Second Life Forums Archive - Is L$ a taxable "license"?

Kazanture Aleixandre

Here I am.

Join date: 5 Oct 2005

Posts: 524

05-08-2006 13:25

From: TOS

"1.4 Second Life "currency" is a limited license right available for purchase or free distribution at Linden Lab's discretion, and is not redeemable for monetary value from Linden Lab.

You acknowledge that the Service presently includes a component of in-world fictional currency ("Currency" or "Linden Dollars" or "L$"

, which constitutes a limited license right to use a feature of our product when, as, and if allowed by Linden Lab. Linden Lab may charge fees for the right to use Linden Dollars, or may distribute Linden Dollars without charge, in its sole discretion. Regardless of terminology used, Linden Dollars represent a limited license right governed solely under the terms of this Agreement, and are not redeemable for any sum of money or monetary value from Linden Lab at any time. You agree that Linden Lab has the absolute right to manage, regulate, control, modify and/or eliminate such Currency as it sees fit in its sole discretion, and that Linden Lab will have no liability to you based on its exercise of such right. "

So far everything is ok.

From: TOS

"
3.3 Linden Lab retains ownership of the account and related data, regardless of intellectual property rights you may have in content you create or otherwise own.

You agree that even though you may retain certain copyright or other intellectual property rights with respect to Content you create while using the Service, you do not own the account you use to access the Service, nor do you own any data Linden Lab stores on Linden Lab servers (including without limitation any data representing or embodying any or all of your Content).
"

Now, LL is owner of all residents' accounts and L$s actually. If LL starts to sell L$, this means they claim L$ has USD value*.

Well, If they own my accounts and L$s(a limited license right), when i sell these L$s(a limited license right), actually i am selling a license owned by LL to a resident for real USD.And this USD goes to LL's bank account.Actually not me, LL is selling it to the other resident because LL is the owner of my L$s(TOS says). And the buyer is paying usd for this L$s(a limited license right) to LL. (It is regardless LL lets me to withdraw their USD using my account(actually it is owned by LL too)).

Well, How much L$ sold at lindex so far? Actually LL sold all of these L$s to residents for USD if *(look at above).
My question is, has they eve paid taxes for these L$ sells at lindex so far?
Just a question, maybe i am wrong.

Burnman Bedlam

Business Person

Join date: 28 Jan 2006

Posts: 1,080

05-08-2006 13:30

If anyone sells L$ for USD... the USD earned from the sale is taxable income. LL has to report their earnings and pay taxes on them just like you and me.

If you aren't claiming your income from selling L$ to the IRS and state department of revenue... well... that's between you and them.

My TV has a cash value... but I don't have to pay taxes on its value.

_____________________

Burnman Bedlam
http://theburnman.com

Not happy about Linden Labs purchase of XStreet (formerly SLX) and OnRez. Will this mean LL will ban resident run online shoping outlets in favor of their own?

Kazanture Aleixandre

Here I am.

Join date: 5 Oct 2005

Posts: 524

05-09-2006 14:14

From: Burnman Bedlam

If anyone sells L$ for USD... the USD earned from the sale is taxable income. LL has to report their earnings and pay taxes on them just like you and me.

If you aren't claiming your income from selling L$ to the IRS and state department of revenue... well... that's between you and them.

My TV has a cash value... but I don't have to pay taxes on its value.

You miss my point. Noone is able to sell L$ WHICH HAS USD VALUE, because all L$ in SL is owned by LL(TOS says).So if anyone pays for any single L$ it means LL is selling L$ to him/her.Which should be taxable.
If they admit L$ has usd value THEY MUST pay tax for every single L$ which is sold at lindex so far(daily over USD20000, USD7.3 million for a year). I mean if you buy L$ from lindex, no matter which resident put it there, it is LL's L$ and the money goes to their account. No matter they let you to cashout.

And you are(or the ones who uses your tv is)not selling your TV for cash.

Rockwell Maltz

Registered User

Join date: 17 Sep 2005

Posts: 34

05-09-2006 14:25

If LL admits the L$ has real value, can you be taxed in game for trading millions of lindens back and forth without ever pulling it out into the REAL WORLD?

