Linden Lab why are you charging VAT to one customer while waving this tax for other customers?

[Count Burks]

How can a company charge VAT, which they are legally obligated to do so to its customers while using their fake game currency which has no actual real value (according to this same company) to circumvent its legal obligations of charging VAT for other customers?

We are not even speaking about different product types here. Company sells PRODUCT 1 on which they need to charge 21% VAT.

Customer A can use fake game currency to pay for PRODUCT 1 without being required to pay 21% VAT. 

Customer B on the other hand has 5 times PRODUCT 1 with the company but is forced to pay 21% VAT when paying in legal tender using USD$.

How are the IRS and the EU VAT office ok with this type of " scheme " where virtual tokens that have no value are being used to circumvent tax laws?

For example:

Customer A located in the Netherlands has a region for their RL company business used for simulation training. They pay in USD and also pay 21% tax every month.

Customer B located in the Netherlands is a creator who is selling skins. He uses his L$ income to pay for his region and is not paying 21% tax every month.

 

When the VAT tax office gets to hear they are not receiving 500 USD$ in tax from Customer B on a yearly basis (40$ VAT per month on a region x 12 months) because he uses a fake currency with tokens that have no actual value. How exactly will the tax office be ok with this?

 

Can you explain this Linden Lab because your latest scheme seems far from  transparent? @Linden Lab

Why do European business customers in Second Life need to be compliant with tax laws, have accountants, pay all kinds of fees while your company suddenly comes up with these "magical hocus pocus" tax avoiding schemes where it is no longer needed to pay VAT on private regions?

 

 

 

[Alwin Alcott]

17 minutes ago, Count Burks said:

 

Customer A located in the Netherlands has a region for their RL company business used for simulation training. They pay in USD and also pay 21% tax every month.

Customer B located in the Netherlands is a creator who is selling skins. He uses his L$ income to pay for his region and is not paying 21% tax every month.

Your question should be asked to the Belastingdienst, not LL, i'm pretty sure their Legal advisors stay within the lines that USA and EU agreed upon, or they would have been in full attention already.
Might be a nice subject for the Belastingdienst .. their systems work so well  

 

Edited March 7, 2023 by Alwin Alcott

[Ceka Cianci]

I would think it's because they offer the option of paying for one region of server space in lindens, in the Premium Plus membership package, as a perk.

If they aren't pulling income out and aren't putting money in, then there really isn't any money to tax..

 

 

[Count Burks]

24 minutes ago, Ceka Cianci said:

I would think it's because they offer the option of paying for one region of server space in lindens, in the Premium Plus membership package, as a perk.

If they aren't pulling income out and aren't putting money in, then there really isn't any money to tax..

VAT = VALUE ADDED TAX 

Tax added to the VALUE OF A PRIVATE REGION  that is where the tax is located on the value of a private region.

In this scheme the VALUE ADDED TAX goes up into nothing and doesn't exist according to Linden Lab because a fake virtual currency is being used to pay for the region. 

A currency that has no real value according to Linden Lab is being used so no VAT or GST is getting charged.

This has nothing to do with pulling income out, no tax is being charged to one user while another user needs to pay tax for the same product. And the tax office is not getting their VAT because a fake currency that has no value is being used to circumvent the payment of the VAT.

 

This comes from the Second Life wiki

What are the items for which Linden Lab charges VAT or GST?

Most services that you pay Linden Lab directly for have VAT or GST applied. This includes:

• Monthly & Quarterly Premium membership fees
• Purchases from the Land Store
• Mainland Land use fees (tier)
• Private Region maintenance fees
• Land auctions
• LindeX transaction fees

What are the items for which Linden Lab doesn't charge VAT or GST?

Transactions in L$ between individual Residents, that do not involve Linden Lab as a direct party, are not subject to VAT or GST.

 

Person 1 is a merchant with a private region, he uses his L$ income to pay for his region and pays no VAT for the year.

