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The Almighty Buck Government United States

Even In the Metaverse, You Can't Escape the Taxman (arstechnica.com) 47

Posted by BeauHD from the it-was-only-a-matter-of-time dept.
An anonymous reader quotes a report from Ars Technica, written by Kyle Orland: Second Life, the long-lived online metaverse that still attracts nearly a million monthly active users, has announced it will start charging US users local sales tax on many in-game purchases for the first time since its launch in 2003. That could be a significant drag on the online universe's robust in-game economy and serve as a warning for other nascent metaverse efforts hoping to sell virtual goods to US residents. In announcing the move Monday, Second Life developer Linden Labs cited the 2018 Supreme Court decision South Dakota v. Wayfair, Inc., Et Al. That decision established that states and localities could charge sales tax even for products sold by online companies that don't have a physical presence in that state. Following that decision, Linden Labs says it has "done our best to shield our residents from these taxes as long as possible, but we are no longer able to absorb them."

As such, starting March 31, Second Life users will be billed for local taxes on recurring billings such as subscriptions and land fees. Linden Labs will continue to absorb any taxes charged on one-time purchases like name changes and purchases of L$ in-game currency. But those costs will be passed on to users "at some point in the future" Linden Labs writes. "This is news we don't enjoy sharing, but for the health of the business and of Second Life, we can no longer continue absorbing these tax burdens," Linden Labs writes. "Thank you for your understanding and your continued support of Second Life."

Linden Labs' experience could serve as a cautionary tale as other major companies all rush to launch their own metaverse offerings. That includes companies using so-called "web3" technologies like cryptocurrencies and NFTs to power their virtual economies. Aside from possible local sales tax exposure, cryptocurrencies can be taxed as income or capital gains when they're earned, sold, or converted to another form. NFTs, meanwhile, could likely be taxed as collectibles, attracting a top capital gains tax rate of 28 percent in the US. And the IRS is starting to crack down on enforcement for crypto-based earnings thanks to a provision in last year's bipartisan infrastructure bill.
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Even In the Metaverse, You Can't Escape the Taxman More

Even In the Metaverse, You Can't Escape the Taxman

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  • don't buy stuff. Stop listening to these stupid articles posted by /. editors where they try to convince you that digital things have real world value beyond gameplay.

    This is yet another article meant to get you thinking about parting with real world cash for pretend goods that aren't part of a video game. It's propaganda from people trying to sell you a digital house because you can't afford a real one. Like something out of that old game Syndicate.
    • It's simply saying that if you buy virtual crap it will get taxed now. I think you read this article through your filter of disliking virtual transactions. I happen to agree that it is beyond foolish for people to do this. But nowhere in this article is it trying to convince you that digital things have real world value and it certainly isn't propaganda trying to sell you a digital house. Again, it's not that you aren't making a valid point, but seriously you need to read the article again because it has no

    • I pay real world cash for virtual books or films and get taxed, and I see no problem with that.

      I dont consider them pretend goods.

      Perhaps you need to sort your definitions out, because your post currently has very narrow boundaries on what you consider “acceptable”.

      • "I pay real world cash for virtual books or films and get taxed, and I see no problem with that."

        Wait until Google sends you a property tax bill for your virtual copy of your house in Google Earth and Maps.

        • Re: (Score:2)

          by Entrope ( 68843 )

          Google may live rent-free in your head, but that doesn't mean you can start billing them for it.

          He didn't ask for, and doesn't control, those bits of Google's database -- so he doesn't owe Google or the government anything for those bits. In contrast, people who want Google to advertise their place on Google Maps must pay Google for that, and that transaction can be taxed.

      • I pay real world cash for virtual books or films and get taxed, and I see no problem with that.
        But which tax jurisdiction should you pay for? Let's say you buy a movie on Netflix while traveling in another state. Do you play taxes in your home state? Despite not being present in said state b/c that's where the billing address is for the credit card? Do you pay taxes in California b/c that's where the datacenter hosting the server is(as an example) or do you pay taxes in the locale you are currently renting

      • I pay real world cash for virtual books or films and get taxed, and I see no problem with that.
        I dont consider them pretend goods.

