Linden Lab to Start Charging Sales Tax on U.S. Second Life Users This Month
Well this is a bit of a bombshell for Linden Lab to drop on a Monday:
The Wayfair Sales Tax case decision by the Supreme Court was when prior rules about sales tax really changed. Since then, we have done our best to shield our residents from these taxes as long as possible, but we are no longer able to absorb them. As of March 31, 2022 we will begin charging sales tax in the U.S. For the time being we will charge taxes only on recurring billings, such as premium subscriptions and land fees. The amount of tax charged will be communicated clearly in the receipt or invoice… Your individual charges will be determined by your local jurisdictions.
Sales taxes vary quite a bit across the United States, and can be extremely high. On the very top end, major cities Los Angeles (hey that’s me!), Oakland, Chicago, and Seattle charge around 10%.
So as an example, if you own a private sim and you live in Seattle, where tax rates are 10.3%, your yearly sales tax hit will come out to about $283.
Which is quite a lot! I have to think this will have a huge impact on the Second Life economy and the community culture as a whole. Then again, SL users in the European Union have been paying a VAT on many Second Life services for years. And yet then again, Americans tend to be much less tolerant to paying taxes. There a whole virtual tax revolt in Second Life modeled on the original American tax revolt over this!
Another interesting aspect of this: I believe this is the first time that the Second Life virtual world will be directly impacted by a US Supreme Court decision:
South Dakota v. Wayfair, Inc., 585 U.S. ___ (2018), was a United States Supreme Court case in which the court held by a 5–4 majority that states may charge tax on purchases made from out-of-state sellers, even if the seller does not have a physical presence in the taxing state. The decision overturned Quill Corp. v. North Dakota (1992), which had held that the Dormant Commerce Clause barred states from compelling retailers to collect sales or use taxes in connection with mail order or Internet sales made to their residents unless those retailers have a physical presence in the taxing state.
Curiously the 2018 decision was not split along the usual partisan lines, with the conservative justices Thomas, Alito, and Gorsuch voting in the majority, along with center right justice Kennedy and… beloved liberal icon the Notorious RBG!