Person 2 is a land trader with 10 private regions, he cannot use his L$ income to pay for the same region products and needs to pay 5000 USD in VAT or GST for the year.

 

 

 

[Rowan Amore]

1 minute ago, Count Burks said:

a fake currency that has no value

is used to pay for fake land that has no value.  Personally, it should have been like this from the start.

[Count Burks]

1 minute ago, Rowan Amore said:

is used to pay for fake land that has no value.  Personally, it should have been like this from the start.

No because according to your logic webhosting services offering web space would have no intrinsic value and not be subject to VAT. Linden Lab is selling server space and software infrastructure which does have intrinsic value and is subject to VAT. This is about creating a manipulative shift using a fake currency so no VAT is getting charged to certain customers while others are being forced to pay VAT for the exact same product. And other people not being allowed to use their fake currency to pay for the exact same product, hence being forced to pay VAT and GST. 

Like I wrote above it is a "magical hocus pocus" scheme and I strongly doubt the legality of it.

[Ceka Cianci]

3 minutes ago, Count Burks said:

VAT = VALUE ADDED TAX 

Tax added to the VALUE OF A PRIVATE REGION  that is where the tax is located on the value of a private region.

In this scheme the VALUE ADDED TAX goes up into nothing and doesn't exist according to Linden Lab because a fake virtual currency is being used to pay for the region. 

A currency that has no real value according to Linden Lab is being used so no VAT or GST is getting charged.

This has nothing to do with pulling income out, no tax is being charged to one user while another user needs to pay tax for the same product. And the tax office is not getting their VAT because a fake currency that has no value is being used to circumvent the payment of the VAT.

 

This comes from the Second Life wiki

What are the items for which Linden Lab charges VAT or GST?

Most services that you pay Linden Lab directly for have VAT or GST applied. This includes:

• Monthly & Quarterly Premium membership fees
• Purchases from the Land Store
• Mainland Land use fees (tier)
• Private Region maintenance fees
• Land auctions
• LindeX transaction fees

What are the items for which Linden Lab doesn't charge VAT or GST?

Transactions in L$ between individual Residents, that do not involve Linden Lab as a direct party, are not subject to VAT or GST.

 

Person 1 is a merchant with a private region, he uses his L$ income to pay for his region and pays no VAT for the year.

Person 2 is a land trader with 10 private regions, he cannot use his L$ income to pay for the same region products and needs to pay 5000 USD in VAT or GST for the year.

 

 

 

Who sets the value of what gets taxed, is it the seller or the tax man? If linden lab decided to give someone free sim server space because they just came out with a new premium Titanium membership and included that free server space in the membership.. Should the person paying for that membership be charged VAT each month if it's included in the membership they paid for?

I can understand being upset about them not making the perk more wide spread and including like Premiums or  something like that.. but really it's just a service offering for having this level of membership..

 

 

[Count Burks]

4 minutes ago, Ceka Cianci said:

Who sets the value of what gets taxed, is it the seller or the tax man? If linden lab decided to give someone free sim server space because they just came out with a new premium Titanium membership and included that free server space in the membership.. Should the person paying for that membership be charged VAT each month if it's included in the membership they paid for?

I can understand being upset about them not making the perk more wide spread and including like Premiums or  something like that.. but really it's just a service offering for having this level of membership..

This is not a product being offered as a "titanium premium subscription model" including free region or server space to every customer of the platform. This is about using deceptive tactics using a fake currency so certain customers can avoid paying VAT or GST while other customers cannot or are not allowed to use their fake currency according to this scheme.

If free server space gets offered in a "Titanium premium" package it is offered to all customers on an equal basis, if a person wants it he can get it. This latest scheme is nothing of the kind. 

Why should the tax office receive 500 USD per year from Linden Lab customer 1 but not from Linden Lab customer 2? Has Linden Lab discovered a magical wormhole where the VAT just vanishes for certain customers while the wormhole stays closed for other customers?

How is that working with invoicing? Client 1 books an invoice with VAT while client 2 books an invoice without VAT? 

