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

[Arielle Popstar]

28 minutes ago, Alwin Alcott said:

no, the money and token traffic doesn't change

It had to have so at the very least both Tila and JP Morgan can make money off of us as well as LL.

[Sid Nagy]

19 minutes ago, Dorientje Woller said:

Frankly, the question is: Do you really want to crash the already weakened economy in Second Life with your ideas? The moment LL would introduce VAT on in world transactions ... the game is over for everybody.

There is a difference in the (EU law) law between customer to customer transactions online and customer  - provider/company transactions.
Marketplace and inworld sales from creators are all in the first group, then no VAT has to be charged as it stands today.
So these transactions are in no danger to be subject of VAT taxes.

Paying LL with L$ is in the second group and needs to be taxed with VAT, if the L$ can be seen as an equivalent of real money. The possibility to pay LL with the game tokens is new and.... needs careful handling by the legal team of the Lab IMHO.

[Lindal Kidd]

On 3/7/2023 at 7:50 PM, Ceka Cianci said:

I don't think this was some scheme to sneak shady tax breaks in really..

Well, if it wasn't, it should have been. Any way to get around VAT, or indeed any tax, is a Good Thing.

Taxation is just a way of legitimizing robbery.

[Rowan Amore]

Since this is a pilot program, I'm wondering if when it goes out fully and if they let you pay for ALL your regions with Ls, will someone suddenly change their concerns about people paying VAT?    🤔

[Caeruleiae]

15 hours ago, Rowan Amore said:

Since this is a pilot program, I'm wondering if when it goes out fully and if they let you pay for ALL your regions with Ls, will someone suddenly change their concerns about people paying VAT?    🤔

That's about the only point that's been made clear this whole thread. I would say yes the- it's not fair game would stop then. 

[Theresa Tennyson]

Dumb question #1: Does Linden Lab charge VAT on tier paid by "US Dollar Balance", which is how I imagine anyone dealing with a "business" in Second Life pays most of their tier?

Dumb question #2: Has anyone in authority said that VAT won't be added to tier payments by Linden Dollars if it's added to tier payments by US Dollar Balance?

Edited March 13, 2023 by Theresa Tennyson

[Theresa Tennyson]

On 3/7/2023 at 2:04 PM, Count Burks said:

 

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.

 

Paying tier does involve Linden Lab as a direct party, so this statement wouldn't apply.

Edited March 13, 2023 by Theresa Tennyson

[Alwin Alcott]

20 hours ago, Arielle Popstar said:

It had to have so at the very least both Tila and JP Morgan can make money off of us as well as LL.

shareholders / investors .. and  Tllia / LL... what is the connection between those and the VAT LL has to collect from their customers ?  ..

answer... NONE

[Arielle Popstar]

14 minutes ago, Alwin Alcott said:

shareholders / investors .. and  Tllia / LL... what is the connection between those and the VAT LL has to collect from their customers ?  ..

answer... NONE

From reading Count's link, Tilla is the deemed reseller and Linden Lab is the Online Gaming Platform. Though in past Tilla and the Lab were one and the same, because of their recent separation as business entities, they have different requirements in the collection of Vat. The lab acting in the capacity of a landlord renting land to residents for Linden $ does not need to collect Vat because they are not acting in the capacity of a reseller as long as they receive the monies in ingame currency (L$)  in the same capacity as Count when he charges tenants for a parcel ie consumer to consumer. This to my mind explains why paying in L$ for Land was not an option before the Tilla and Lab split. 

[Count Burks]

34 minutes ago, Theresa Tennyson said:

Dumb question #1: Does Linden Lab charge VAT on tier paid by "US Dollar Balance", which is how I imagine anyone dealing with a "business" in Second Life pays most of their tier?

Yes of course, there is no difference if you get billed on your USD balance or pay directly using another form of payment.

36 minutes ago, Theresa Tennyson said:

Dumb question #2: Has anyone in authority said that VAT won't be added to tier payments by Linden Dollars if it's added to tier payments by US Dollar Balance?

Linden Lab denied they would be charging VAT on direct Linden Dollar payments for tier in world in their latest episode of their Labgab show.

[Count Burks]

2 minutes ago, Arielle Popstar said:

From reading Count's link, Tilla is the deemed reseller and Linden Lab is the Online Gaming Platform. Though in past Tilla and the Lab were one and the same, because of their recent separation as business entities, they have different requirements in the collection of Vat. The lab acting in the capacity of a landlord renting land to residents for Linden $ does not need to collect Vat because they are not acting in the capacity of a reseller as long as they receive the monies in ingame currency (L$)  in the same capacity as Count when he charges tenants for a parcel ie consumer to consumer. This to my mind explains why paying in L$ for Land was not an option before the Tilla and Lab split. 

