1. Given that only two things in life are guaranteed, it is of no surprise that a taxing entity is casting a hungry gaze at SL's rapidly growing economy. Be it the feds, a state or even local governmental entity, someone somewhere is going to try to figure out a way to get a piece of the Linden pie.

I wouldn't worry too much about it, however, especially if you give a bit of thought to some of the difficulties inherent in taxing either the transactions or income generated within SL:

Sales tax? Which jurisidiction's sales tax and transaction reporting requirements be applicable in a sales transaction in SL? the buyers? Sellers? Would VAT be applicable? How would the taxing entity even know of the transaction?

Income tax? Who is responsible for sending the 1099 on income earned? What if the SL club is owned by a US citizen's account but the dancer dancing for pay is from an account owned by a citizen of another country? Would that constitute working illegally in the US? Would this allow for the deduction of expenses necessary for SL-a computer, broadband, tier, part of a house?

Capital gains? How will the basis for such an "investment" be determined and kept track of? Would my 512m2 be considered a real estate investment? Could I take advantage of my losses and deduct them?

I could go on and on but I think you get the picture.

Niko

PS - For my analysis on how to use SL as a retirement vehicle check out: (http://www.sluniverse.com/forums/FindPost10371.aspx)

Posted at 4:19PM on Oct 16th 2006 by niko donburi

2. HELL NAW.


Maybe if we make all our prims into consumables or dairy products we can escape the tax?

Posted at 4:38PM on Oct 16th 2006 by Andrew MacKay

3. I'm not an Immersionist, as I understand your usage, and occasional blips in the program don't take me out of the experience. But to me your initial line seemed both unnecessary and condescending. Wouldn't this affect all SL users, or at least the ones who exchange money and services? Why use it to get in a dig at Immersionists?

Posted at 5:20PM on Oct 16th 2006 by Cabridges Fanwood

4. Although it does bring up lotsa questions. If someone in Osaka buys a virtual service from someone in Italy, why would they pay tax to the US? Just because at some point it ran through a computer in California?
Move some servers out of the country and that's solved, and worldwide redundancy ain't a bad idea anyway.

Posted at 5:28PM on Oct 16th 2006 by Cabridges Fanwood

5. How am I condescending? I feel for those who don't want RL intruding on their SL any more than it has to, that's all. Believe me, if I had a negative opinion about something, it would be a lot more plain to see. I'm not as subtle and manipulative as you might think!

Posted at 5:43PM on Oct 16th 2006 by Akela Talamasca

6. Hmmm...
Not good I think. Especially if you think of Linden Dollars as a currency. What happens to a currency market if the underlying of one of it's two(!!) products is subject to some kind of tax (which in addition is collected by a state which is NOT involved in that product)....

Could be an interesting subject for some economists....

Posted at 5:49PM on Oct 16th 2006 by FEZ Rutherford

7. It just seemed tangential to the very real story, and unnecessary. Pending legislation of this nature will affect everyone in SL, so why bring up the Immersionist/Extensionist feud at all? Minor quibble.

It'll be interesting to see how this plays out. SL's position has been that Lindens are not currency, regardless of their functional use as such in the game (http://forums.secondlife.com/showthread.php?p=1295835#post1295835). Wonder if the Legislature is capable of seeing it that way, or if they'll just see "money" flying by without any of it going into the govt.'s pockets.

Posted at 5:55PM on Oct 16th 2006 by Cabridges Fanwood

8. The main is factor is your actual real world citizenship when you convert your lindens into real cash. If I am making $2,000 USD a month from my virtual jewelry business, and depositing that into my bank account, you can be darn sure that I better have reported that as income before I get audited.

Fortunately / unfortunately, I don't have that problem.

Posted at 6:24PM on Oct 16th 2006 by Rik Riel

9. If you're making $2000 real world USD per month from an in-game business, you are already supposed to be reporting that on your income taxes under current law. What Congress is investigating is the possibility of taxing completely virtual assets that never leave the virtual world -- which makes me curious about how this could possibly implemented. People are going to be pissed if they have to spend real world money as a tax on their virtual assets. And yet, if the tax you'd be required to pay isn't real world dollars but virtual currency... what the hell would Congress do with it? Curiouser and curioser.