[Ceka Cianci]

1 hour ago, Count Burks said:

This is not a product being offered as a "titanium premium subscription model" including free region or server space to every customer of the platform. This is about using deceptive tactics using a fake currency so certain customers can avoid paying VAT or GST while other customers cannot or are not allowed to use their fake currency according to this scheme.

If free server space gets offered in a "Titanium premium" package it is offered to all customers on an equal basis, if a person wants it he can get it. This latest scheme is nothing of the kind. 

Why should the tax office receive 500 USD per year from Linden Lab customer 1 but not from Linden Lab customer 2? Has Linden Lab discovered a magical wormhole where the VAT just vanishes for certain customers while the wormhole stays closed for other customers?

How is that working with invoicing? Client 1 books an invoice with VAT while client 2 books an invoice without VAT? 

This is a perk being added to a membership, Just like land/server space that comes with two of the three memberships.. You have to get that membership to get the perk.

Basic Plus is a membership that can buy land on mainland and that's the perk they get with their membership, they'll get charged VAT if they deal with lindens direct and have to pay vat..

Premium gets a 1024 included with it's membership..

Premium Plus gets double that in land, plus the ability to pay for one region with lindens..

People haven't been paying VAT tax on those lots that come with their memberships, ever since they started coming as perks with their memberships.

Because the VAT gets paid when they pay their fee for the membership..

The magic wormhole is that they can give cost breaks and cost increases for their services where they want or give away what they want..

They give this person a better deal because they have the better membership, but the costs get shifted to the majority to pay for the perk added to the membership..

Linden Lab doesn't make anything when they take their own property for payment.. So if a user is paying linden lab with linden labs own property, then linden lab are pretty much giving the sim away for free and getting the cost paid elsewhere. which is from the increases they put out at the same time for buying and selling lindens..

If there is nothing of value being given to linden lab for the land, then there is nothing to tax.

There is no difference in the server space of a 1024 or a region other than the size..They are pretty much the same thing and the memberships do make a difference in how much VAT you  will pay for those with our without  one..

 

Edited March 7, 2023 by Ceka Cianci
silly typos and forgetting fillers.. hehehe

[Rowan Amore]

11 minutes ago, Ceka Cianci said:

Because the VAT gets paid when they pay their fee for the membership..

VAT is no longer paid on any membership plan as of Nov. 2022.  You also don't need a membership at all to purchase a private region, AFAIK.

[Ceka Cianci]

1 minute ago, Rowan Amore said:

VAT is no longer paid on any membership plan as of Nov. 2022.  You also don't need a membership at all to purchase a private region, AFAIK.

Ya that's right I forgot about that.. They introduced that when PP+ came out..hehehe

Regions, I can't remember ever having to be a member to get one of those.. Only really to get mainland I believe..

[Count Burks]

1 hour ago, Ceka Cianci said:

Linden Lab doesn't make anything when they take their own property for payment.. So if a user is paying linden lab with linden labs own property, then linden lab are pretty much giving the sim away for free and getting the cost paid elsewhere. which is from the increases they put out at the same time for buying and selling lindens..

If there is nothing of value being given to linden lab for the land, then there is nothing to tax.

 

What a weird logic, Linden Lab takes their own property for payment which are Linden Dollars and what do you think they will do with these Linden Dollars? They will keep them under their mattress? They will just convert these Linden Dollars into USD$.

Let me show you the magic wormhole and how VAT vanishes into thin air.

 

Customer A owns a full region pays 209 US$ + 21% VAT

Customer B owns a full region pays 209 US$ in Linden Dollars.

 

The tax office receives 43.89 USD per month or 526.68 USD on an annual basis from customer A

Customer B on the other hand is Premium + and pays no VAT because he can pay in fake currency for his region which is magically exempt from VAT.

Premium + costs 249 USD annual with 11 USD per month stipend or 132 USD cash back per year, net cost of 117 USD.

 

The magical tax wormhole works like this:

For a small investment of 117 USD you can dodge 526.68 USD in sales tax (even more if you are in a country like Sweden).

