Letter to the EU (Warning: VAT-related :-)

I have written to the EU to seek some clarification on the VAT issue, and I thought I’d publish my letter on my blog so everyone can make use of it. Find it here:

http://drickenbacker.wordpress.com/2007/10/04/vat-what/

It's "Linden Lab" ... not Labs ... but apart from that, let's hope it has some effect.

Quite apart from the move being most likely illegal, it's most definitely sucky. There are many things I could add but most likely it's already been raised.

Broccoli

i hope they will respond but with the reality check in mind, LL will just keep it in place untill some smart ppl from SL with the financial background actually takes LL to court and speak in name of us all to have every one`s money refunded of tax incase this has been illigal

Out of interest Dylan, who or to which office/position do you send it to. I might want to add to it as well.

The problem is that the US users are right - LL, being an EU company, isn't affected by EU law.

(So why does it have to charge VAT at all? Because it's part of an international trade agreement, which isn't quite the same as law. It's not enforcable in the same way, but generally countries expect each other to keep them, otherwise there would be nothing to stop all kinds of abuses of the system.)

US companies offering goods to European users certainly _don't_ have to include VAT in their prices advertised on websites; I have often bought software registrations online from US companies, and no company I know has ever shown a VAT inclusive price.

The credit card issue is a more major one - it seems that LL should have needed permission to take the extra money from credit cards, no matter the reason _why_ they needed to take the extra money. Certainly, changing the price in the middle seems like a breach of a contract of sale.

It _might_ be worth asking if a US company can dodge the international agreement by freely allowing private individuals to become resellers of its goods, or if the use of L$ to make transactions non-VATable and damage European competition is in violation of the same agreement.

I assume you ment that LL is a US company, not an EU.

Just one thing I have always found amusing is that everyone that posts on the subject assumes that they know the legality of this issue better the LL with all the lawyers and consultants that they have.

Death and taxes, two things that you can't escape. I am sure that it won't be long until each and every L$ transaction will be taxed. Talk about an economic disaster.

LL have published their VAT number, it's deeply hidden in the knowledge base if you search VAT.

I would have also pointed out in the letter how SL is a platform where people trade with each other to gain $L to either gain more inworld or to make a profit by cashing out, with the VAT added on land tier, this now makes it a lot harder for Europeans to compete with those not effected.

I think this is more a fear than a bonus, though. If LL's lawyers really are that great, that means they knew about the whole VAT business when they moved to their European office and did so with deliberate intent to trade-off the ability of European land sellers to compete.

This was all found in the KB. It really makes your letter weak. The only argument that has any sense of being a good one is that land being held before the annoncement cannot be dumped to avoid the VAT. Even that is shaky.

Is that sarcasm? Log in to support.secondlife.com, enter VAT in the search box and it's there..


I hope they also compensate US people for how badly the US$ is sucking right now. We've been at a disadvantage for a while...

I'm not surprised that people think they know positions better than LL when LL implement changes in such a fashion.

Telling someone that they owe x amount and then saying it's actually a different amount is misleading and would most certainly be frowned upon at the very least.

I'm pretty sure that it's an offence not to notify people that the prices quoted exclude VAT if you're intending to charge VAT. Which is back to the misleading advertising position. Trading standards officials aren't happy with people being misled.

LL have misled people, and this could have been avoided if LL had given residents the same information they were providing their internal billing team.

No, it's not sarcasm, the knowledge base isn't really the only place the VAT number should be written, it should be on our account pages.

As for compensating US users for the weak doller, we are all earning L$ in SL which we can only cash out to US$, the rest of us then have to pay charges to get it into our own currancy. Pretty strange for us in the UK considering the payment office is here.

Right because when I spend USD$100 inworld it gets me much more than it gets you ....oh hold on a minute that's not true at all is it

not to mention that u still don`t have an overview of ur island costs...

.

It's called Asda

Yes - for pure consumers, the VAT isn't such a problem because of the dollar exchange rate. For an island, for example, a UK resident will pay UKP 170/month, as opposed to UKP 144/month without VAT - which isn't _too_ bad, for someone who was prepared to pay that amount in the first place. Most consumer users do not buy islands though - for a premium membership it's still only UKP5.75 a month, which is still cheap compared to many MMOs (WoW is UKP8.99/month)

The problem is for L$-based businesses. A business owning an island needs to earn L$78470/month to pay for that island... but now, if the owner happens to be British, they need to earn L$92203. That's a fairly dramatic increase in sales (a 17.5% increase), and when you consider the Pareto curve of money earned by SL businesses, that's going to be very difficult to achieve. Even if the owner was able to register for VAT, they could only claim a VAT refund on the part of the island actually used for their business, so this is yet another pinch on the number of "business to fund fun" users (but that said, the number of users in that class has spiralled down anyway).

What makes you think they *do* have experts in these fields?

What makes you think the 'so called' experts actually are?

What makes you so sure that LL's decision to charge VAT is right anyway?

Broccoli

I didn't say they do Broccoli, it was the person whom I was replying to who insinuated that.

I'm not sure whether it's legal or not. I said elsewhere that I'm pretty sure not advertising that prices don't include VAT is something they are likely to get in trouble for.

To SL members in EU countries that have to pay VAT. It is your governments, not LL that is putting this hardship on you. LL is charging the say price to everyone no matter where they are from, your governments then insist on adding in a tax, this tax is your responsibility not LL's. LL due to various laws just has to collect it and remit it to your governments. If you don't like a tax talk to your leaders and don't blame someone who has no control over the matter.

You do well until the last sentence. LL had control over when it was introduced. LL had control over giving notice. LL had control over advertising prices correctly. That's why LL are getting it in the neck.

@ Sy: I sent it here: http://ec.europa.eu/taxation_customs/common/contact/index_en.htm

LL has no control over the tax and whether someone in the EU must pay it. And without more information you do not know that LL had much say in when it was introduced and the prices listed are in USD from a US company and if you are in a VAT required area you can pretty much assume that it will be in addition to the price being charged to US customers by a US company. If you were a US citizen and your local state required a tax on teh services that LL provides you would owe those taxes in addition to the price listed unless it stateded otherwise.

We have been over and over this the last few days. Americans don't understand that in Europe VAT has to legally be included in the price advertised unless it clearly states VAT excl alongside. What has happened is that we have been charged VAT on tier for the previous month and were not given a chance to tier down or cancel before the charge came into place. The pricing pages still have no mention that further fees will be incured for new people coming along and will fall foul to the hidden charges.

No we assume if a price quoted doesn't say "VAT not included" that all our payments are correct as advertised. We assume that the seller (who at the end of the day is responsible) has quoted us the correct and legal price. This is how it works in Europe where we pay VAT so we're used to this. That's the law on pricing, you must tell the buyer if VAT is excluded.

As LL have been investigating whether they needed to collect VAT, they should also know this. Indeed my tier fee does now say "VAT Included".

LL knew this was coming. They had to identify who was affected, put the new billing structure in place, prepare emails etc. This wasn't done on the morning of September 27th. The legal and financial issues had been brewing for some time before that.

There is no excuse for the lack of notice. People were tiering up, becoming premium members and being told they'd have to pay price x and in the same billing cycle it became price y. That is misleading people.