UK VAT Law

just a bit of a note ...the VAT rules apply to the customers location NOT the suppliers location, so it doesnt matter if LL were in SF , London, Paris or Russia...... VAT would apply accross all EU users.

With that said ..... its is a failure of a system called international trade balanced against local VAT/Duty?sales taxes.
E.g. the USA which has ONE central government has a seperate state taxes.... in the UK thats similar to local government "community charge" it seams alien to me that a local government could impose a sales tax on a product.

Many comments have been made about how these things just are they way they are and I for one appreciate the symphaies of my american cousins, but I do believe that as a UK citizen american law doesnt really apply to me...the same way that EU taxes apply to the USA. I consider in someways that you are lucky in the USA that its rationised that services are slightly different to goods. I expect to pay Value Added Tax on a TV, but to recieve it on an internet service from the other side of the world wether or not legitimate (which I feel that it IS) is just a joke.
One could argue the fact that SL has no competition therefor it is uncompetitive to raise the market price n EU users through taxation while leaving other parts untaxed is a US monopoly...I agree its not the US's fault .. but aEU directive issue to tax.

Just a note though ........ if we look at the facts ... LL have been aware of this VAT responsibility for a few months ..... I would hazzard a guess...just before the MASS dumping of land by LL. I personlly think LL knew about this issue and attempted to get RID of all the upcomming furture land BEFORE they had to declare that VAT was chargable.

Lastly....

I appreciate how things go in the US..... with regards to taxation and expected prices.... but its like tipping ..... in the US ...its AMOST a law to tip. We DO have different cultural differences but LLare an international and they should have known and priced accordingly. We in the UK have been overcharged higher than the conversation rate for years in many occasions the $ was just swapped for a £, so its not unreasonble for UK residents to expect the price advertised to be te price paid...... in the us ... the price advertised is ALWAYS excl sales tax and in the instance of SL isnt applied anyway.

I can only suggesdt t those in the UK ......
if you can afford it ... pay it..its law
Complain to your MEP

Thats all you can do...... I dont think LL can do anything other than say ...sorry ...we have already swallowed this tax for a long time....you need to pay it. P.S I got taxed for 30days and my cost went up with 8 days remaining till the next billing cycle so I personally got 8 days notice,(or rather none as LL would have taken that in arrears)

Well I've written to my MEP about it and signed the petition.

I can only wish LL had given us a month's notice. I can understand that with the rapid growth of SL in EU countries, that they could not continue to absorbe VAT charges for ever - but if they have been taking the hit on VAT since they started, you might think they could have managed for one more month!

A purely hypothetical one. I'm merely trying to point out that they wouldn't have handled the situation so abysmally.



Apparently they are. I've never bought from Sony Online, but Morwen says they do.

From reading the links left by LL on their posts regarding this issue i believe that it only became mandatory in July this year so any invoices before that date would probaby not contain VAT anyway (waits to be shot down if hes wrong there)

One of the main companies pressing for this was freeserve who complained that AOL were gaining a competitive edge over them because of this loophole and that they had gotten away with paying something in the region of $150 million in VAT over a certain period.

With those amount of figures being generated I cant really see any letters or petitions making much difference especially if your in the UK where the government are falling over themselves to try to find new ideas and taxes to make you part with your hard earnt money.

Yeah - all too feasible.



or move to an estate that accepts $L payments for tier.



It was my understanding from the blog that they haven't been paying it for the last 4 years. By the sound of it, they're only paying it from September, because they claim to have only just become aware of it (the land dumping you refer to was purely coincidental of course.)

That's exactly my point - if LL have known about this since last July and have been paying VAT since then (or whenever it became mandatory) why were the customers not informed? If I had received an email from LL that told me they had been paying VAT since whenever, but would have to start charging it from whenever - and given a date in the future that was at least 30 days ahead....well, I might not have liked it, but it would have been better than the zero day's notice I actually got!

As for Freeserve - they were taken over by Wannadoo, who have subsequently been taken over by Orange - and Orange (as an ISP) have given me worse customer service than have LL!