Posted at 6:54PM on Oct 16th 2006 by barb dybwad

10. if they start charging for L$ transacctions, I would probably forfit whatever is show on the top right corner of my client window and go after a meta-virtual currency (a system that would have mensurable tokens that can be exchanged by products and services but woudln't be directyl linked to the any real or virtual currency)

there would probably be places you could exchange the meta-virtual currency fro l$ or real life currency, but I would stay away from there as much as I could

btw, is it legal fro them to charge real life money (even if represented by a virtual currency) for changes in zero and ones inside a single company computer network? I mean, if you are giving one person;company uses their credit card (or bank) to tranfer real life money to some other person/company, it makes a bit more of sense to chrage taxes, but if techinicly when one perrson clicks their mouse, and data is changed in a remote computer how can they explain why they are chraging for that?

Posted at 8:35PM on Oct 16th 2006 by TigroSpottystripes Katsu

11. Obviously they'll have to establish a virtual Congress to apportion the virtual tax revenue towards various virtual fundings. And then the virtual lobbying begins..

Posted at 8:34PM on Oct 16th 2006 by Cabridges Fanwood

12. so how would the exchange rate fall into play... im not being taxed a dollar us for a transaction that is less than that in linden. i think the government is getting in over their heads on this one

L$300 per $1USD.. so at current tax rates... roughly 23% of that 300 linden would go to the tax. hell thats like 60 linden. then they may institute a SLIRS and impose sales taxes based on the sim(much like states and counties set their own sales tax rates...) but that is why the IRS makes the rules, and i sit there and scratch my head every february.

it wont fly. i know if it hits like that, im out of SL in a hurry. it isnt worth the extra money just for some downtime. i can go to the park for free

Posted at 1:54AM on Oct 17th 2006 by AllieKat Stovall

13. There are a thin lines connecting industry and corrupt politicians. One of them is tax.

Nike moves in to SL and gets taxed for land use and don't like it. Their virtual clothing industry association's lobbyists pay election contributions to congressman or senator xyz, and suddenly there's tax exemption on virtual clothes.

Man, I left RL to escape this. Where do I go next?

Posted at 9:56AM on Oct 17th 2006 by Name Withheld

14. I agree that this was highly political, an unnecessary jab at Immersionists -- it's just the Platformers' Party lead by Aimee Weber at it again, banging away from the Augmentationists perspective. But of course the more cynical Augmentationists who just use the platform to make money and don't really live in the world, are the ones more likely to have the taxable income. The Immersionists are likely to be people living off Lindens and never cashing anything out, or old ladies who only log on SL on Sundays, saving their pin money.

And all this committee is doing is investigating the whole phenom. They didn't draft any legislation yet. They didn't come after the world yet. And when they do, of course people can show them all their expenses -- and the value of their assets which according to the TOS is nil.

This is a hyped story if ever there was one.

Posted at 8:46PM on Oct 17th 2006 by Prokofy Neva

15. Well I'm glad to hear that they aren't just jumping right into it. Hopefully they'll hesitate for a LONG time.

Now, taxing membership fees makes sense (I'm guessing this does occur?), as well as taxing exchanges of cash for Linden dollars. However, beyond that, it's imaginary money being used to buy imaginary items, all of which is watched over by Linden Labs, not the government. The day that the government has the right to tax transactions taking place entirely in a virtual world is the day that the government understands computers so well that it takes on the role of a worthy protector of all transactions that occur in that world. That day isn't anytime soon.

Additionally, I can only imagine virtual transactions of a determined 'substantial size' being taxed. It would be at that same point that the buyer would have the right to complain to the government about any problems with that transaction. Below that it's all at the discretion of Linden Labs or whoever runs that metaverse (or that portion of the metaverse, if and when virtual reality companies get around to connecting their systems into one big world).

Posted at 12:56AM on Nov 12th 2006 by Al Sonic

16. When I first logged onto SL just a few weeks ago, I looked at the US Dollar amount changing hands each day (shown on the Second Life website) and said to anyone who would listen, "There is no way that the US Government isn't going to want to get their hands on some of that and regulate it!"

I'm sad to see that my faith in the U.S. Government is still valid.

Even moving the SL Grid off-shore isn't going to help as if they can't get their greedy hands on the money, they'll just find a way to outlaw it like they did with online poker.

"If it exists, regulate it. If it moves tax it, if it doesn't, subsidize it."

Posted at 3:32PM on Dec 7th 2006 by RC Paderborn