VAT: Discussion w/Zee Linden July 31-Aug 03 2008

If you're in a country that requires VAT, enjoy those government services it provides. I'll sit here in Hawaii not paying VAT, but sending $300 a month to my health insurance company. It shakes out. No, I am not interested in subsidizing your tax situation.

Well to me it seems that LL listened to the European community when so many were demanding that LL have a office over there for several reasons. Finally they put a office there and guess what now they have to abide by the VAT laws there. Its not LLs fault that they have to obey those laws. If LL didn't collect the VA taxes as it was required to do then the same people when the taxman caught up to them would be saying it was LLs fault for not following the law of the land. Like always becarefull what you ask for , you might just get it.

There seems to be a grey area regarding the legality of Linden Labs charging customers from all EU countries VAT. Being a law abiding UK citizen I am happy to pay LL VAT on the services they provide to me, mainly to avoid any suspision from the tax man. However if you insist on charging me VAT you are legally bound by UK law to to provide me with an invoice or financial statement detailing your EU Registered VAT number at least once per financial year. Within the last financial year I recieved no such statement. I have used all avenues of communication available to me to request said statement from LL and have yet to recieve it. My accountant has also tried in vain extract this statement from you and has now formerly lodged a complaint against LL to HMRC.

This is an extremely serious oversight on your part and I strongly advise you to employ a financial/legal adviser versed on EU law to make sure you comply with the national laws of every EU country that hosts residents within your user base.

If i buy goods over the internet, or by telephone that are then physically posted to me from abroad, HMRC charges me VAT on those goods at entry into the country. So it is not upto the person i buy the goods from, if they are outside the UK, to make that charge for me. This seems to work with many of the arguments regarding "internet purchasing" and VAT.

There is obviously a lot of issue regarding VAT for services that are provided over the internet. As people have already stated, i'm not sure HMRC has really provided a solid example of what and how this situation can be transparently described and where it fits into existing legislation.

Someone mentioned a petition at the downing street site, but i don't find it. Are there any other lobby groups actively working on this subject both at UK and EU government levels? If so, can anyone post details so we might all be able to correspond directly with those people. Linden Labs are obviously trying to stay within prescribed legal boundaries, but if the prescription is vague, how can their decision be based on solid law to avoid dispute? There have been so many quotes of various legal arguments here, all seem legitimate...

...I'm confused, it looks like many others are too with no way to get the issues resolved.

I'll be the first person to admit I know nothing about VAT. But taxes are taxes wherever you live and eventually you end up paying someone.

I see a common cry that no one has received a yearly financial statement. Has LL been charging VAT for a year yet? Give it time and give them a chance to do what they need to do. The rapidly growing world that this is, everyone is learning as they go.

Many ask why LL is bound to collect VAT if they are based in the US and their servers are in the US an you pay in USD. Bottom line: it's the ethical thing to do. Besides being ethical, later down the road it would probably inhibit growth. I can't imagine opening a support office somewhere in the EU would be easy if there was an outstanding tax debt.

Letters, petitions and talking with your government officials is probably the best route to take. Make you concerns known to those people whom create and control those laws. Maybe this forum will create enough buzz to start a movement to express those concerns as a larger group. But berating LL won't solve the issue at hand.


-joe

"Never take life seriously. No one gets out alive anyway."

If you go to your account and press 'Account statements', you will get a PDF with an overview of transactions with LL for a specific month including LL's VAT number.

WARNING!!! OFF TOPIC CONTENT AHEAD


For those that always complain about VAT and now for something completely different:




EVERYBODY ON THE FORUMS!!!!

/me whistles

/me whistles




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Back on topic I hope that cheers everyone up a little bit now we can all go back to the conversation. I just hope Katt and the other Lindens are Monty Python fans and get this.

I don't see how presumably educated residents can expect LL to actually shoulder the financial burden for a tax lawfully put in place by your stumbling overbearing bureaucracy of a European Union, I'm honestly surprised that they covered it at their expense mind you and out of their profit margins which I think were thin to begin with at least for the first couple of years before the massive blooming of the economy (in my opinion that would be 2003-2005/3006 (esp. 6/6/06) when from what I've read they essentially operated at a loss in the end and could only due so because of the invested capital and in the dream of making that back once the platform was developed.

Hi.

I am not averse to paying VAT, I have been paying it to our Customs and Excise since its inception.

I am not upset that other do pay VAT, and some others do Not pay VAT.

I am upset about the flaws in the way that you Implemented it.

