Fat VAT

Just as the European authorities were first to crack down on the sexual issues of Second Life -- not the "Puritan Americans" as the Euros often claim -- so these social welfare states are the first to raise the specter of taxation to Second Life. I've been amazed that Europeans have been screeching as much as they have about being taxed for Second Life, given that their socialism has to have somebody pay for it -- are they belatedly discovering it's themselves?

Oh, they have every right to be mad about the lack of notification -- the Lindens pulled this with the gambling issue, too, and that just seems inexcusable. There's no reason in hell they can't give a 30-day notification on something like this. If they are warned -- or think they will be warned by some authority -- of course, following most normal practices in law, they will be given some reasonable period for compliance.

I marvel at the angry, buzzing, entitlement happy kids who fume that VAT is always included, it's always *expected* to be included, that's always how it is "done," and that's why they refuse even to grasp the concept that yeah, tax has to be added to make a price higher when it's discovered you have to pay it -- yes, the cost has to be passed on to customers.

And the minute anybody steps on their tail like this, how quickly that nasty anti-Americanism of theirs comes to the surface, we're told we're SUV-driving religious fundamentalist racist freaks, and the Euros want to be left alone, in, oh, Amsterdam, to gamble, smoke pot, and get laid without prudish Americans on their case. But...all those things are taxed if legalized, too, no? And frankly, the whole reason VAT can be "included" is because, duh, there's an existing system set up to include it -- duh? I mean, if I travel in Europe, pay the VAT in a product, it's separable out from the price because I can go get a refund on it at the airport, and often don't even bother. So it *is* separable out of the price -- someone once conceived a price...and added a VAT. If I get a hotel bill, the VAT is shown as added -- if I rent a conference hall, I get a statement showing the fee and the VAT. That's always been my experience doing business in Europe. Now, if Europeans have that absorbed into their pricing (unlike the U.S., where the tax is always shown separately) -- just like their tip is always absorbed in the restaurant bill (making them seem like cheapskates when they don't leave tips in the U.S., thinking it's already in the bill) -- well, at some point, they have to realize the price goes up, it is *added*.

The Lindens cannot at all be expected to have included the VAT, not being a European country company, nor could I confirm after drilling on this question, nor could others who queried them, that they have absorbed it at any point. How could they? It seems they only recently began this SL Grid stuff and began opening up foreign offices and foreign partnerships. Every company I've ever worked with with multiple offices overseas always goes through all these headaches figuring out local fees and taxes and having to put them in place. If the Lindens have to charge more for Europeans, well, they have to charge more, because those states have more welfare. Hello? That's not Lindens' fault, and it's not the fault of "puritan Americans" or evil American land barons whom Gwyn imagines are going to now make a killing, now that their European competitors are driven to peel back their tier due to higher costs.

If everyone makes a big enough fuss, I'll bet the Lindens would consider knocking off $150 per island sale (at the new price where some $300 would have to be added to $1695), and $25 per monthly tier (due to the $50 added to $295 -- this is assuming 17 percent VAT, although it's 19 or even 25 in some countries) -- and meet the Europeans half-way to keep their business. That might be an option, or perhaps someone will figure out how to base all this in Switzerland free of taxes or something. LL might now restore a system they used to have where tier was payable in Linden dollars -- if they have them pegged to a genuine LindEx rate (they used to have them be worth far less when it came to having to pay tier with them), they might beat the problem.

I think the reason the Lindens spring these things on people so harshly, with no blog even, and then only a half-assed blog on a late Friday afternoon before they go home, isn't because they are incompetent, and isn't because one hand doesn't know what the other is doing. I think it's very deliberate. It stems from the philosophy that Philip explained to us at SLCC 3 in Chicago -- that they can't be moderate in what they do, they can't be thorough (announcing a tax 90 days in advance, slowly ramping up to it) because...they have to smash through and be radical or they'd never get anything done (or so the theory goes). In other words, first get millions of European users through the hack and slash method, then only later, think about how to VAT them and take care of their child pornography laws. The Lindens have admitted before that they put things over on us in features, wait until everybody screams loudly, they try to find the most acute area of pain, then mitigate it --as they did with the move to make unverified accounts first, then a few weeks later, put in land boxes to check off to restrict such persons if they had "no payment on file".

Here's our conversation at the dam tonight on this subject:

You: hi
katykiwi Moonflower: hi prok!
You: what other groups should I invite
katykiwi Moonflower: concierge?
JenzZa Misfit: LOL i was going to say that
You: I always wonder if you can post events on there tho
You: imagine the spam if you did
You: people would get angry
JenzZa Misfit: hmmm
You: but maybe for this they wouldn't care
katykiwi Moonflower: no you cant and they will call you names but who cares
JenzZa Misfit: call it a rezday party and wrap it in sushi
You: wow that hair is pink katy
katykiwi Moonflower: lol
katykiwi Moonflower: yes
You: you shoudl tint the shoes pink too
Dizzy Banjo: hi people :)
katykiwi Moonflower: i live life petite with brown hair brown eyes so i made my avie tall and pink and green eyes
JenzZa Misfit: ......DIzzy Banjo woot woot
Dwayanu Weyland: ;-)
Dizzy Banjo: :)
You: Dizzy I didn't understand today if you had another transcript with Zero, or just that one
You: is there a new one? because I didn't see it on your blog
You: I lost the IM you sent
Dizzy Banjo: yeh well its just that one i IMed you.. i tried to have a go during it.. but frankly i was silenced
Dizzy Banjo: i havent blogged it because i couldnt really get anywhere
Dizzy Banjo: ill send the link again
You: well but that in itself is something, you SHOULD blog it
Zahara Rahja is Offline
You: publish just that
Dizzy Banjo: yeh
You: well I saw the 'office hour with Zero Linden" thing
You: well they need to be stormed
You: I asked Robin Linden about this OGA and the currency thing and closing the LindEx
You: and she was like "Closing the LindEx? Oh, I don't think we'd do that"
You: so I sent her the wiki link
You: and I said I'm gathering Zero wrote this
You: she said, don't be so sure, it could be anybody, even residents
Dizzy Banjo: yeh .. my blog is normally just dealing with music and audio related issues but i may have to step outside that remit for this.. is too important
You: but you know, look at the wiki, it has the look of a pre-cooked wiki if you know what I mean
You: all neatly entered on the same dates with no edits or multiple people
Dizzy Banjo: yeh
You: if not Zero Linden, then One Linden, or Two Linden is my point
You: not relevant really
Dizzy Banjo: overall though .. i think youre right.. they just dont really care much..
Dizzy Banjo: its the same as this vat thing.. they are just like "oh well legislation says we should .. so fuck the EU members we will just do it.. we dont care about the community anyway.."
Fleep Tuque: Still rezzing, apologies if I sit on anyone.
You: I wonder if sometimes one hand knows what the other is doing
katykiwi Moonflower: the preparation for determining and billing for VAT and the email address collection had to be ongoing for some time and there is no excuse for lack of advance notice, despite robins claim there was no time
Malburns Writer: thanks
Dizzy Banjo: most Lindens seem to be primarily enthused about doing new stuff.. pushing what can be done.. just for the hell of doing it more than anything
You: some drone just put out that letter, without thinking, oh, you know, a blog would be nice
You: oh totally, Dizzy, it's their software beta extravaganza
Dizzy Banjo: no i dont think they are organised at all.. not at all .. lol
You: and gosh, we're like totally privileged to be in it
Dizzy Banjo: yeh
You: Hi well let's get started
You: If anybody has any ideas of groups to notify let me know
Dizzy Banjo: privilged to fund it for them
Malburns Writer: Oh - hi Fleep
You: I have groups already like Mainlanders and such and I sent it to Free culture etc
Fleep Tuque: Hi Mal. :)
You: yes well think of how the people building the pyramids felt
Fleep Tuque: And happy rez day Prok
You: they probably were all like weary and sore and pissy
Dizzy Banjo: lol
katykiwi Moonflower: Metaverse justice?
You: and had no scope, no vision
JenzZa Misfit: wow .... Robin Linden JUST posted 20 mintues ago to the SL blog ....on this
You: no *perspective* dammit
You: uh oh
Malburns Writer: oh yes - happy rez day
JenzZa Misfit: minutes*** even
You: Havok on a Prim?
You: HTML on an Engine?
JenzZa Misfit: Questions About VAT?
BigRick Byrd is Offline
JenzZa Misfit: thats Robins topic
Kicku Kungfu: hello love
JenzZa Misfit: only 13 comments so far so its fresh
Mouse Smit: hi babe
katykiwi Moonflower: remember the annoucement about eliminating hubs came at the end of the day on friday, just like robins blog announcement
JenzZa Misfit: wow .. bold "follow up "
JenzZa Misfit: she posted
Fleep Tuque: Just reading through the comments now..
Dizzy Banjo: Vanessa's point is good
You: Hmm does that blog raise more questions than it answers?
Dizzy Banjo: yes lol
You: OK well first of all
You: before we begin talkinga bout VAT
You: It's my Rez Day and I'll cry if I want to
You: cry if I want to
Dizzy Banjo: lol
You: : )
Fleep Tuque laughs.
Dizzy Banjo: happy rez day prok
You: and I encourage you all to give generously to the tip jar to pay the tier on this club
You: but more urgently
You: I just lost 9000 m2 out of the land preserve due to a whole drama not worth going into
You: so I have to make that up soon before the Lindens seize it
You: I'm going to rent some of it off some land baron but if anyone has 512 m2 they aren't using
You: or even just 16 m2 or something
You: go to SL Public Land Preserve to donate
You: you pay a one-time $50 L fee and can place prims and "camp" (the old fashioned way) at any of 25 locations
You: so end of infomercial
You: now their excuse for not notifying people is that they couldn't confuse the entire population
You: but that seems odd
You: if the entire population is like 50 percent European???
You: katy can you give like the one paragraph explanation of this?
You: that you see how it impacts businesses
katykiwi Moonflower: there are two aspects of this
katykiwi Moonflower: first is the one most people face now and that it being charged the vat tax
katykiwi Moonflower: that is something EU residents face each day in their countries
Feles Seitan: /ao off
katykiwi Moonflower: the second aspect of this is conjecture at this point but its a logical flow from it
katykiwi Moonflower: and that is are the residents who earn income from SL liable for paying VAT
katykiwi Moonflower: and thats not limited to EU members
JenzZa Misfit: ...*** why not the specific countries laws & policies on gambling then ? **** ( and gambing isnt even my thing ) but the point is valid ....
katykiwi Moonflower: VAT law requires all businesses wherever located to pay VAT if there is ecommerce downloaded to the EU resident
You: true that
katykiwi Moonflower: the question becomes one at the point at which lindens are sold for cash
