Today Linden Lab released a notice concerning Sales Tax for U.S. Purchases:
Ever since Second Life’s inception two decades ago we have seen many local, state and federal governments impose new ways to collect tax revenue from internet-based businesses. The Wayfair Sales Tax case decision by the Supreme Court was when prior rules about sales tax really changed. Since then, we have done our best to shield our residents from these taxes as long as possible, but we are no longer able to absorb them.
As of March 31, 2022 we will begin charging sales tax in the U.S. For the time being we will charge taxes only on recurring billings, such as premium subscriptions and land fees. The amount of tax charged will be communicated clearly in the receipt or invoice.
We will continue to absorb the taxes at point-of-sale purchases such as one-time L$ buys, first-time premium subscriptions, and name changes. At some point in the future we will need to begin passing those taxes on to you. We will make another announcement when those charges are phased in.
Your individual charges will be determined by your local jurisdictions. There are more than 13,000 sales and use tax jurisdictions in the United States, with great variation in their rules and tax rates. Tax amounts are also affected by other factors such as the type of goods or services being purchased. To determine the charges, we will be relying on an automated third-party system which closely tracks local tax laws, so the tax amounts are always up to date.
This is news we don’t enjoy sharing, but for the health of the business and of Second Life, we can no longer continue absorbing these tax burdens.
Thank you for your understanding and your continued support of Second Life.
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This is hard news for many people who are already at their financial limit for SL fees and charge increases. I am not sure of the legality of charging State taxes on virtual land fees, though. In any case, there is not enough information in this notification, just hints at things to come. Less than a month notice on this abrupt change too. There is no time for people to change their land usage without abandoning the land - which means a total loss of value on the very thing that is being billed for and now taxed for. There is not enough time for most people to sell the land to recoup their "investment" in it.
We will have to wait and see how this pans out, but I know that it is the landowners and premium users who keep SL alive. We do the creating, the designing, the landscaping, the events, and the promotion - and apparently, all of the paying too. 😕
It is another brick in the wall, and another straw on the camel's back; That extra $5, $10, $20, and more every month will mean that many people will be cutting back their land usage. They will also be cutting back on the number of private estates and homesteads they own. And people who run rental properties will be increasing rents to cover the additional tax costs. Those who host income games for players, they will be cutting back on how much they fund those games that give so many SL players free $L. It is a domino effect that affects more than most people realize.
But that is how it is going to be from now on. There is no fighting it. There was no way to stop Netflix and Hulu from charging State taxes on our monthly plans, and there is no way to stop this from happening in Second Life. I just hope that Linden Lab rethinks their plans to add additional levels of Premium Membership; That will be, I really believe, the last straw, and the last brick, for Second Life.
Best regards to all,
Markham Weatherwax
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