Tilia is a money transmitter, not a reseller.Welcome to Tilia Developer Documentation!

Linden Lab is the one invoicing private region sales, not Tilia. Private regions or sims are the core product of Linden Lab.

[Arielle Popstar]

1 minute ago, Count Burks said:

Tilia is a money transmitter, not a reseller.Welcome to Tilia Developer Documentation!

Linden Lab is the one invoicing private region sales, not Tilia. Private regions or sims are the core product of Linden Lab.

Using your Casino example from before, you realize that as long as you have the chips you purchased or won from before, you can go from the Blackjack tables to the Roulette wheel without being charged Vat between the one to the other. You might have won millions at the Blackjack but then lost it all at Roulette. At the end of the night when you cash in your chips, you are not going to be paying taxes, Vat or otherwise, on the chips you won at Blackjack. In the same way when a creator makes thousands of L$ on products sold and then goes and rents a region for a couple months from the Lab, she/he should not have to pay Vat on that as it is ingame currency and taxes will not apply until she/he cashes out their remaining L$ for R/L monies. 

[Alwin Alcott]

3 hours ago, Arielle Popstar said:

Using your Casino example from before, you realize that as long as you have the chips you purchased or won from before, you can go from the Blackjack tables to the Roulette wheel without being charged Vat between the one to the other. You might have won millions at the Blackjack but then lost it all at Roulette. At the end of the night when you cash in your chips, you are not going to be paying taxes, Vat or otherwise, on the chips you won at Blackjack. In the same way when a creator makes thousands of L$ on products sold and then goes and rents a region for a couple months from the Lab, she/he should not have to pay Vat on that as it is ingame currency and taxes will not apply until she/he cashes out their remaining L$ for R/L monies. 

do you even realize VAT isn't relevant at all in your example ? At most a few gambling or income taxes who only are applied to profits by gambling VAT has NOTHING to do with income... so it's absurd to compare it with SL Regions.

[Arielle Popstar]

2 hours ago, Alwin Alcott said:

do you even realize VAT isn't relevant at all in your example ? At most a few gambling or income taxes who only are applied to profits by gambling VAT has NOTHING to do with income... so it's absurd to compare it with SL Regions.

It's all a little absurd isn't it being taxation? According to a recent tax law case involving a German Landlord in S/L, a German High Court ruled:

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

German Tax Court Rules Renting Virtual Land is VAT Free

The landlord appealed the ruling to the German Federal Tax Court, which overturned the lower court ruling. The Court ruled that the renting of virtual assets was irrelevant for tax purposes as it took place entirely in a virtual world. Although virtual land had significant value, this value was limited to a particular online environment. If the virtual world closed down, the virtual land would cease to exist.

Therefore, “in-game” activities undertaken for hobby purposes should not have real tax consequences.

However, the Federal Tax Court noted that activities beyond the boundaries of a virtual world may have real tax consequences. The Court ruled that the plaintiff performed a taxable transaction when he exchanged Linden dollars for US dollars. But because that exchange took place over Second Life’s currency exchange platform, which is established in the US, the Court ruled that the transaction was not subject to tax in Germany.

The decision of the German Federal Tax Court is final and cannot be appealed

https://news.bloombergtax.com/daily-tax-report-international/german-tax-court-rules-renting-virtual-land-is-vat-free

[Count Burks]

24 minutes ago, Arielle Popstar said:

It's all a little absurd isn't it being taxation? According to a recent tax law case involving a German Landlord in S/L, a German High Court ruled:

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Therefore, “in-game” activities undertaken for hobby purposes should not have real tax consequences.

Not really since this is obviously a C2C transaction. You mention it yourself. User to User transactions or player to player transactions are Consumer To Consumer transactions and not subject to VAT and there is a significant difference between C2C and B2C or C2B transactions. (Business To Consumer and Consumer To Business).

Go to page 4 of this thread and look for my post where I put an orange box around the text, read it and check the source and read the source and then read it again.

 

 

For the tax office Second Life is Linden Lab their shop, Linden Lab is the merchant and if the merchant aka platform owner is selling his goods to customers in the shop, you can be sure the tax office will want their VAT.

The merchant Linden Lab can offer his goods and accept space coins for the digital goods, still VAT needs to be charged where applicable based on the Real Life location of the customer.

Linden Lab the online platform is viewed as a taxable person while a fellow player or platform user is not.

Again think about the logic behind this, Linden Lab charges VAT on their website for the exact same product which they offer in world for their L$ currency. And by some magic the tax office would not want their VAT on those sales? The VAT tax office already covered that loophole by differentiating C2C and B2C transactions on digital platforms.