The concept of simply bolting on VAT, like a gas station in Tampa Florida bolted on 25 cents during the building of the Buccaneers stadium, is reprehensible and plain wrong. It is only 'Right' if EVERY customer using the gas station gets charged the same 25 cents. To charge that tax to 'out of towners' is disproportionate and clearly wrong. Yet, I feel that is exactly what you are doing with VAT.

Bolting on the tax after the price has been agreed, and then applying it to only those from 'Out Of Town'! I hear your laughter, "Dang, thats a clever idea", but it is also illegal under our law and under your law, both constitutional as an instrument and socially as a directive.

Right now, my investment in dying on SL for a number of reasons, no more $4,000 USD a month from me because i cannot charge a tier to my customers that is financially attractive. I have had to sell three islands, so I effectively lost 12 customers who were paying $125 USD a month to enjoy peaceful land, no ad farms, residential, and 7 x 24 concierge service. Thats a drop of $1,500 USD coming into your income stream each month. I know that may not be very much in your global economy.

Let me share why VAT and its poor implementation is losing customers at such an alarming rate.

The American island owner needs customers. EU islands owner needs customers.

The EU island owner, if they want to work with no profit, might elect to charge just tier for their island residents, and lets say they have one resident wanting that island. I could charge that resident $295 USD plus another 17.5% to cover my VAT payment to you. The American player, knowing I am unfairly handicapped by having to pay VAT, charges $295 USD for the same island, and 5% for a slim profit margin. You can see where the customer will go to.

That is what I have complained about so many times and I have called it a non level playing field. (search my entries for River Ely to confirm).


If you wanted to do it fairly, so that none of your customers were disadvantaged, you could have implemented it in a manner called VAT-INC, or VAT Inclusive.
This means, the same end price goes to all your customers, be they EU or USA, ie $295 USD. However, it means you get to keep more of the USA players $295 than you keep of the EU Players $295. ( multiply by 1.175 I think) You deduct from the EU players $295 the correct proportion of VAT and pay that to the UH HMRC. Simple. Now, all your players are on a level playing field and have to charge the customers the same to break even, so there is no advantage to being in the US, UK or anywhere else.

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Let me clear up something I would like you to share with the USA players that do not understand VAT and please explain to some of your live help concierge who also do not understand how VAT works. If you are aware of this, I apologize in advance.

Registering with Linden Labs for VAT does NOT exclude paying VAT, I am still just as liable, only now, if I don't pay vat, instead of losing my account with Linden Labs, I can end up in jail. here is why.

You agree to collect VAT and then pay it quarterly. That is an implicit duty as far as I am aware. As I registered for VAT, got my VAT number, I now have to HOLD ONTO my VAT and pay it directly to the UK HMRC.

Example: Between November 07 and 23 December 07, you billed me for £1,200 of VAT related Purchases, of which £209 were the VAT component.. I have to pay HMRC the sum of £209.69 VAT. ( to work out Vat Inc, the formula is Multiply by 7 and divide by 47, so a vat inclusive bill of £100.00 is £14.89)

So registering for VAT does not exclude me, it simple means I get to hold onto the VAT before sending it to the Tax Man, instead of you collecting it to send to the taxman. It is fair business practice, to offer a lower working price to a VAT registered business, as business men tend to regard other business men as professionals, as well as customers, not just a another source of income.

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So sum up:

1) Charging a bolted on tax to some customers, and not others, gives financial advantage to those who do not get taxed. That is plain Unfair.

2) Registering for VAT does not exclude you from VAT. It simple means that the customer pays the VAT direct to the HMRC and not to Lindens Labs to pay to the HMRC. It does not create a level playing field.

Thank you for listening, River Ely.

http://rivers-rock.blogspot.com/

That, I believe is correct. The service is currently exempt from US Sales Tax - so until such time as the US changes their laws about this, US residents do not pay sales tax for Second Life membership or tier costs.

The only two things you can be sure about in life are death and taxes.

In my world the financial year runs from April 1st to Mar 31. So even if LL started charging VAT on 1 Mar I still need a financial statement or recipt covering the previous financial year, even if that means it only shows 1 months payments.




This feature has never worked for me. I've tried to download statements both from my home PC and work laptop, but I allways get 'unable to load page'. Tried in 3 different browers with no luck. I've allways assumed this is a broken link or a feature not yet implemented.

Does this feature work for you?

I think I just want to make two points:

i) The way VAT was implemented was disgraceful and legally dubious - unlike US sales tax where the price advertised is not necessarily to total price paid, in the EU the price advertised *is* the total price paid (unless explicitly indicated), any taxes due to be deducted from this price. As such, in EU terms LL's change of policy re VAT constituted an increase in charges, and morally and legally required proper notice.

ii) It should be possible to pay LL tier and island purchases in L$ - as VAT is not applicable on in world L$ transactions, this help lower the playing field for EU members to some degree.