Taxed on all transactions, even in world? Not possible?

Barbarra Blair

Short Person

Join date: 18 Apr 2004

Posts: 588

05-09-2006 15:04

From: someone

If LL admits the L$ has real value, can you be taxed in game for trading millions of lindens back and forth without ever pulling it out into the REAL WORLD?

You'd need to file a schedule C to show your business expenses and income (or hobby expenses and income) so that you only pay taxes on your net, should there be any.

_____________________

--Obvious Lady

Blakar Ogre

Registered User

Join date: 18 Mar 2006

Posts: 209

05-09-2006 15:17

I don't know how much the American accounting system differs from what we do in Europe but in Europe LL would have no reason to pay taxes except on their 3.5% fee on Lindex. As the other money is not really revenue (off course they do need to pay taxes on the revenues they make from managing that money). They are just holding it and face the risk that you can cash out. If they start selling L$ themself then in Europe they would need to pay taxes on pretty much the full amount as the full amount would be revenue.

I can't but assume the system in the US won't be too different.

Aurael Neurocam

Will script for food

Join date: 25 Oct 2005

Posts: 267

05-09-2006 15:36

This has been answered previously as "yes", "no", and "Maybe".

Barbarra mentioned Hobby Income. Essentially, hobbies are something you do for fun and might make money at, but aren't businesses. If it's a business, you'd have to file a 1099.

It's my understanding that you need a business license if you do more than a certain amount of business in your area, but that amount may vary. In my town, that cap is $600 a year, but no license is required at all outside of the city limits.

In short, if you make more than a few dollars, you will need to deduct money you've spent on Second Life (this includes SL fees, software, computer hardware, ISP fees, and anything else directly related to using SL). Then any money you've made should be taxable.

However, since you don't own anything inside of Second Life, including the items you "bought" with Linden "Money", L$ are just play money, and until they've been converted to real dollars, are not taxable.

Web Page

slow but steady

Join date: 4 Dec 2004

Posts: 129

05-10-2006 12:08

heretoforthwithetaletc all my vendors will have floaty text for price, but when you go to pay, it will add 6% to the quickpay