        Well, they are. If you're happy paying for the experience of consuming them once then by all means, go ahead. But anything DRM-protected is something from which you can be cut off even if you think you paid for it, and pretending otherwise is willful ignorance.

        If you don't have a DRM-unencumbered copy of some media on your own physical storage device, then it's virtual, and you're pretending that you own it.

      • So a PDF is a virtual book now, right.. So your avatar reads books and watches movies? Yup there's some sorting out to do.

    • Re: (Score:2)

      by tlhIngan ( 30335 )

      Except the whole point of the "metaverse" crap is to sell ads and sell people crap.

      The only good thing is that Facebook's concept only seems to apply if you have a VR headset, which means a very expensive computer and a very expensive accessory, preferably one from Facebook themselves.

    • don't buy stuff. Stop listening to these stupid articles posted by /. editors where they try to convince you that digital things have real world value beyond gameplay...

      First off, uh, don't shoot the messenger? It wasn't Slashdot editors who invented L$ and started charging real money for that. I believe you need to be speaking to the addicts who have been opening their wallets for years paying for this.

      It's propaganda from people trying to sell you a digital house because you can't afford a real one.

      How ironic. Those who have been addicted since game inception, have probably spent a small house on it by now.

    • Re: (Score:2)

      by nzkbuk ( 773506 )

      digital things have real world value beyond gameplay

      Are you trying to say that Office, Exchange OR any other software does not have value?
      Granted this is essentially bits in a database, but people have been spending alot via in-app purchases and companies post profits on that. Why shouldn't it attract sales tax?

  • Isn't it the honor system?

    • Re: (Score:2)

      by dohzer ( 867770 )

      I'd love to tell you where I live, but that would inadvertently provide you with metadata about my current location.

    • No, the SL client knows what you're buying and for how much.

    • If you buy via credit card, the credit card knows where "it" is.
      So, if it's a credit card of Bank of Peoria, Illinois (the address on the stamp of Stan and Bran), the sale tax goes to the state of Illinois.

      • "If you buy via credit card, the credit card knows where "it" is."

        I use anonymous prepaid virtual credit cards.

        • "anonymous prepaid virtual credit cards"...
          Really? How anonymous are they? Did you bought them from a corporation based on the Moon? Or maybe Mars? Pluto? A shady character sitting inside a fiscal paradise? Or maybe in the space between two US states?
          Possibly in the "tax free" space inside an airport?

          On the other hand, if you bought them from a USA-based corporation, you pay tax on those transactions. You could very well dispute the tax, and the IRS will be happy to return you the sales tax wrongfully taken

          • "Really? How anonymous are they? Did you bought them from a corporation based on the Moon?"

            No, cash at a gas-station with a mask, sunglasses and a hat.
            And the gas-station still has a CCTV with tapes and EGA resolution.

      • Re: (Score:2)

        by jbengt ( 874751 )
        So, will the credit card know all the county, city, and local taxes, like the special taxing district between Navy Pier and the McCormick Place Convention Center, in case I buy something in the metaverse while at work downtown? And if I buy virtual groceries or virtual medicine, will the credit card know that that should be virtually tax-free in some jurisdictions but not in others?
  • As per subject, please tell me its spoilt little kids buying up this trash and not grown adults. For the sake of humanity.

    • Re: (Score:2)

      by dohzer ( 867770 )

      Don't forget adults who (mentally) identify as kids.

    • No kid would be caught dead playing this game. This is 100% adults. A major portion of them over the age of 30.

    • As per subject, please tell me its spoilt little kids buying up this trash and not grown adults. For the sake of humanity.

      Uh, might I remind you this game is a generation old now.

      That "sake of humanity" you're looking for, is sitting next to their child playing along.

  • How dare the government do that!
    They are 15 years late to the party.

  • It will turn into something else entirely, probably some sort of mockery of facebook.
    As any oldish internet user will tell you, you have to let terms grow naturally, because forced memes rarely if ever work.