And all of this is possible thanks to the deployment of a fake currency which has no actual RL value? 

You know what such a scheme is called right?

Linden Lab is not giving anything away in this case, they use a virtual currency which has been declared for the previous 20 years as a currency without any RL value as an instrument to circumvent VAT and GST tax.

 

 

 

Edited March 7, 2023 by Count Burks

[Rowan Amore]

5 minutes ago, Count Burks said:

What a weird logic, Linden Lab takes their own property for payment which are Linden Dollars and what do you think they will do with these Linden Dollars? They will keep them under their mattress? They will just convert these Linden Dollars into USD$.

Let me show you the magic wormhole and how VAT vanishes into thin air.

 

Customer A owns a full region pays 209 US$ + 21% VAT

Customer B owns a full region pays 209 US$ in Linden Dollars.

 

The tax office receives 43.89 USD per month or 526.68 USD on an annual basis from customer A

Customer B on the other hand is Premium + and pays no VAT because he can pay in fake currency for his region which is magically exempt from VAT.

Premium + costs 249 USD annual with 11 USD per month stipend or 132 USD cash back per year, net cost of 117 USD.

 

The magical tax wormhole works like this:

For a small investment of 117 USD you can dodge 526.68 USD in sales tax (even more if you are in a country like Sweden).

And all of this is possible thanks to the deployment of a fake currency which has no actual RL value? 

You know what such a scheme is called right?

Linden Lab is not giving anything away in this case, they use a virtual currency which they have been declared for the previous 20 years as a currency without any RL value as an instrument to circumvent VAT and GST tax.

 

 

 

Question...do you only accept PayPal for your rentals?

[benchthis]

6 minutes ago, Count Burks said:

Customer A owns a full region pays 209 US$ + 21% VAT

Customer B owns a full region pays 209 US$ in Linden Dollars.

I'm no CPA but should customer B pay 21%VAT in Linden Dollars as well? 

Edit: Not sure if this would apply

The basic tax avoidance penalties in the UK are:

• No penalty: if you took reasonable care – which includes telling HMRC if you discover a mistake.
• Up to 30% if you have been careless or failed to send in a return.
• Up to 70% if the error was deliberate.
• Up to 100% if the error was deliberate and you tried to conceal it.

Edited March 7, 2023 by benchthis

[Charolotte Caxton]

4 hours ago, Count Burks said:

How can a company charge VAT, which they are legally obligated to do so to its customers while using their fake game currency which has no actual real value (according to this same company) to circumvent its legal obligations of charging VAT for other customers?

We are not even speaking about different product types here. Company sells PRODUCT 1 on which they need to charge 21% VAT.

Customer A can use fake game currency to pay for PRODUCT 1 without being required to pay 21% VAT. 

Customer B on the other hand has 5 times PRODUCT 1 with the company but is forced to pay 21% VAT when paying in legal tender using USD$.

How are the IRS and the EU VAT office ok with this type of " scheme " where virtual tokens that have no value are being used to circumvent tax laws?

For example:

Customer A located in the Netherlands has a region for their RL company business used for simulation training. They pay in USD and also pay 21% tax every month.

Customer B located in the Netherlands is a creator who is selling skins. He uses his L$ income to pay for his region and is not paying 21% tax every month.

 

When the VAT tax office gets to hear they are not receiving 500 USD$ in tax from Customer B on a yearly basis (40$ VAT per month on a region x 12 months) because he uses a fake currency with tokens that have no actual value. How exactly will the tax office be ok with this?

 

Can you explain this Linden Lab because your latest scheme seems far from  transparent? @Linden Lab

Why do European business customers in Second Life need to be compliant with tax laws, have accountants, pay all kinds of fees while your company suddenly comes up with these "magical hocus pocus" tax avoiding schemes where it is no longer needed to pay VAT on private regions?

 

 

 

I highly doubt you are going to discover something the IRS does not know, you must not be American. It's ok, just watch.