Malburns Writer: yes - am in UK and is common to pay VAT on everything
Malburns Writer: corporates reclaim it
You: are you saying that if I have a European tenant I have to collect Vat and pay it somewhere? That's retarded, I'm not going to be doing that
JenzZa Misfit: which EU resident ? the merchant ? or the customers ? both ?
Malburns Writer: so only small users suffer extra fees
Dizzy Banjo: yeh
You: Mal it sounds like that
JenzZa Misfit: do USA residents have to find out where their customers reside ???
katykiwi Moonflower: you cannot offset your VAT charges unless you are a VAT registered business and to be registered you must have an income in excess of a certain amount from the VAT transactions, in the UK i think its equal to about 150K dollars
You: but if the point is only when you cash out, then it's Linden paying you, that's how it shows up in your account
You: so, they have to pay someting, no?
You: not you
katykiwi Moonflower: well there is the question jen
Dizzy Banjo: my business is VAT registered in the UK .. so i have a VAT exemption number
Dizzy Banjo: but non business users will really suffer
Malburns Writer: yes - in paper publishing days i made profit from VAT
You: that seems hugely excessive
JenzZa Misfit: because if they purchase ? they in effect download our product to their geographical location in RL ?
Malburns Writer: but not as cosumer
katykiwi Moonflower: does LL have to disclose the location of all members to other members
You: in the US you can offset everything relevant off personal and business, even unincorporated small business
You: the unincorporated business tax in NYC is $1000 a year
JenzZa Misfit: yes Prok
katykiwi Moonflower: the linden to linden transactions are not VAT events its like play money
JenzZa Misfit: oh katy
JenzZa Misfit: so what is it ::: tier ? and things ?
katykiwi Moonflower: but when you sell linden for cash it becomes a taxable event
You: yes but if I cash out and make money off SL and then am slammed with a VAT
JenzZa Misfit: paid to LL ?
JenzZa Misfit: ahhh yes
You: then wouldn't I have to pass on that cost to customers?
Fleep Tuque: I think that was part of the point of the identity verification scheme - confirming people's geographical location for determining which laws are applicable to whom. That's just conjecture on my part though.
JenzZa Misfit: it does ... i know this but im in the USA
Dizzy Banjo: of course..
You: but they don't have enough compliance with it yet to make a determination
You: it's not even out of beta so to speak
JenzZa Misfit: but I know everytime i cash out :: i have a usa federal & state / taxable event
Fleep Tuque nods.
You: if you make over a certain amount, $600 US or something
You: after deductible expenses
katykiwi Moonflower: also I read in a blog the comment that people can deduct VAT charges from taxes, but its not that simple, you cant deduct VAT unless you are charging customers VAT and are registered with income over a certain amount
JenzZa Misfit: what a MESS
You: Has anyone confirmed that it is indeed 17 percent?
Dizzy Banjo: in the UK its 17.5%
katykiwi Moonflower: what portion of that income is derived from information downloaded to an EU consumer,
JenzZa Misfit: and I was a US income tax practitioner .. IN RL !
Dizzy Banjo: its different in differen countries in the EU
Malburns Writer: it is 17.5% in the UK - not sure all EU is same rate
Fleep Tuque: I believe it was 17.5%
katykiwi Moonflower: jen: then you see how confusing this is
JenzZa Misfit: omg i so do
Dizzy Banjo: in denmark its 25% for instance
katykiwi Moonflower: wow
Fleep Tuque: Goodness gracious.
JenzZa Misfit: are they NUTS ?
You: it sounded to me as if what Gwyn was saying was that you could pick one VAT country to register in, so you could pick the Delaware equivalent, the cheapest and easiest maybe
Dizzy Banjo: nick isnt happy over at metaversed..
Malburns Writer: i think this was inevitable when Linden moved billing operation to Brighton in UK
JenzZa Misfit: wow I bet not
katykiwi Moonflower: well registering isnt that
Malburns Writer: but they only charge here and in EU regions where applies
Fleep Tuque: So this tax only applies to fees paid to LL, and NOT to transactions in-world?
Malburns Writer: US bills will still be exempt
JenzZa Misfit: .......well ... here we go .........
You: Perhaps we will see U.S. registered companies with European silent partners
katykiwi Moonflower: registering is just to simplify paying the amount due, teh country you register with makes the payments to all the individual companies
Fleep Tuque: I'm terribly confused.
You: payments TO companies? I don't get it. for what?
Malburns Writer: there cant be any VAT on inworld transactions
Malburns Writer: only RL money
JenzZa Misfit: ............ fluster CLUCK ! I can NOT believe it
katykiwi Moonflower: dizzy is more familiar wiht this since his business is VAT registered he said
Dizzy Banjo: yes i think that wil happen.. but i think that will all still be tracable
Hermoine Pennyfeather is Online
You: but how do you mean payment TO
Dizzy Banjo: if those companies are paying out to private accounts over here
Fleep Tuque: OK from the website - VAT applies to:
Fleep Tuque: * Premium account registration * Purchases from the Land Store * Land use fees (tier) * Private Region fees * Land auctions
JenzZa Misfit: wow
katykiwi Moonflower: yes thats one side of it fleep
JenzZa Misfit: so its :: PP of land AND tier fees
Balkan Sands: hello sorry for beeing late got the info just min ago
JenzZa Misfit: hi Balkan :)
Dizzy Banjo: its like.. when i charge for my services here.. my clients pay VAT
Malburns Writer: anything Linden charge in RL money will have VAT on it
Fleep Tuque: Website also says Transactions in L$ between individual Residents are not subject to VAT.
Balkan Sands: hi jenzza
Dizzy Banjo: but i also pay VAT on things i buy..
Malburns Writer: but only in counrties that have VAT system
JenzZa Misfit: WOW .. on all the purchase price figures ?? are they retroactively going to do that ?
You: New York State sales tax is 8.25 percent
katykiwi Moonflower: but if LL is liable to collect VAT then what is the VAT responsibility for members when they sell lindens, i know LL said its a vat free transaction between members but LL takes a commission
Balkan Sands: no u wont pay VAT on things u buy
You: why would you have to retroactively do that? that really seems draconian
Balkan Sands: it affects only Europeans so far
Dizzy Banjo: as long as my turnover is over about £60K or something.. i can be exempt from VAT
JenzZa Misfit: will they be charging it on island purchases ? YES it looks like