verbatimattaboyugogurllll

Is L$ a taxable "license"?
Kazanture Aleixandre Here I am. Join date: 5 Oct 2005 Posts: 524	05-08-2006 13:25 From: TOS "1.4 Second Life "currency" is a limited license right available for purchase or free distribution at Linden Lab's discretion, and is not redeemable for monetary value from Linden Lab. You acknowledge that the Service presently includes a component of in-world fictional currency ("Currency" or "Linden Dollars" or "L$", which constitutes a limited license right to use a feature of our product when, as, and if allowed by Linden Lab. Linden Lab may charge fees for the right to use Linden Dollars, or may distribute Linden Dollars without charge, in its sole discretion. Regardless of terminology used, Linden Dollars represent a limited license right governed solely under the terms of this Agreement, and are not redeemable for any sum of money or monetary value from Linden Lab at any time. You agree that Linden Lab has the absolute right to manage, regulate, control, modify and/or eliminate such Currency as it sees fit in its sole discretion, and that Linden Lab will have no liability to you based on its exercise of such right. " So far everything is ok. From: TOS " 3.3 Linden Lab retains ownership of the account and related data, regardless of intellectual property rights you may have in content you create or otherwise own. You agree that even though you may retain certain copyright or other intellectual property rights with respect to Content you create while using the Service, you do not own the account you use to access the Service, nor do you own any data Linden Lab stores on Linden Lab servers (including without limitation any data representing or embodying any or all of your Content). " Now, LL is owner of all residents' accounts and L$s actually. If LL starts to sell L$, this means they claim L$ has USD value. Well, If they own my accounts and L$s(a limited license right), when i sell these L$s(a limited license right), actually i am selling a license owned by LL to a resident for real USD.And this USD goes to LL's bank account.Actually not me, LL is selling it to the other resident because LL is the owner of my L$s(TOS says). And the buyer is paying usd for this L$s(a limited license right) to LL. (It is regardless LL lets me to withdraw their USD using my account(actually it is owned by LL too)). Well, How much L$ sold at lindex so far? Actually LL sold all of these L$s to residents for USD if (look at above). My question is, has they eve paid taxes for these L$ sells at lindex so far? Just a question, maybe i am wrong.
Burnman Bedlam Business Person Join date: 28 Jan 2006 Posts: 1,080	05-08-2006 13:30 If anyone sells L$ for USD... the USD earned from the sale is taxable income. LL has to report their earnings and pay taxes on them just like you and me. If you aren't claiming your income from selling L$ to the IRS and state department of revenue... well... that's between you and them. My TV has a cash value... but I don't have to pay taxes on its value. _____________________ Burnman Bedlam http://theburnman.com Not happy about Linden Labs purchase of XStreet (formerly SLX) and OnRez. Will this mean LL will ban resident run online shoping outlets in favor of their own?
Kazanture Aleixandre Here I am. Join date: 5 Oct 2005 Posts: 524	05-09-2006 14:14 From: Burnman Bedlam If anyone sells L$ for USD... the USD earned from the sale is taxable income. LL has to report their earnings and pay taxes on them just like you and me. If you aren't claiming your income from selling L$ to the IRS and state department of revenue... well... that's between you and them. My TV has a cash value... but I don't have to pay taxes on its value. You miss my point. Noone is able to sell L$ WHICH HAS USD VALUE, because all L$ in SL is owned by LL(TOS says).So if anyone pays for any single L$ it means LL is selling L$ to him/her.Which should be taxable. If they admit L$ has usd value THEY MUST pay tax for every single L$ which is sold at lindex so far(daily over USD20000, USD7.3 million for a year). I mean if you buy L$ from lindex, no matter which resident put it there, it is LL's L$ and the money goes to their account. No matter they let you to cashout. And you are(or the ones who uses your tv is)not selling your TV for cash.
Rockwell Maltz Registered User Join date: 17 Sep 2005 Posts: 34	05-09-2006 14:25 If LL admits the L$ has real value, can you be taxed in game for trading millions of lindens back and forth without ever pulling it out into the REAL WORLD? Taxed on all transactions, even in world? Not possible?
Barbarra Blair Short Person Join date: 18 Apr 2004 Posts: 588	05-09-2006 15:04 From: someone If LL admits the L$ has real value, can you be taxed in game for trading millions of lindens back and forth without ever pulling it out into the REAL WORLD? You'd need to file a schedule C to show your business expenses and income (or hobby expenses and income) so that you only pay taxes on your net, should there be any. _____________________ --Obvious Lady
Blakar Ogre Registered User Join date: 18 Mar 2006 Posts: 209	05-09-2006 15:17 I don't know how much the American accounting system differs from what we do in Europe but in Europe LL would have no reason to pay taxes except on their 3.5% fee on Lindex. As the other money is not really revenue (off course they do need to pay taxes on the revenues they make from managing that money). They are just holding it and face the risk that you can cash out. If they start selling L$ themself then in Europe they would need to pay taxes on pretty much the full amount as the full amount would be revenue. I can't but assume the system in the US won't be too different.
Aurael Neurocam Will script for food Join date: 25 Oct 2005 Posts: 267	05-09-2006 15:36 This has been answered previously as "yes", "no", and "Maybe". Barbarra mentioned Hobby Income. Essentially, hobbies are something you do for fun and might make money at, but aren't businesses. If it's a business, you'd have to file a 1099. It's my understanding that you need a business license if you do more than a certain amount of business in your area, but that amount may vary. In my town, that cap is $600 a year, but no license is required at all outside of the city limits. In short, if you make more than a few dollars, you will need to deduct money you've spent on Second Life (this includes SL fees, software, computer hardware, ISP fees, and anything else directly related to using SL). Then any money you've made should be taxable. However, since you don't own anything inside of Second Life, including the items you "bought" with Linden "Money", L$ are just play money, and until they've been converted to real dollars, are not taxable.
Web Page slow but steady Join date: 4 Dec 2004 Posts: 129	05-10-2006 12:08 heretoforthwithetaletc all my vendors will have floaty text for price, but when you go to pay, it will add 6% to the quickpay verbatimattaboyugogurllll

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Is L$ a taxable "license"?