Edited March 7, 2023 by Charolotte Caxton

[Charolotte Caxton]

3 minutes ago, benchthis said:

I'm no CPA but should customer B pay 21%VAT in Linden Dollars as well? 

Edit: Not sure if this would apply

The basic tax avoidance penalties in the UK are:

• No penalty: if you took reasonable care – which includes telling HMRC if you discover a mistake.
• Up to 30% if you have been careless or failed to send in a return.
• Up to 70% if the error was deliberate.
• Up to 100% if the error was deliberate and you tried to conceal it.

In the UK, we released ourselves of them long ago. 1776 I think.

[Qie Niangao]

4 minutes ago, Count Burks said:

What a weird logic, Linden Lab takes their own property for payment which are Linden Dollars and what do you think they will do with these Linden Dollars? They will keep them under their mattress? They will just convert these Linden Dollars into USD$.

Formally, it's more complicated than that. Practically the process has (almost) the same effect, though. Just for completeness: The Lab doesn't sell to residents the L$s it collects; those just vanish into thin air upon collection. But the Lab does sell brand new L$s to residents at their target exchange rate. It also distributes L$ to Premium residents as stipends. So it's not as simple as collect L$s and convert them to US$s directly; rather, the Lab has other ways to monetize the game currency and at the same time increase customer "stickiness" to the platform (and god knows what other marketing magic they might be performing).

Don't ask me if this has any relevance to VAT. I've studiously avoided knowing anything about VAT for years and years.

[benchthis]

If I go to amazon from uk and use an amazon gift card/amazon currency to buy something virtual like a 3d file I would still have to pay VAT on that purchase? Are the Linden Dollar land payers getting a tax discount as well, like SL absorbs the tax and pays it? Some companies do that. Weed company in colorado did does it makes paying so much easier vs paying 20 different taxes have it all included.

Edit: I'm surprised the MP does not have taxes for each purchase YET. Just wait until that happens. That will suck. 

Edited March 7, 2023 by benchthis

[Count Burks]

2 minutes ago, benchthis said:

If I go to amazon from uk and use an amazon gift card/amazon currency to buy something virtual like a 3d file I would still have to pay VAT on that purchase? Are the Linden Dollar land payers getting a tax discount as well, like SL absorbs the tax and pays it? Some companies do that. Weed company in colorado did does it makes paying so much easier vs paying 20 different taxes have it all included. 

That is the whole point of this thread. The VAT or GST is vanishing in thin air by the use of the Linden Dollar for some people but not for others.

[benchthis]

I'd feel same way. Thankfully I don't follow the linden exchange and fees but heard it's crazy. We have more questions than answers, sure do. 

I was a little confused about being able to pay all regions no limit per 1 account with this new linden payment region/island??, for everyone to use not just premium plus, maybe taken off of PP? or just made as option for everyone in the world. If I see a linden home or a market place home or a mainland home (not really mainland guess would be for land owners) i'm a noob I could use lindens to rent property or buy property.? No idea where they are going with all this. 

Hopefully you'll get some answers and some tax relief. That's crazy. 

Edited March 7, 2023 by benchthis

[Ceka Cianci]

25 minutes ago, Qie Niangao said:

Formally, it's more complicated than that. Practically the process has (almost) the same effect, though. Just for completeness: The Lab doesn't sell to residents the L$s it collects; those just vanish into thin air upon collection. But the Lab does sell brand new L$s to residents at their target exchange rate. It also distributes L$ to Premium residents as stipends. So it's not as simple as collect L$s and convert them to US$s directly; rather, the Lab has other ways to monetize the game currency and at the same time increase customer "stickiness" to the platform (and god knows what other marketing magic they might be performing).

Don't ask me if this has any relevance to VAT. I've studiously avoided knowing anything about VAT for years and years.

Yep, they make that money back in the buy and sell market, from the increases to buying and selling lindens, which were introduced at the same time as the perk,which pays for the perk....