[Rowan Amore]

31 minutes ago, Count Burks said:

Not really since this is obviously a C2C transaction. You mention it yourself. User to User transactions or player to player transactions are Consumer To Consumer transactions and not subject to VAT and there is a significant difference between C2C and B2C or C2B transactions. (Business To Consumer and Consumer To Business).

Go to page 4 of this thread and look for my post where I put an orange box around the text, read it and check the source and read the source and then read it again.

 

 

For the tax office Second Life is Linden Lab their shop, Linden Lab is the merchant and if the merchant aka platform owner is selling his goods to customers in the shop, you can be sure the tax office will want their VAT.

The merchant Linden Lab can offer his goods and accept space coins for the digital goods, still VAT needs to be charged where applicable based on the Real Life location of the customer.

Linden Lab the online platform is viewed as a taxable person while a fellow player or platform user is not.

Again think about the logic behind this, Linden Lab charges VAT on their website for the exact same product which they offer in world for their L$ currency. And by some magic the tax office would not want their VAT on those sales? The VAT tax office already covered that loophole by differentiating C2C and B2C transactions on digital platforms.

If LL decides to make paying in Lindens available for ALL regions owned by an individual will you...

~continue to allow payment through PayPal on your rentals?

~take advantage of this service and pay in Lindens thus avoiding VAT?

 

[Caeruleiae]

5 hours ago, Count Burks said:

Go to page 4 of this thread and look for my post where I put an orange box around the text, read it and check the source and read the source and then read it again

You should read your own source, because the entire proposition does not agree with you nor does all the feedback already given on that proposition-only some of it does. You can't just keep cherry picking parts you think agree with you on other sources-it makes your position seem ridiculous and barely partially thought out. You're actually sharing links to information that disproves your belief and don't realize it. 

Also the link you provided-and apparently did not actually read in its entirety-is merely a proposition being placed before the powers that be and does not discuss actual law currently in place or even necessarily an entirely newly proposed law, but rather clarification of existing and other proposed laws. It literally cites exact laws as they stand and those proposed to stand-none of which back up your position on the matter. 

In other words, it will go as far as absolutely nowhere.  It doesn't matter how many times you try to describe the scenario over and over-you're still not correct and ll still has a legal team that has definitely already consulted all existing laws on the planet to ensure they're compliant with regulations and governing bodies. If the governing bodies had no issues with the way ll is doing things-you don't have a leg to stand on. Except the its not fair I have to pay more than other people leg-which got old on page one. 

[Dorientje Woller]

8 hours ago, Count Burks said:

Not really since this is obviously a C2C transaction. You mention it yourself. User to User transactions or player to player transactions are Consumer To Consumer transactions and not subject to VAT and there is a significant difference between C2C and B2C or C2B transactions. (Business To Consumer and Consumer To Business).

Go to page 4 of this thread and look for my post where I put an orange box around the text, read it and check the source and read the source and then read it again.

 

 

For the tax office Second Life is Linden Lab their shop, Linden Lab is the merchant and if the merchant aka platform owner is selling his goods to customers in the shop, you can be sure the tax office will want their VAT.

The merchant Linden Lab can offer his goods and accept space coins for the digital goods, still VAT needs to be charged where applicable based on the Real Life location of the customer.

Linden Lab the online platform is viewed as a taxable person while a fellow player or platform user is not.

Again think about the logic behind this, Linden Lab charges VAT on their website for the exact same product which they offer in world for their L$ currency. And by some magic the tax office would not want their VAT on those sales? The VAT tax office already covered that loophole by differentiating C2C and B2C transactions on digital platforms.

Quick little lesson into the workings of the EU:

- An EU law isn't a law, it's a guideline on which each of their 28 members are allowed to set their own conditions and or laws.

- An EU rule is a law, and has to be followed when all 28 members has agreed upon.

 

Which of the 2 situations are you refering to: an EU law or an EU rule?

Edited March 14, 2023 by Dorientje Woller

[Arielle Popstar]

14 hours ago, Count Burks said:

Again think about the logic behind this, Linden Lab charges VAT on their website for the exact same product which they offer in world for their L$ currency. And by some magic the tax office would not want their VAT on those sales? The VAT tax office already covered that loophole by differentiating C2C and B2C transactions on digital platforms.

After reading the ruling by the German high court I linked above, it seems to me the more relevant question is whether the Lab should be collecting any Vat at all since:

The Court ruled that the plaintiff performed a taxable transaction when he exchanged Linden dollars for US dollars. But because that exchange took place over Second Life’s currency exchange platform, which is established in the US, the Court ruled that the transaction was not subject to tax in Germany.