Balkan Sands: yes jenzza
katykiwi Moonflower: yes
JenzZa Misfit: wow
Fleep Tuque: Yep looks like it
Balkan Sands: havent u read it on the website
JenzZa Misfit: ..........well sort of .. Im getting there .. :)
Fleep Tuque:
http://secondlife.com/corporate/vat.php
JenzZa Misfit: crazy
Balkan Sands: and they scan IP adresses so not necessary to change adress or whatever
Fleep Tuque: Yes, I just got to that part
JenzZa Misfit: wow
Dizzy Banjo: proxy IPs could be a way around that
Fleep Tuque: If your IP doesn't match your initial registration then they flag you
Balkan Sands: so if u are from erope thy know it
Balkan Sands: and charge the VAT
Dizzy Banjo: but not many users will do that
Balkan Sands: i will paste the e-mail I got from them
Dizzy Banjo: register an alt through a proxy US based IP
Dizzy Banjo: transfer everything to them
Dizzy Banjo: lol
Count Burks: Here is the place for the VAT?
Fleep Tuque: Hi Count
Quirky McArdle is Online
Count Burks: hello
Fleep Tuque: Yes, we're discussing the VAT here
Count Burks: No Lindens?
Malburns Writer: hah - as if!
Dizzy Banjo: lol they dont like lions dens ;)
Count Burks: yes would surprise me if they turned up
You: the Lindens already have a page up about this:
http://secondlife.com/corporate/vat.php
Count Burks: yes
Count Burks: but that page doesn't say a lot
Balkan Sands: well I suggest something else since we are the citizenz and no country even a virtual cant do politics without its citizens - downgrade if u dont have lindenland to guest or make ur land groupowned
Count Burks: still they have to charge VAT they are obligated by law
Balkan Sands: Hello, Balkan Sands. We have identified that you reside in a European country. Accordingly, your next bill will reflect Value Added Tax (VAT) charged at the rate specified by your country. Please note that VAT applies to all payments to Linden Lab such as land sales, monthly maintenance fees and Premium subscription fees. If you are eligible for a VAT exemption, you may submit proof of your exemption status, such as your VAT number, here:
https://secondlife.com/account/vat_enter_id.php
If you have other questions, please read the VAT FAQ:
http://secondlife.com/corporate/vat.php
You can also contact us via the support portal:
http://secondlife.com/support
Best regards, and thank you for your continuing support. Linden Lab Creators of Second Life Hello, Balkan Sands. We have identified that you reside in a European country. Accordingly, your next bill will reflect Value Added Tax (VAT) charged at the rate specified by your country. Please note that VAT applies to all payments to Linden Lab such as land s
Count Burks: yes I got that mail as well
Balkan Sands: ok
You: here's Gwyn's article, Dizzy, what do you think of this:
http://secondslog.blogspot.com/2007/09/european-residents-to-pay-value-added.html#links
Count Burks: There is nothing to do about this
You: Count it seems not unless you figure it out within your own country as an exemption
Balkan Sands: yes u can
Fleep Tuque: Is it possible to purchase islands as a group instead of an individual? How will this affect transatlantic collaborative groups?
Balkan Sands: as I said downgrde ur premium if u have one to gues status
Balkan Sands: u still can do business
Count Burks: that's dangerous to do
katykiwi Moonflower: i think anyone who states the imposition of VAT tax is a double blessing doesnt understand how VAT works
Dizzy Banjo: just reading..
You: Is this why Anshe suddenly put Dreamland all into Linden payments 6 weeks ago? and ended all her PayPal subscriptions?
Malburns Writer: if i has US office and bought land from there VAT would not be charged
Balkan Sands: that way u wont pay VAT on ur membership fee
JenzZa Misfit: ... yes .. I dont think this is " swayable " .. no matter what you threaten or even do ...is it ?
Malburns Writer: but would still pay one ewway or another if money came back to UK
katykiwi Moonflower: she has gotten advance notice of past decisions before other members, i would not be surprised if she was warned
Balkan Sands: thats the question
katykiwi Moonflower: she was given the heads up about sim price increases
Balkan Sands: I transfer each month about 200 US back to my account from inworld income
You: So it's an extra $300 per island and $50 per month on top of tier for this
You: yes all the people in that SL dev group got the islands heads up
katykiwi Moonflower: it adds up when you have a trazillion sims
Dizzy Banjo: i think this "blessing" description isnt quite rigth.. because the VAT is being added ontop of the existing fee
Malburns Writer: only in EU
Balkan Sands: lol
JenzZa Misfit: this is a EU law isnt it , Balkan ? not an LL proclamation ...
JenzZa Misfit: yes exactly, Dizzy .... LL should eat this one
Balkan Sands: yes
You: well why do people keep saying you can't add it on top? but that sounds silly, so you include it, same as adding it on top
Balkan Sands: they claim it
JenzZa Misfit: and declare it ::: inclusive in the existing fees
Malburns Writer: and if you make profits you may be able to claim VAT back on your purches here
Fleep Tuque: I think it's custom to include VAT in the price of services
Balkan Sands: only EUROPE SO FAR IS AFFECTEDnot the rest of the world
katykiwi Moonflower: i agree dizzy about the blessing characterization, its based on the us tax system set up with an assumption there is a deduction available for all VAT assessments
Malburns Writer: Yes Fleep
Balkan Sands: but maybe further
JenzZa Misfit: it means less profit for LL if they do that
Alliez Mysterio is Offline
Malburns Writer: the moment lindens based office here the law applied
You: yes we got that Balkan, except that LL itself is effected, not being European, so all U.S. businesses have to ask then, what's up?
Fleep Tuque: When I was in Ireland, VAT was included in the price of things, and I had to fill out a form to have it taken off.
You: so could they dump the office and save everyone this?
You: or I suppose they don'[t care
JenzZa Misfit: but that is exactly what they OWE the residents ... isnt it LL's fault they have failed to comply until now ?
Balkan Sands: well for linden its worst because it makes the game less attractive for companies
katykiwi Moonflower: Balkan: the law states its not just the EU and although its conjecture at this point it could have a wider impact outside the EU and it will impact the SL economy
Balkan Sands: but for them no extra costs
Malburns Writer: dont Lindens ever charge state sales tax in US? befire?
Balkan Sands: it will definatly
Balkan Sands: they ruin all
Fleep Tuque: Um

