purchases outside of SL made with Tilia / real money.  In other words, only Premium membership, tier, and region charges.  Possibly down the road it might also apply to L$ buying.

Edited March 29, 2022 by LittleMe Jewell

[LittleMe Jewell]

6 hours ago, Love Zhaoying said:

My state also. But if I buy stuff on Amazon, I pay tax for a long time now. That could be due to Amazon having a physical presence here. That predates the current requirement, I guess. But either way, I'm used to paying taxes on internet stuffs (whether real or virtual).

In that case, you are paying taxes for physical goods, not virtual stuff.  And yeah, it is because Amazon has a presence there -- or whichever other online store you buy from.  If you buy online from a store that does not physically exist in your state, you typically will not have to pay sales tax - though even then, I think the laws can vary by state.

[Love Zhaoying]

40 minutes ago, LittleMe Jewell said:

In that case, you are paying taxes for physical goods, not virtual stuff. 

I buy a lot of virtual stuff from Amazon too. Movies, Music..I believe it's all taxed. I can check how long..

[Drake1 Nightfire]

24 minutes ago, Love Zhaoying said:

I buy a lot of virtual stuff from Amazon too. Movies, Music..I believe it's all taxed. I can check how long..

That all depends on your state. I have never paid sales tax on digital items from Amazon as my state doesn't charge them. 

 

[LittleMe Jewell]

58 minutes ago, Love Zhaoying said:

I buy a lot of virtual stuff from Amazon too. Movies, Music..I believe it's all taxed. I can check how long..

Usually because the state has decided that the digital version of something that could be physical is taxable.  Colorado does that, so I have to pay tax on purchased kindle books, movies & tv shows that I stream, and digital music.

[Drizzt Naumova]

( Saw this old post and had to answer even tho it will be a necro post )

All of this started to come to the forefront back in 2014 when the irs declared virtual currency was a taxable property. Thus, allowing them to start taxing linden. SL and its converting of linden to real life money had long been a thorn in the side of the irs as they tried to figure out ways of taxing virtual currency. With the rise of crypto, and the final descision that it was deemed a physical property, linden finally was able to be taxed by our geriatric greedongering government. Don't let it fool you, they HAVE figured out how to tax us for the oxygen we breath through climate initiatives, policies, abd clean air taxes. If it's taxable, it will be taxed. Abd if it isn't, a way will be found. I get push back from people all the time when I say they should stop paying as many taxes as possible en-mass. Including property rl property taxes. Citizens in the US are over so over taxed it's pathetic./end rant (hope my explanation helped out on the reasoning behind you being taxed from sl)