 

 

[DaniMillar2000]

The basic premise here is wrong and that's why there's confusion. You cannot purchase anything from LindenLab in L$. No one is paying region rental (tier) to LL in LindenDollar tokens. Those tokens, which have no intrinsic value are paid to third parties. The third parties (which may or may not be in Europe) pay in fiat currency to LL. (fiat currency is currency issued by a government). It they're located in a VAT state, then they'd pay it. So ultimately, LL is collecting and paying the VAT appropriately.

[Ceka Cianci]

2 hours ago, Count Burks said:

What a weird logic, Linden Lab takes their own property for payment which are Linden Dollars and what do you think they will do with these Linden Dollars? They will keep them under their mattress? They will just convert these Linden Dollars into USD$.

Let me show you the magic wormhole and how VAT vanishes into thin air.

 

Customer A owns a full region pays 209 US$ + 21% VAT

Customer B owns a full region pays 209 US$ in Linden Dollars.

 

The tax office receives 43.89 USD per month or 526.68 USD on an annual basis from customer A

Customer B on the other hand is Premium + and pays no VAT because he can pay in fake currency for his region which is magically exempt from VAT.

Premium + costs 249 USD annual with 11 USD per month stipend or 132 USD cash back per year, net cost of 117 USD.

 

The magical tax wormhole works like this:

For a small investment of 117 USD you can dodge 526.68 USD in sales tax (even more if you are in a country like Sweden).

And all of this is possible thanks to the deployment of a fake currency which has no actual RL value? 

You know what such a scheme is called right?

Linden Lab is not giving anything away in this case, they use a virtual currency which has been declared for the previous 20 years as a currency without any RL value as an instrument to circumvent VAT and GST tax.

 

 

 

It's not really that weird. I mean if it was a good idea, they would have probably been doing it the whole time..

They are more than likely going to make it up with the increases , which this perk was introduced with..

They had a lot of frosting in the blog before they got down to the real cupcake of a reason for the blog.. The price increases.. 

All those goodies were to make the bad tasting cupcake go down smoother.. I don't think this was some scheme to sneak shady tax breaks in really..

I understand the frustration of how it may not seem fair and  how they should have spread things around a bit more.. But honestly, I can't think of any laws they could be breaking or any reason the tax man is going to pull anyone in for an audit and be in trouble for not having to pay for server space  that was part of a membership perk..

If they aren't breaking any tax laws or other laws, then there really isn't anything wrong they are doing , unless it's that you feel it's unethical. That or you can see laws being broken doing this.

It's easy to see the perk isn't going to be doable for everyone with one of those memberships, because you have to be able to make that much inside the world to make it worth doing..

User B would get run through the ringer buying 209 dollars worth of lindens.. hehehe  They'd have the fee plus then get hit with VAT..

 

I know one thing.I'm not getting another sim anytime soon.. hehehe

 

 

 

 

[Ceka Cianci]

13 minutes ago, DaniMillar2000 said:

The basic premise here is wrong and that's why there's confusion. You cannot purchase anything from LindenLab in L$. No one is paying region rental (tier) to LL in LindenDollar tokens. Those tokens, which have no intrinsic value are paid to third parties. The third parties (which may or may not be in Europe) pay in fiat currency to LL. (fiat currency is currency issued by a government). It they're located in a VAT state, then they'd pay it. So ultimately, LL is collecting and paying the VAT appropriately.

What about Linden dollars that are generated in world..

I can't see why anyone buy linden dollars to pay for their monthly on a sim, that would cost them more.. But this perk is set up more for those that generate lindens in world and not cash them out..

They don't even have to leave the world and can pay through a kiosk in world from my understanding..

[Rowan Amore]

18 minutes ago, DaniMillar2000 said:

No one is paying region rental (tier) to LL in LindenDollar tokens

They can now as per the blog post from LL...

• Accepting Linden Dollars for land payments - a convenient new option for Premium Plus members. If you are a creator earning L$ inworld, you now won’t have to sell on the LindeX to pay for your region!