Charity laws stiffle micro-donations

This is a link to a blurb in Randy Moss's blog. Randy Moss is heading up the Second Life Relay for Life charity event, and he noted that a lawyer pointed out that vendors who want to donate profits have to register in every state that profits exist in. Really interesting perspective.

http://como.typepad.com/community_mobilization/2005/08/convergence_of_.html

Interesting. Doesn't this issue really strike at the heart of the virtual goods question? When is the donation actually realized? When vendor X sends L$ to the ACS avatar, or when the ACS avatar converts those micropayments into US$ through a convenient online service?

If the government considers it as the former (as it seems the ACS legal counsel is counting on), then for all intents and purposes it's endorsing virtual currency as having some inherent value, which could have farther reaching implications than simply the matter at hand.

There are two very important questions to consider here. The first, as Ricky pointed out, is does the Linden Dollar have any inherent, real-world value. The second (which is only becomes important, depending on the answer to the first) is where are sales actually being made.

The answer to the first question according to Linden Lab, the sole producer of Linden Dollars, is absoultely not. The Linden Dollar has no real-world value. Therefore, on that basis, I have to disagree with the ACS lawyer. It would seem that donations given inside SL do not become "valuable" until the moment the $L are converted to $US. The only one technically making a "donation" is the one who gives the $US to ACS.

As for the second question, as I said it's only relevant if the answer to the first question had been yes, but just to be thorough I'll answer it anyway. I've got some experience in this area, having been in direct sales my entire adult life. According to the US government, if you are in the business of manufaturing and marketing your own products directly to consumers, you are a direct seller. This is true even if you contract others to aid you in creating sales. If you're a direct seller, then you must register in each and every state in which you make a sale. The question of where a sale is made is determined simply by where the product is being delivered. If you're in NY and somone in Florida places an order with you which is to be dlievered there, then the sale was made in Florida, even though you didn't actually go there to sell it. You'd therefore have to collect and remit Florida sales tax, register your business in the state of Florida, etc.

However, if you're running a pernament retail business, meaning you have a fixed location (retail store) where your products are sold, then you are only required to register in the state where your store is located. If you're in NY and someone from Florida calls to order something from you, it is considered a mail-order sale, made in the state of New York, and therefore subject only to the trade laws & regulations of NY. Florida would have nothing to do with it (except for shipping regulations, which are not relevant for this discussion).

So, how are we sellers legally defined? Are we direct sellers or are we local retailers? If we're direct sellers, where are our products actually being delivered? I would argue that they're not actually being delivered at all. All products sold in SL remain in SL. The buyer does not get a copy of it that he or she can "own" in any other environment. Technically, all they're really getting is the ability to remotely view it and virtually interact with it.

If we're local retailers, which would lessen the importance of the delivery question, in what locality are we operating? Are we doing business in California since that's where the servers are located, or are our "stores" where we live?

These questions, interesting as they are, are all very difficult to answer. The technology is years ahead of the apropriate legislation, and in the absense of specific guidelines, it's nearly impossible to determine the right answers. I agree with the blogger that perhaps it's time for a lawsuit, but I shudder to think what the results might be since judges and legislators tend to be dreadfully ill-equipped to understand the technology and its implications. Also, tech changes so fast that a law written today to settle all this could be obsolote and antiquated as early as tomorrow.

Anyway, as I said, in this case, I think the key is the first question. The Linden Dollar has no inherent value so technically a donation of $L is no donation at all. The fact that it's a percentage of "proceeds" shouldn't change that. Once $US have been collected and remitted to ACS, then and only then should it be considered a donation. The fact that the $US were aquired through the sale of worthless Linden Dollars to people who happen to feel like paying $US in exchange for them is no concern of ACS.

Well, Flippers work around is fine though legally, right?