  • Just wait till they get some stupid brainwave like Indian Govt's plan of having 1% TDS (Tax deduction at Source).

    So even crypto-crypto transactions & smart contracts need to deduct 1% TDS before paying any amount to anyone.

    And deposit that in fiat to the IRS equivalent, and provide paperwork to other party so they can claim it back when filing their taxes.

    Objective is to have a record of all crypto transactions. Result will be no more smart contracts and automated / high volume stuff.

    Would still be wo

  • This will go down as one of the worse investments in history. You are off the hook for now, Star Citizen.

  • Escape.

    An escape from reality, where for that brief time, you get a break from the crud that meat space can throw at you.

    An escape from The Grind.

    More and more games are creating grind situations with no actual "fun" gameplay, except the generation of revenue.
    Worse still, those with deep pockets can just "buy" game "assets", which quite simply pulls in all the inequality of "meat space", where talentless wealthy folk can just jump ahead of the queue.

    About 18 years ago, which is a huge amount of time in the

    • Second Life had a million monthly users in 2020 - height of the pandemic - but I bet its nowhere near that now. And then the number is just users that log in at least once month.

      Aside from that, I see no big deal in the fact that people will have to pay sales tax for things they buy from Linden Labs, such as land rentals. There's an in-game currency of funny money, presumably tax won't be taken from transactions using that.

    • Our one point of freedom and anonymity is rapidly vanishing - paper money. When was the last time you bought something with that?

      Four days ago. There are still some things I will pay for in cash. It's nobody's business what I enjoy doing on my Friday nights.

    • This is totally Off Topic, but I am so glad to see someone else use the term "meat space". I've been using it for almost 20 years and most people (especially my wife) look at me like I am a damn fool.

      It doesn't come up in much conversation, though. Usually only a topic much like this about purchasing virtual goods with real-world money in a video game. More often in a conversation with my kids lately.

      My favorite was using it on my World of Warcraft friends back in the day who were multi-boxing because they

  • If there's one place you won't escape the Tax Man, it's inside Zuckerberg's metaverse.

  • Second Life, the long-lived online metaverse

    So now all VR worlds are called "metaverses", even when they're not Facebook's?

    I guess Zuckerberg at least managed to pollute the English language.

    • Re: (Score:3)

      by Entrope ( 68843 )

      Neal Stephenson coined the word [wikipedia.org] 30 years ago. As with so many other things, Facebook just hopped on a bandwagon to monetize it.

    • Re: (Score:2)

      by cstacy ( 534252 )

      Second Life, the long-lived online metaverse

      So now all VR worlds are called "metaverses", even when they're not Facebook's?

      Second Life was called the "metaverse" from the beginning. And the term came from a sci-fi novel of the time. Facebook isn't going to be able to trademark "Metaverse".

      The could try something like "The Meta" or "The Verse" maybe.

      I versemet my wife in Second Life, and she is the candy kid!

  • The organized criminal gang people call "the government" is really good at getting money, or just printing it and charge us with inflation. Where's your stimulus check now?
  • When I read the post a quote from Benjamin Franklin come to mind “Our new Constitution is now established, everything seems to promise it will be durable; but, in this world, nothing is certain except death and taxes. I guess after centuries it's still relevant hehe
  • Just don't force me to use the Metaverse to call my mom, order pizza, find apartment rentals or real estate, buy cars, apply for employment, etc. The strangle hold of forcing technology down everyones throats is ridiculous. I want my yellow pages and off grid options.

  • As in property taxes?

  • The State of California levies its sales tax on the retail sale of tangible personal property. Services are not taxed. If I buy a virtual item in a game, that's still not tangible property. In all actuality, that in-game item is just a graphical representation of a set function or process. That's a service and California doesn't tax services.

    Scenario 1: I'm playing the new smash hit "GloboWorld". I kill a bunch of bad guys, loot their wares, and sell those wares to NPC vendors for in-game currency. This is

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