[Sorry, this is all that fit on the notecard, and I didn't realize it. If anyone else has the rest, let me know. There was a long discussion about how people could exempt their costs if they paid VAT, therefore reducing the hit from VAT -- but the threshold appears to be something like $150,000 as your income, so that would be unrealistic for many people with small businesses in SL.]

Comments

[aEoLuS Waves]

As a 'non SUV-driving religious fundamentalist racist freak (Smoking pot, while I gamble with a Ho on my knee (Oh yeah you knew she pays tax here in the Netherlands?)' it wasn't a shock for me that they add tax but it was a shock to see how they did it. Its bad business and at least they should have given people a term to bail out SL (or to change their business plan).

Know that we also need to pay our government(s) tax for the money we make working with (or within) SL. so I can understand that people do get a bit upset. It feels like you have to pay everyone while you don't get the reductions you feel you deserve because you are not a big company. Is this LL fault? No of course not. But they could have given us a warning to get ready.

Anyway, I will pay the tax, will not raise prices within SL and I do charge companies I work for my 20% tax fee.

In a few weeks it will be more clear who does or who does not get a "refund tax" from their government. We will see how it goes and how it works..

With the rapid falling of the Dollar (against the Euro) it isn't the end of the world. Although I bet someone else will cry about the fact that we need to earn more dollars to get Euro's and that the sky is falling again..

Oh well, just my two cents.

Have a great weekend!

[Chav Paderborn]

As a socialist I just find it bizarre that they just suddenly went "BTW, you should have been paying tax. Oops. Let's just shove it on now and not speak of this again." Non-Europeans perhaps should be worrying about other countries getting the same idea.

The real cause of the fuss is that this the standard socialist practice being implemented on a platform full of anti-tax libertarians, and on something virtual that doesn't, as it were, exist in the real, taxed world.

[Ciaran Laval]

The Anshe Chung comment is interesting because I do believe that if she was charging by Paypal that she would have to collect VAT, that's how she'd be able to offset VAT costs.

I've looked into becoming VAT registered and from what I can tell, I can't. All my transactions are in L$, which are exempt from VAT and therefore there's nothing to be collected.

Yes VAT is separated out of the cost, you're quite correct but prices must be advertised including or excluding VAT. All stores will have prices which include VAT. However plenty of places will give you a VAT receipt if you ask for it, as you point out hotels generally do this.

As for your tipping comment, I'm not sure what parts of Europe you travel in but I've seen gratuity included in some bills in the US and Europe but more often than not it's not included.

The Lindens as an international business doing business in Europe should have known about VAT. However to be fair, reading the VAT rules is a complete nightmare and there are exceptions, even for internet based products. It's all to do with the place of supply, which somehow the EU have twisted to mean it might not actually be the place where it's technically supplied.

[Prokofy Neva]

Ciaran and others making this point: we all *get it* that when you advertise prices, you have to include the VAT. That point is NOT hard to grasp, truly.

The problem is your inability to see that when somebody starts the clock -- a new business coming into the EU and needing to pay VAT -- what on earth you expect them to do, when they've had a menu of internationally-available prices.

They can't very well say "Oh, we'll eat this, just so you Euros have the illusion this is all included". Because it's not! They might be able, as an American company, get some write-offs; even as a European-registered company doing business above a certain amount (it was said $150,000 a year in our meeting, needs to be checked) they might be eligible for write-offs.

But then at a certain point they have to say "sorry, we're raising our prices". It's just how life works. You can't expect the Lindens to endlessly support the sort of socialism you're used to from your governments (and apparently hate paying for, too).

The only fault I can see here on LL's side is not staging this and announcing it. This idea that they have to announce it for instant application really strikes me as totally fake. I can't believe any EU authority interested in pressuring them on this wouldn't grant them some sort of period to get up to speed. That's always how it is done. What, are we to presume they got a 30-day notice themselves, yet decided not to pass that on to customers as there was no *good* way to do it?

Linden Lab doesn't send tax accountants, lawyers, and bureaucratic administrators out to the field to open up offices. They send out programmers and designers. And that's the problem. Those people can't be expected to grasp all the nuts and bolts of how you open up an office. Or...perhaps they do, but figure they'll just plug it in, whenever.

The Lindens *just* announced this SL grid thing, and the opening of new overseas offices. So they just got the word on this obviously, and in their usual Bolshevik fashion, are announcing it peremptorily.

And I think my theory of how they announce bad news as quickly as possible, so as not to drag it out, and see how much pain there is THEN try to alleviate the pain (as a *conscious policy*) is likely at play here.

[Dalien Talbot]

'But then at a certain point they have to say "sorry, we're raising our prices". It's just how life works.'

-- indeed. However, there is a difference between "Apologies, due to legislation misunderstandings, the VAT, that has to be included according to the european legislation, was previously not included - so in order to comply with the law, we are obliged to increase the net payment in order to include the VAT." and "We have identified that you reside in a European country. Accordingly, your next bill will reflect Value Added Tax (VAT) charged at the rate specified by your country.". As if it took an extensive investigation to figure out that I reside in the european country :-)

I'd be interested to see the reaction if the wording was different. Of course, noone jumping in joy (if you find someone who would be happy when they have to part with more money than before for the same thing, let me know:), but I think it would've made a difference.

If your sources of information about whom they send to the offices are accurate, then possibly the designer who was supposed to write the mails, was busy calculating the TVA, so they put a programmer to write it down - and the folk tried to explain it in the shortest phrase possible, so the poor tekkies are again to blame!!! :)

[Prokofy Neva]

<"We have identified that you reside in a European country. Accordingly, your next bill will reflect Value Added Tax (VAT) charged at the rate specified by your country.".

This is exactly what they are saying. If it is not an explicit statement, by the time you get the next month's bill, it will be abundantly clear.

[Prokofy Neva]

As for their staffing, it's mere conjecture. I don't see that they have a lot of administrative operational types among those 140 or so which includes a whopping 28 engineers and many liaisons doing customer service.

[Dalien Talbot]

1. I admit I should have paragraphed the thing differently. There were *two* wordings in it - apologies if I made it hard for you to distinguish between them. Would you please re-read again ? :-)

And as for the bill - I'm actually thankful to this mail. Out of curiosity I did go and recheck the state of my accounting alt, and appears there was a 512m2 that I did not get rid of. So that's now fixed and account is suspended, pending cancellation.

Indeed I might still have one more bill, with VAT, but that is totally justifiable, I suppose this is bound to the monthly hosting expenses.

2. Staffing - for the one-time thing like opening the *first* office overseas, you do not need to have an expert in-house.

That is why there are a plethora of accounting and lawyer companies.

Nonetheless, there could be other reasons, either internal to LL, or legal; so I prefer not to blame without the good ground.

My only plead is that the next time they take programmer to calculate the VAT, so that maybe designer can phrase the stuff in a less ho-style way. (pun intended).

[Prokofy Neva]

Here's the text of the letter everyone is getting. And now that I see it, I don't see why people can scream in the Concierge list that they fear they will have to pay BACK taxes, or scream that they aren't informed, or that there is false advertising blah blah.