[Alwin Alcott]

2 hours ago, Arielle Popstar said:

After reading the ruling by the German high court I linked above, it seems to me the more relevant question is whether the Lab should be collecting any Vat at all since:

The Court ruled that the plaintiff performed a taxable transaction when he exchanged Linden dollars for US dollars. But because that exchange took place over Second Life’s currency exchange platform, which is established in the US, the Court ruled that the transaction was not subject to tax in Germany.

again nothing to compare, gets a symptom instead of a incident .. 
You and Count should meet inworld and stop posting in this thread, you'd go great together talking in circles about your  misinformation.

[Love Zhaoying]

3 minutes ago, Alwin Alcott said:

You and Count should meet inworld and stop posting in this thread, you'd go great together talking in circles about your  misinformation.

..misinformation? On the Forums?

/me asks in a sultry voice, "Is there a Mister Information?"

[BelindaN]

I haven't been involved in VAT for a while, but be in no doubt of the complexity of this system. Goods and services are treated differently.  Place of supply of services is complex. Consider making a supply of computer services internationally down a phone line. Inside or outside the EU also impacts on the liability.

The law determines what are goods and what are services, and the grey areas get resolved at tribunal.

Companies also have a designated principal place of business, but can set up a satellite operation overseas. In some cases based on turnover this is mandatory.

Working in this area can be challenging so don't expect to get a clear picture easily.

[Count Burks]

12 hours ago, Caeruleiae said:

You should read your own source, because the entire proposition does not agree with you nor does all the feedback already given on that proposition-only some of it does. You can't just keep cherry picking parts you think agree with you on other sources-it makes your position seem ridiculous and barely partially thought out. You're actually sharing links to information that disproves your belief and don't realize it. 

Also the link you provided-and apparently did not actually read in its entirety-is merely a proposition being placed before the powers that be and does not discuss actual law currently in place or even necessarily an entirely newly proposed law, but rather clarification of existing and other proposed laws. It literally cites exact laws as they stand and those proposed to stand-none of which back up your position on the matter. 

In other words, it will go as far as absolutely nowhere.  It doesn't matter how many times you try to describe the scenario over and over-you're still not correct and ll still has a legal team that has definitely already consulted all existing laws on the planet to ensure they're compliant with regulations and governing bodies. If the governing bodies had no issues with the way ll is doing things-you don't have a leg to stand on. Except the its not fair I have to pay more than other people leg-which got old on page one. 

Hi, and aren't we in a cranky mood today?

Through this entire thread I have been very careful in my wording. If you would read carefully what I say, at no point did I make a claim that "This is the law and this is how it should be applied."

I did speak in terms of "this is my opinion" and will continue to do so. At no point am I dictating the law or making legal claims. 

If you would read the post where I speak about the article you will notice that I speak about an "Interesting article confirming my theories". I have just read the article again and agree with the article. 

This feedback posted by Baker McKenzie which just happens to be one of the largest tax law firms on the planet with 14000 people working for them provides a clear interpretation on how Baker McKenzie sees how VAT should be applied inside of digital gaming environments, pointing out the difference between C2C and B2C transactions.

In the court case brought up by Arielle Popstar the outcome of the legal conflict was judged based on the fact that the defendant aka the Second Life land seller from Germany did not have to charge VAT because he was involved in hobby transactions which took place between platform users or players (C2C transactions). The final ruling in this case is again aligned with the feedback posted by Baker McKenzie.

Of course I am not basing solely my opinion on this single article which is not an actual law. Fact is that the law is rather complicated which is again a reason I am stating that what I write is merely my opinion.

I encourage you to do some more research yourself in particular about the OECD https://en.wikipedia.org/wiki/OECD and the role of digital platforms in the collection of VAT and GST on online sales. Here is the PDF for you or anyone interested in learning more. https://www.oecd.org/tax/consumption/the-role-of-digital-platforms-in-the-collection-of-vat-gst-on-online-sales.pdf

Be aware that this document speaks about the Full VAT/GST liability regime which has already been adopted by several countries around the world and is under consideration by more countries. Also take note that the USA is a member of the OECD which doesn't mean the USA just adopts any model the OECD brings up but you get the idea.

Now because you state: "Count Burks you don't know what you are talking about" or "Count Burks you are pulling things out of context" I will provide you with another example to demonstrate how and why the tax office wants their VAT. Even if the sale happened through a digital platform in fake fictional currency that has no value.

Comparing an NFT with a sim might seem strange but in essence they are both digital products that exist on the internet.