Well, I'm pretty sure AOL have charged me VAT for as long as I've been with them, just like all the other ISPs here, so I don't know where that comes from. In this case the service effectively originates in the UK, as well as being delivered here - how could they possibly avoid paying VAT?

I can confirm that Sony do indeed charge VAT.

I think the problem is not so much with charging VAT on the fees, as with not requiring US businesses _within_ Second Life to collect VAT in the same way.

I know that the E-directive specifies that private individuals are excluded, but that probably didn't allow for a private individual being able to run a network of 20 retail shops and produce as much as would require several large factories IRL.

Certainly in the case of land, I think there's a risk of LL being investigated, because land barons are basically reselling LL's product. If they can get away with that then (for example) why wouldn't Amazon.com just make arrangements with a few private individuals in America, that Europeans could pay them for goods (attracting no VAT because it's a private individual transaction) and then the US individual would give Amazon the money (attracting no VAT because they are American)?

Holy Cow! You have my deepest condolences.

Only since 2003. It's arguably down to AOL and Freeserve that the stupid VAT Directive was enacted in the first place.

Freeserve: Bwaaaaah! AOL ain't charging customers VAT!
AOL: Bwahahahahaha!

Meanwhile, Freeserve CEO contacts his local MEP.

Freeserve: Bwaaaaah! Bwaaaah! Bwaaaah!

EU's E-Business Directive implemented.
AOL starts paying VAT.

(Freeserve really did drag the EU Parliament into it.)

One thing I still don't understand...

assuming LL are correct, and we're liable for VAT on tier fees, why is it again we're not liable for VAT on other purchases from LL (premium subscription, Lindex trading, etc.)?

Or are they saving that one up as a Christmas treat for us all?

If they did, then Amazon would deserve a round of applause. Tyranny should always be fought in any way possible.
But for your analogy to work, Amazon would have to sell the books to the "Book Barons" at wholesale prices then the barons could sell to you at retail prices.

You DO pay VAT on Premium subscription

Well, I don't think VAT is actually charged on books, but CDs, maybe..

The point is that this wouldn't really work for physical goods, because in the case of physical goods being shipped into Europe, if the seller isn't registered as an EU VAT payer then the goods are intercepted by customs and held until the VAT is paid on them. So even this wouldn't work. If the goods were sent as a "gift", this doesn't apply, but lying about a purchase being a gift can get a business into severe trouble.

This is the whole reason for the E-Business directive - to bring internet stores into the same fold..

It would be an outrageous overstep for the EU to tax private individuals running virtual "businesses" in a video game on servers in San Francisco and Texas just because some of the buyers just happen to be sitting behind monitors in the EU. That's just an outrageous overstretch of taxation madness.

The VAT directive does _not_ affect actual goods like this. It's only regarding 'digitised services'. Purchases over a certain value (about £25) have always attracted VAT, no matter where in the world they come from because Customs intercept them when they arrive in this country, calculate the VAT and charges the carrier with collecting the fee.

Edit: Oh forget that, I just saw your more recent post and realise now that you knew this.

Evading taxes is an American tradition.

From Murry Rothbard:

Americans, furthermore, had inherited hatred of the excise tax from the British opposition; for two centuries, excise taxes in Britain, in particular the hated tax on cider, had provoked riots and demonstrations upholding the slogan, "liberty, property, and no excise!" To the average American, the federal government's assumption of the power to impose excise taxes did not look very different from the levies of the British crown.

The main distortion of the Official View of the Whiskey Rebellion was its alleged confinement to four counties of western Pennsylvania. From recent research, we now know that no one paid the tax on whiskey throughout the American "back-country": that is, the frontier areas of Maryland, Virginia, North and South Carolina, Georgia, and the entire state of Kentucky.

President Washington and Secretary Hamilton chose to make a fuss about Western Pennsylvania precisely because in that region there was a cadre of wealthy officials who were willing to collect taxes. Such a cadre did not even exist in the other areas of the American frontier; there was no fuss or violence against tax collectors in Kentucky and the rest of the back-country because there was no one willing to be a tax collector.