It says: starting next month. SO they aren't even billed this month, but given a 30-day warning that they WILL be billed.

I fail to see what's so terrible about this now -- except that they should have announced it first on the blog.

Hello, Avatar.

We have identified that you reside in a European country. Accordingly, your next bill will reflect Value Added Tax (VAT) charged at the rate specified by your country. Please note that VAT applies to all payments to Linden Lab such as land sales, monthly maintenance fees and Premium subscription fees.

If you are eligible for a VAT exemption, you may submit proof of your exemption status, such as your VAT number, here:
https://secondlife.com/account/vat_enter_id.php

If you have other questions, please read the VAT FAQ:
http://secondlife.com/corporate/vat.php

You can also contact us via the support portal:
http://secondlife.com/support

Best regards, and thank you for your continuing support.

Linden Lab
Creators of Second Life

[Dalien Talbot]

30-day notice is an illusion. Even if I do not like the fact of me paying more, I *will* have to pay more. (I cancelled the account yesterday and there *will* be one more pay cycle.)

It's not really a big deal at all - just one more annoying pin on the chair :-)

I do realise that while the fantasy dreamworld transforms into the ecommerce engine, there will definitely be some growing pains - I still remember having to go to the dentist and pull out the "first" teeth. A tiny smile during the process can do miracles.

[Ciaran Laval]

I have no idea where you've got this 30 day idea from. My tier is due on the 10th and it includes VAT.

[Prokofy Neva]

Ciaran, the point is, that it is in the NEXT TIER cycle. Yes, for some people, that means tomorrow. For somebody else, it means 30 days from now. What is the given mean and given average for everyone's accounts? They all fall on different bill dates. The point is, it says in the NEXT tier bill, not for the PAST one.

[Ciaran Laval]

Prok we pay mainland tier behind, you should know this. They are charging VAT now. There has been no notice.

I am being charged VAT from the 10th to 26th Of September when the knowledge base says that prior to 27th September we aren't liable to VAT charges.

If I had tiered up or bought an island on September 26th the information would have been misleading. Some people have been billed Septmber 28th, there was no notice.

[Dalien Talbot]

Correction: my whining about the VAT still being being scheduled to be charged to the account after I canceled it might not be true. While in "cancel pending" the pending invoice did show the increased price, now that it's canceled, the "pending amount" has decreaed. So even if this is a bug, it's a "good" one.

[Gwyneth Llewelyn]

Aaah Prok, you see, you are also misunderstanding me — as an Eurabian Socialist™ I'm quite more devious than that!

"Evil" American land barons? Not at all! They're now a blessing, since they can relieve the poor Europeans from paying any taxes, by accepting payments in tax-free L$ from Europeans — so they're everything but an "evil", but a blessing!

Still, my fellow Europeans might grumble a bit that large-scale land baroning in Europe is not worth the costs of setting up the operation any more. What nonsense! If you're *really* into large-scale real estate, all you need to do is... open a company in the US with a partner, and operate from there. Globalisation does not work only in one direction — as so many incorrectly pointed out! — but working with the US is a multiple blessing! Lower costs, almost zero taxes, highly qualified workforce that works cheap (but very motivated!), and a currency that promotes buying goods and services in the US due to its constantly sliding down — this is a paradise for any serious entrepreneur!

If there is something that I've learned in business management, is that any successful business will turn threats into opportunities. In this case, I just see a rosy paradise for any European-based operation that wants to invest *seriously* in SL. Just run it out of the US! Register a Delaware company with an American partner! Finance it every month with a strong € (you'll pay less every month!), hire your workforce in the US (you'll pay them less every month!), enjoy an almost-tax-free haven, and turn the tables around — instead of complaining that you have to pay now more for buying sims, if you buy them out of the US, you'll be paying every month an absolute amount that grows less and less over the year (about 10% per year) — an advantage that only European residents have :)

So, no, I don't have anything against the "evil" American land barons... the evil European land barons have a much larger advantage here, they'll reduce their running costs of operation every year by 10% just because of fluctuations in the EURUSD index!

One can go a step further and simply state that this is a great time for Europeans to massively invest in the US economy. Alas, the ones doing it *right now* will be the ones reaping the most benefits, but it requires a completely different mindset — exploring an opportunity instead of whining, griping, and complaining.

As a good Eurabian Socialist™, of course, I'm all for globalisation, free markets, free exchange of services and money, limitless hiring of people abroad, and obviously, locating your company in the country where you get the best combination of advantages — highly qualified labour for the lowest cost, high motivation, low taxes, weak currency. It's almost a sin not to take advantage of that!

Ok, enough of my sarcasm, which confuses everybody. But, seriously, whoever is complaining about "local taxes", they're just being narrow-minded — this is just a new opportunity popping up, and it's up to any serious entrepreneur to grab the opportunity and make the most out of it!

[Prokofy Neva]

Um, Gwyn, evil American land barons may be a blessing for European *consumers* but they aren't a blessing for European landlords. I wonder, for example, what Dana Bergson and Otherland Group thinks of this. I saw they restructured their business recently, perhaps anticipating such developments.

Yes, of course, there will be a lot of European silent partners now. However, some authority might decide to crack down on that. I've had Europeans ask me in the past if I would hold their payments for them on PayPal then find ways to pass it to them and the answer is "no". I don't think that's going to fly with any US tax authority.

Yes, Europeans could look at this as an opportunity instead of a threat and try to figure out ways of collaboration instead of whining and hating, but that wouldn't be like them, eh?

And yes, the Eurobarons have had an easier time of it, buying cheaper Lindens. But when they come to cash them out, I'm not sure that the exchange rates undo a lot of it. Still, I think they are at an advantage, being able to get cheaper American dollars, and hence Lindens, to invest in their businesses especially at the start.

Gwyn, you wouldn't join Neualtenberg and glow about Al-Andalusa in SL if you weren't some kind of socialist or Eurabian, and you know it. You like to play this game.

I find that the tekkie class is if in fact often for globalization (which runs against some socialist and Eurabian sentiment surely) if they can see that it benefits them and their class personally. If it begins to harm their lifestyle in other areas, they gripe.

