The announcement comes with a note that the company will, for the time being, continue to absorb sales tax on point-of-sales purchases such as for first-time Premium subscription payment, Name Change fees, and one-time Linden Dollar purchases – although the announcement notes that taxes on such purchases will have to be passed on to U.S. users at some point in the future.
The blog post carrying the announcement reads in full:
Ever since Second Life’s inception two decades ago we have seen many local, state and federal governments impose new ways to collect tax revenue from internet-based businesses. 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.
We will continue to absorb the taxes at point-of-sale purchases such as one-time L$ buys, first-time premium subscriptions, and name changes. At some point in the future we will need to begin passing those taxes on to you. We will make another announcement when those charges are phased in.
Your individual charges will be determined by your local jurisdictions. There are more than 13,000 sales and use tax jurisdictions in the United States, with great variation in their rules and tax rates. Tax amounts are also affected by other factors such as the type of goods or services being purchased. To determine the charges, we will be relying on an automated third-party system which closely tracks local tax laws, so the tax amounts are always up to date.
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.
Thank you for your understanding and your continued support of Second Life.
Again, please note the paragraph stating that the sale tax you may face is dependent upon your local tax jurisdiction – there is no “one size fits all” approach.
The Wayfair Sales Tax case refers to the 2018 South Dakota v. Wayfair, Inc. et al case heard by the Supreme Court, in which the Court determined that an out-of-state seller (e.g. Linden Lab) can have economic presence in U.S. states where it has no physical presence, and can thusly be held legally accountable for collecting appropriate sale taxes on goods and services.
Since that decision, U.S. states have increasingly sought to mandate that out-of-state companies selling products in within their boundaries via electronic, etc., means and no physical presence, should collect sales tax on those sales.
The move by the Lab also follows past moves vis-à-vis the passing of Valued Added Taxed (VAT) charges for EU citizens (2007 – although there was later some revision to this in 2015), and passing VAT changes charge on to users in Norway, and Goods and Services Tax (GST) for citizens in Australia, both of which were announced in 2020.