Oh - too good to be true then. I must have dreamt that

How about Lindex trading? (though I get all my pseudo-currency from SLX - I hope they never open a European office!)



Wouldn't that rule out the ~£5 that premium subscription comes to each month?

Now I really am confused!

Looks like the Lindex isn't affected. Yet.

Given how Anshe has switched from pricing everything in real currency (USD/EUD/UKP) to Fisher Price currency (Lindens), I think it's reasonable to expect Lindex transactions will remain free of VAT for the foreseeable future.

This is based on my theory that she was tipped off about the whole VAT thing, late July/early August .. which may not even be true.

Yeah, but Lindens are bought with real money, so buying them on Lindex using $US?

Maybe LL could bill tier fees by the day - that would reduce it to well under £25 for just about everyone?

Bear in mind, they wouldn't actually _tax_ you. All they'd require you to do is to _collect_ tax for them. LL could probably automate this for you too - when a European customer clicks on the "buy" button in your store, the L$ price they see is 17.5% higher than the value you set it to, with the surplus going to Currency Linden for sale to pay VAT.

And you've put your finger on why this moment could be a turning point for SL.

If LL leaves things as it is now, then it makes a clear statement that SL businesses must fall into one of two categories. Either virtual businesses just run for fun; or real businesses with real products who just use SL as a sideline. Virtual businesses with trade equivalent to a real business will be officially declared an anomaly of which maybe a few exist but it doesn't matter if we basically ban a whole continent from having them because they're just weird data points anyway, right?

If LL wishes to suggest that SL is a global platform for _real_ business, then it _must_ add some provision for US businesses to collect VAT from Euro customers, and for Euro businesses to become VAT-registered even if they only do business in L$.

I just disagree. There is no way private businesses in the US should be collecting VAT for the EU. Your jurisdiction does not apply here. It's an outrageous overstretch. This is NOT Europe.

I can understand what you are saying - but the reality is that this is exactly what the E-Business directive states.

And it isn't really that much of an imposition! A lot of payment processors that _are_ used by US private individuals in other internet businesses (such as RegNow or Digital River, used for selling software) will automatically deal with collecting the VAT and sending it to Europe, so that the US seller doesn't even notice anything. There's no reason why LL shouldn't do the same.

As for the jurisdiction issue - there was a question as to how this type of thing would be enforced. So far, most companies have cooperated voluntarily, but it's been suggested that one way would be that if a company refuses to collect VAT because "it's not in your jurisdiction so you can't force us", then Europe will permit piracy of the products in question on the same grounds. I don't know if they'd ever do that, but that was, apparantly, seriously discussed in the EU parliament.

With LL having an office in the EU, I can see why they now have to collect VAT for customers in the EU. Hey it’s the EU law and upset as the SL users in the EU might be, that is the law of country. What I’m not seeing as part of this is the complaint about EU laws requiring advance notice and billing cycle requirements. I’m sure the VAT man is not going to let LL defer paying this tax. Is a company in the USA, selling a product located and provided from the USA, required to following pricing guidelines of the EU? I may be wrong but to me the pricing should be done under the laws of the USA and possibly California since that is the place the sale is transacted in. That there are data centers in another state in the USA and a financial processing center in the EU, the point of sale is still in California. As such the VAT or any other charge that is specific to other locations would be a charge added on top of the sale price. Living in the USA in a different state than LL exists, the laws here are even different on taxes and tax rates. If LL had an office here, they would be required to add the tax due in my state, otherwise I’m responsible to declare the purchase on my state tax return and pay the tax myself. So is a service in the USA, sold in US$, with none of the offered product originating in the EU, required to use EU pricing rules? Then to add a real twist to it all, how do you know who to charge VAT and at what rate if you have not verified who and where they are?

Yes I'm aware of that. Nevertheless this is an offensive extra-territorial tax. Europe has no business asking people in the US to collect European taxes. That's obnoxious full stop, directive or no directive. The EU's laws don't apply to us, regardless of what Brussels thinks or wants. I in no way support the introduction of that kind of extraterritorial tax collection regime into SL.