Matthew

The important word in that is currently as the linden economy grows it will become more and more conspicious. While they may feel that it is not worth the effort to monitor this will change as it grows more and more conspicious.

one easy way of making it more conspicious would be for the LL to change to chargein for its taxible services in it.

And you think health insurance is free? As for example, in VAT country Germany? Think again...

Someone else put the exchange rate USD vs EURO in the discussion. That doesn't help a SL land business at all, when it charges in L$ and has to set them for sale. They have to charge more L$ to cover the VAT added fees.


Last but not least, I agree with what others already asked LL to do: allow payments directly in L$.

I believe that the Lindens are correct and they are obliged to collect VAT for fees charged to EU residents, this is the Law. However I believe that the law they are applying also requires them to show prices INCLUSIVE of VAT.

This means they should either:
a) Show the different fees they want/need to charge based on a customers Real Life residency or
b) charge everyone the same regardless of where they live. (OK EU residents would still have the extra costs of converting to US currency but we are used to that.

The playing field would certainly be far more level if fees could be paid in L$ which legally would not attract VAT (and yes this is Tax avoidance, a perfectly legal activity which keeps many accountants in work. It is not Tax evasion)

Allowing this should have no effect on the SL economy (apart from encouraging more economic activity from EU residents) since the net demand for L$ would not change and would be satisfied by the Lindens converting L$ to US$ rather than land owners.

So come on Lindens, you have developed a fantastic resource which is worldwide, please stop being parochial and make some effort to enable us all to enjoy it with equal access to ALL it provides, including the opportunity to help fund our own governments with Income Tax paid on profits earned in a fair and competetive business community.

As I understand things Jane, Linden Lab have an office in the UK and are able to remitt the VAT to HMRC - the tax authority in the UK and HMRC sort out paying all the other EU member states the VAT due to them. So Linden Lab do not have to deal directly with all the numerous tax authorities in every EU member state.

It's here:

http://petitions.pm.gov.uk/EU-INTERNET/

...but unfortunately it closed a couple of days ago.

Write to your MEP and hope he knows what the internet is.

I absolutely despise how Linden Labs kowtowed before our european tax thugs . It makes one ponder, when VAT will be introduced on in-world-sales. I am here for the fun, I create stuff, I sell products, I buy things. I don't want to spend time with filling out tax declarations for my revenues in Second Life.

In my opinion, we need a "Declaration of Independence", then we don't have to pay any more taxes, except the tiers. For the tiers, I would recommend "No taxation without representation", since tier is just another name Linden Lab uses for their service to give us the platform for our second life.

Yes it does - I can get my LL statements ok from the account pages on the web site..

It's not about the european laws that unlevel the businesses in SL. It's about *HOW* Linden Labs applied that taxes, that unleveled and disadvantaged Europeans.

The laws are correct! I am a business owner in RL in Europe and i know exactly, that the law says, services have to be INCLUSIVE VAT and it's illegal to charge it different. The end price for the end consumer had to be the same for US and EU residents, then it would be charged the correct way. But no, Linden Labs thought first about to not raise prices or for some of the residents or not lost money if they would comply with EU laws fully. For me, that is like caring for one law and ignore/violate another, how it fits best for you.

It wasn't until today answered or carefully ignored to ever answer it, why you charge the VAT the wrong way and not how it's required from our laws, if you think you have to comply about them. So many of us want an answer about this!

Good to see some more attempts at communication from LL, although it's very one-sided ATM (perhaps the next time you announce an interactive discussion with Linden X, that Linden could actually be on hand).

I agree with the points re: the way LL charges VAT - a complete invoice containing all my data, with LL info specified, is required by our VAT laws. That goes doubly so for companies. The way you handle PDFs at the moment is not enough - you need to let us enter all pertinent information and print it on the PDF report. The only way I can scrape by is to enter my VAT number in a billing info field and then get the PDF with the VAT id included - but without any other company data.

And, while you're looking at VAT - since its introduction, there has been no way of removing an avatar as a VAT-registered entity. You can not delete your VAT number - you can only replace it with another. Please add the "Clear VAT info" to the web menu.

Best regards,

IYan

Yes that would be unfair wouldn't it, you could stretch it and say 'individual countries'?

If you want to contact the European Union go here:

http://ec.europa.eu/taxation_customs/common/contact/index_en.htm#

Use the drop down boxes to select the category, Taxation, VAT and then send them an email about this subject if you feel it's unfair.

tax on lindex transactions suck!