You don't mind hiring other people to do your labour for the lowest cost; but you want to make sure you're not among those labourers fetching the lowest cost *yourselves*. Your views are predicated on imagining yourself always as the uber class sitting on top of the other classes by virtual of everything being digital, and you being the masters of the digital.

I think the IRS is more likely to try to charge people for their income tax in SL than the states are likely to get organized and go against their own moratoriums and legal battles about trying to collect sales tax from e-commerce.

Perhaps some might take the position then that they'll be happy to pay a tax on SL when the Lindens send them a 1099 form for payment of their labour.

[Prokofy Neva]

Ciaran,

Once again, I don't see why you can't grasp this. Your bill is just your own bill -- but it is not a typical or common bill.

You aren't being hit with an instant charge, that you must pay TODAY that debits TODAY. It's a charge hitting your NEXT bill date.

If you bought a sim not knowing that you'd be slapped with a charge of 20 extra percent, fine, that's a valid point...but...are you in that situation?

Can we define that class of people? It's not everybody; it's likely a very small class of people, as there are not more than 800-1000 sims bought per month by all customers. So let's not exaggerate this as an issue.

Are there perhaps 250 Europeans at most who bought sims during the days of August and September, unaware that 20 percent extra would be slapped on them? Then deal with that class of people.

First of all, as I keep saying over and over, you are not billed INSTANTLY for that period; you are billed FOR THE NEXT period. If you don't LIKE this, you will not be billed for it AGAIN if you tier down by that bill date.

Yes, you are billed for your PAST level of tier. But what you seem to refuse to understand is that you are also setting up NEXT MONTH's bill by KEEPING that tier at this level. It's NEXT months' bill you create if you do not tier down.

So the only narrow point you are making correctly -- one that doesn't apply to the lion's share of accounts that are just at the level they've always been -- is for new purchases made without this knowledge.

So one could reasonably ask the Lindens to make a 17 percent discount on all purchases made between August 25 and September 25, let's say, to deal with the problem of how you are billed for your highest level of tier that past month.

This will be a small class of people.

Oh, you say, ALL people who made purchases for 3 years should be eligible? Why? You came into a free-enterprise frontier that didn't have laws and taxes in place because it was new territory, and you were dealing with an American company that didn't charge VAT because it wasn't European.

Companies raise prices and change policies all the time; it's in the TOS of this one in spades. They can't coddle everybody endlessly.
The only thing one could say is that another billing period of grace period should be enabled so that people can tier down.

So you had your tax-free holiday, now it's over, due to YOUR OWN GOVERNMENTS' policies, not due to the fault of LL.

Now that they are established in Europe as a business with VAT registration number themselves, they are forced to comply -- and do.

They can't very well say -- take another month to not comply because if they've been given notification of non-compliance, or their counsel has alerted to them the need to comply, they feel they have no grace period. I think any Eurocrat or judge, not wishing to lose their business and send a chill on all American investment in Europe, would concede a 30-day grace period for compliance. They obviously don't want to take that chance.

I don't think anyone can prove the Lindens long had knowledge of this or even official notification of this such as to fail to pass it on to customers, and slam them at the last minute to avoid their loss 3 months or 3 years ago.

Another way this could be handled is for people to simply not pay their bills, and let them ride for 30 days, and for the Lindens to tacitly agree that they will not attempt to collect them for 15 days or something, giving people the equivalent of extra tier coverage for some part of the month that would be equal to that 20 percent add-on. That might get them in legal hot water, not sure.

[Ciaran Laval]

I understand what you're saying about bills and how to tier down.

I'm actually in the situation of being lucky and unlucky on this issue. You'll probably slam me for this, but in terms of billing my island tier was due September 26th. I've had a month's notice on that one.

However on the other hand I have tiered up this month on mainland to be in the full sim billing section and during that time I was buying extra land LL knew VAT was going to be applied to my tier and didn't tell me. In all reality I'd have still probably tiered up but it would have had an impact on my rental prices. I actually lowered rental prices on some of my existing plots, because as you know, the more you own the less per meter it costs you.

So I've based my rental prices on what I believed to be the amount I would be billed for this billing cycle. That's why I'm unhappy at the lack of notice. Heck if it had happened next month I'd still be in a position whereby I'd be considering whether I needed to raise prices but a little notice would certainly have helped me.

I know it's not LL's fault that they have to charge VAT. I have not once blamed LL for having to collect VAT. I've told Robin I don't hold LL responsible for taxes and anyone who does try and blame LL for this is simply being ignorant of reality.

LL owe me nothing, I understand that. You're right about me getting in effect a tax free holiday. This is something that people won't want to grasp. It's a fine point but two wrongs don't make a right.

However I believe that any Eurocrat would give LL a break on this because they're now collecting a shed load of extra revenue so why try and squeeze blood out of a stone. However Eurocrats being Eurocrats you never know. Once they get wind that there's a new trough to feed from they'll have their snouts deep in it.

However let's be honest here, unless LL's attonreys are novices I can't picture them running around the office shouting "We have to charge VAT now". It appears to me that September 27th was VAT compliant day. They had to identify users, adjust bills, and send emails. So it is inexcusable that they didn't forewarn us. On the other hand no matter when they warned us it was going to be a kick in the gonads, but we can't blame LL for our tax laws.

[Prokofy Neva]

However on the other hand I have tiered up this month on mainland to be in the full sim billing section and during that time I was buying extra land LL knew VAT was going to be applied to my tier and didn't tell me.

This is an assumption I don't find credible. That is, I'm quite prepared that LL knows things it doesn't tell us, that's common. But if you are going to give a very strict and punitive reading of this 2003 EU law, the Lindens should have assiduously collected this for people like Moopf Murray or Fizik Baskerville since 2003. And they didn't. And we never heard those two, or any other European businessmen in SL, complaining about their tax-free operating zone where they got to launch their fabulous virtual enterprises, eh?

It's more likely in practical terms that since actually registering inside the UK, opening an office, hiring staff that they were told to pay VAT and had to face the music and put this notice out immediately when they were either informed by governments or warned by lawyers. I don't see how this represents some evil deed vis-a-vis residents, who had a tax-free holiday as long as it could last.