I am bringing this up as an example as NFT's are most of the time sold for virtual space coins. Coins such as elonmuskshibaspacecoin for example, worthless tokens which can be converted to RL USD$. On top of that these sales take place on a digital platform.  https://www.vatcalc.com/eu/eu-vat-non-fungible-tokens-nfts-as-digital-services/#:~:text=Digital currencies in the EU,the financial services VAT exemption.

Now come again why Linden Lab should not charge VAT when they sell their product in Second Life for Linden Dollars?

The VAT office will want their tax, do you think for one moment they do not want their VAT, or are unable to claim their VAT because the transaction took place in a fictional currency?

Again this is my opinion, no legal claims are being made. 

 

 

 

[Dorientje Woller]

29 minutes ago, Count Burks said:

Hi, and aren't we in a cranky mood today?

Through this entire thread I have been very careful in my wording. If you would read carefully what I say, at no point did I make a claim that "This is the law and this is how it should be applied."

I did speak in terms of "this is my opinion" and will continue to do so. At no point am I dictating the law or making legal claims. 

If you would read the post where I speak about the article you will notice that I speak about an "Interesting article confirming my theories". I have just read the article again and agree with the article. 

This feedback posted by Baker McKenzie which just happens to be one of the largest tax law firms on the planet with 14000 people working for them provides a clear interpretation on how Baker McKenzie sees how VAT should be applied inside of digital gaming environments, pointing out the difference between C2C and B2C transactions.

In the court case brought up by Arielle Popstar the outcome of the legal conflict was judged based on the fact that the defendant aka the Second Life land seller from Germany did not have to charge VAT because he was involved in hobby transactions which took place between platform users or players (C2C transactions). The final ruling in this case is again aligned with the feedback posted by Baker McKenzie.

Of course I am not basing solely my opinion on this single article which is not an actual law. Fact is that the law is rather complicated which is again a reason I am stating that what I write is merely my opinion.

I encourage you to do some more research yourself in particular about the OECD https://en.wikipedia.org/wiki/OECD and the role of digital platforms in the collection of VAT and GST on online sales. Here is the PDF for you or anyone interested in learning more. https://www.oecd.org/tax/consumption/the-role-of-digital-platforms-in-the-collection-of-vat-gst-on-online-sales.pdf

Be aware that this document speaks about the Full VAT/GST liability regime which has already been adopted by several countries around the world and is under consideration by more countries. Also take note that the USA is a member of the OECD which doesn't mean the USA just adopts any model the OECD brings up but you get the idea.

Now because you state: "Count Burks you don't know what you are talking about" or "Count Burks you are pulling things out of context" I will provide you with another example to demonstrate how and why the tax office wants their VAT. Even if the sale happened through a digital platform in fake fictional currency that has no value.

Comparing an NFT with a sim might seem strange but in essence they are both digital products that exist on the internet.

I am bringing this up as an example as NFT's are most of the time sold for virtual space coins. Coins such as elonmuskshibaspacecoin for example, worthless tokens which can be converted to RL USD$. On top of that these sales take place on a digital platform.  https://www.vatcalc.com/eu/eu-vat-non-fungible-tokens-nfts-as-digital-services/#:~:text=Digital currencies in the EU,the financial services VAT exemption.

Now come again why Linden Lab should not charge VAT when they sell their product in Second Life for Linden Dollars?

The VAT office will want their tax, do you think for one moment they do not want their VAT, or are unable to claim their VAT because the transaction took place in a fictional currency?

Again this is my opinion, no legal claims are being made. 

Again, knowing the difference between an EU rule and an EU law is the key in what you use as example: is what you post an EU Law or an EU Rule?

 

29 minutes ago, Count Burks said:

 

 

Edited March 14, 2023 by Dorientje Woller

[Caeruleiae]

4 hours ago, Count Burks said:

Hi, and aren't we in a cranky mood today?

Not at all cranky.. One thing I am though is amused that you think restating the same thing over and over and over and over and over again using similar if not identical scenarios is going to somehow change people's opinions that yours and your interpretations are correct. It won't- it hasn't yet- and no governing body anywhere on the planet agrees with you-not one.  Ll's legal team doesn't either and it's their job to ensure all regulations and laws are followed to the letter-so they would know best here.

You are using the whole it's not fair I have to pay fees someone else doesn't have to pay line -and acting as if we can't see that's exactly why you're up in arms. If anyone is cranky it's likely you because you have to pay fees I don't. I'm sorry your nation requires that sort of fee-I'm sure it's not fun. I have to pay a lot of taxes on things I don't want to either-that's life. 

Have fun on your hill-just mind the first step when you fall it's a doozy.