It's not true that "the more you own, the less you pay" because...if you own more, ultimately even with a bulk discount, you pay more. And there's a limit. The cheapest it gets to is 0.02960 US dollars per meter.

If this entire saga for you is merely your whining about getting stuck with charging too-low rental prices, my God in Heaven, haven't we all been there a million times. I get stuck with "too-high" rental prices all the time -- it's called "the free market". I've adjusted my prices up and down in conjunction with the market and growing population numerous times. If there is a huge economic slump and I can't move my rentals, oops, the price comes down.

If there is a huge demand on 4096s and I have them 100 percent occupied, I can ratchet up the price and still fill them.

I keep pretty steady rental prices, but what I'll do is create more discounted areas if it seems something isn't moving. Then I remove the discounts if they fill up and stay filled.

This is life in the big city.

I'm all for LL giving notification and being more fair. But they aren't, and we've all had to suck in many times things like the GOMing of the GOM, which saw our value of our wages plummet from $4.25 US per $1000 Lindens to a numbing $2.80 US per $1000 Lindens, and much worse. It's a risky business, SL, and it's good to learn that.

I can't help wondering why $50 per sim in VAT is something that you can't eat for a month, like you're expecting the Lindens to eat it *cough* and something you phase in for your rentals next month.

These Eurocratic snouts at the trough are politicians you've enabled by opting for socialist or social welfare parties. Suck it up. Vote differently to change things. Socialism always breeds crime and graft and corruption.

>So it is inexcusable that they didn't forewarn us.

It's like the gambling ban. It may be that they got a 30-day warning, who knows. And to have passed that on to their customers would cost them too much money, and they are bolsheviks, and so they soldier on. I have no idea. But I don't expect anything different from them.

We compelled them to compensate for the damage of the telehub debacle. Europeans have to lobby them to do the right this on this and delay billing for a time to compensate.

[Ciaran Laval]

Of course I'm not whining about my rental prices, well technically I was but really I was just giving an example of how the lack of notification affected me. I have to be prepared to take a hit on my rentals, especially when I open new plots, that's the nature of the beast. If I can't handle that heat I shouldn't be dabbling in the land game.

This law isn't exactly straight forward, which isn't surprising being as it's not only a tax law but also one inspired by the EU.

For example:

Non EU Supplier - Customer is in the EU - Customer is in the UK - The services are used for business purposes - The Services are used and enjoyed outside the EU.

The above scenario means that the service is outside the scope of UK (and EU) VAT. In that scenario, LL would not have to charge VAT.

Now the problem is trying to work out what the heck they mean by the service being used and enjoyed outside the EU. Does that mean others use the service or the individual uses the service.

Now if the service isn't used for business purposes, then it is in the scope of the UK and EU VAT rules and I'd guess that this is where LL see themselves. Plenty of people just have fun here.

The bigger issue is that SL is a different beast to the issues that this law was introduced for. This law was introduced to stop ISP's operating outside the EU and being able to provide cheaper services ...which to a consumer isn't great but I can understand why business objected.

The irony is that EU business owners in SL now find themselves in the very position that this law was introduced to prevent.

[Prokofy Neva]

Ciaran, so it seems, I wondered about that, too, from reading the page the Lindens provided with an article on the law.

I guess they've gotten a ruling on this. Perhaps they held off as long as they can. Perhaps they will say nothing to limit their liability to litigation.

I guess none of these Europeans, yourself included, are actually able to put your head up for a minute, and imagine the enormous hit it would mean for the Lindens to have to suddenly pay 20 percent of all European revenue to some tax authority, for a system they as a business get absolutely nothing out of. It's a terrible hit.

This isn't only a case of "no taxes without representation" -- it's a case of a system where you are taxed, but you don't get the roads or breaks on rent or services that you'd expect to get if you lived there. But...perhaps they WILL get those things, I just don't know enough of how the advantages work.

The point is, they had the choice of taking a huge hit themselves, possibly forcing them to close or fire staff or something, or have Europeans individually take the hit. So they chose the latter.

[Ace Albion]

"I can't help wondering why $50 per sim in VAT is something that you can't eat for a month, like you're expecting the Lindens to eat it *cough* and something you phase in for your rentals next month."

In some ways you can expect it.

The VAT issue is a cost for LL. Just like their payroll, their colo fees, and all the other stuff.

They can tell me "Hey, it costs us 17.5% more to provide service to you in the UK, than our base prices, so we'll charge that." And as a consumer I'd decide whether I liked the service they offered for the price they ask.

They might have found that they would indeed have to eat some of the cost- to get customers who maybe just wouldn't pay $47 per month for something they would pay $40 for. That's just a business decision. To be fair, most goods cost way more in the EU than any VAT rate difference, so we still have a great deal from Linden Lab, as consumers relatively speaking. You can see this by looking at consumer electronics in amazon.com vs amazon.co.uk- often double the price over here in real terms. +17.5% is quite a bargain!

But yeah, all those small scale island rentals are going to have to do what LL doesn't want to, and suck up the cost themselves. If they raise prices, people will just move to American/Australian/Wherever landlords instead.

They may yet find some sting in various countries' consumer protection laws around sudden, unannounced price hiking- that will be interesting to see.

[Ciaran Laval]

Well Prok I have actually considered the cost implications of LL swallowing the costs for a month or so and compared it with how much they'll lose if people sell up and tier down.

From that perspective, if past history is anything to go by, the sabre rattlers will just rattle, that's been the experience in the past so LL have gambled on that being the case again, which I suspect it will be.

[Prokofy Neva]

Ace, why does the rest of the world have to support European socialism?

[Ace Albion]

If Linden Lab wants to sell me a product or service, they have to pitch it at a price I, as a consumer, consider worth paying. Their costs are no concern of mine, except where I would take them into consideration while determining value for money.

If they find business dropping in Europe and increase prices to Australian, Brazilian and American residents to compensate, then they can only do that as far as the market will stand, and that's the nature of international business.

Seeing as I'm now tiering down, and moved one account already to basic, you might be subsidizing European socialism eventually anyway, because with fewer premium subscriptions, Linden Lab may have to raise prices across the board to recoup income.