Ciaran Laval

April 21, 2014

Virtual World Currencies Continue To Pose Tax Headaches

Back in March the IRS issued more guidance on virtual currencies in the guise of Notice 2014-21. The purpose of this notice is to provide some answers to frequently asked questions regarding virtual currencies. One of those questions for those of us who use virtual worlds is whether Linden Dollars are actually a virtual currency, the answer remains unclear. However over on Forbes Peter J Reilly blogged : Bitcoins Not Tax Fairy Dust – Second Life Still A Tax Haven?

Bitcoins are specifically mentioned in the IRS document, Linden Dollars are not. However it’s the scope of the IRS notice that makes some people believe that Linden Dollars do not fall within the tax bracket :

In general, the sale or exchange of convertible virtual currency, or the use of convertible virtual currency to pay for goods or services in a real-world economy transaction, has tax consequences that may result in a tax liability. This notice addresses only the U.S. federal tax consequences of transactions in, or transactions that use, convertible virtual currency, and the term “virtual currency” as used in Section 4 refers only to convertible virtual currency. No inference should be drawn with respect to virtual currencies not described in this notice.

The Treasury Department and the IRS recognize that there may be other questions regarding the tax consequences of virtual currency not addressed in this notice that warrant consideration. Therefore, the Treasury Department and the IRS request comments from the public regarding other types or aspects of virtual currency transactions that should be addressed in future guidance.

The part of the scope that Peter J Reilly feels leaves the Linden economy unmolested is with respect to payment of goods or services in a real-world economy transaction. This is not unusual, when I raised the issue of VAT within Second Life with the UK tax officials at HMRC I was informed that transactions that take place entirely within a virtual world are outside the scope of VAT, in other words, VAT did not apply to inworld transactions with Linden Dollars when I queried HMRC, which is just as well as Linden Dollar transactions would cause a mighty headache for Second Life merchants if they were within the scope of VAT.

However grey areas do remain and one can’t help but feel that things will change in the future.

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April 20, 2014

Second Life’s 11th Birthday Plans Annoucned

Last year Second Life celebrated its tenth birthday, you don’t need to be a genius in maths to realise that this year will be its eleventh birthday, although technically it’s a tad older as Steller Sunshine celebrated turning twelve in March!

However let’s not let that spoil matters, the celebration this year is the eleventh birthday and there will be music and magic, fireworks, puzzles and much more in yet another celebration of the virtual world that leads all virtual worlds, the Mom and Dad of them all, yes I’m still talking about Second Life!

Originally, during the Alpha period, the grid was known as Lindenworld. As we were getting ready to launch the Beta, we decided we needed a name that would convey the expansiveness, involvement and complexity we hoped would characterize this world as it grew. We started by debating the merits of a ‘place’ name versus a ‘descriptive’ name. We believed a place name would give people a sense of destination, and possibly some added layer of meaning. And we thought a descriptive name would help people understand this new concept of a shared, 3D collaborative space.

We had a lot of ideas for place names — one of my favorites was Sansara, which was not only euphonic, but had an interesting meaning in the original Sanskrit, meaning roughly ‘ever changing world’. Ultimately, though, we chose to go with a descriptive name, and looked at many derivatives of Terra, Viva, and life. We kept coming back to Life2, and then landed on Second Life as more interesting, more evocative and more what we hoped the world could become as it evolved and grew to be as big as life.

And that’s how it came about!

Originally there were just 16 regions, eleven years on there are over 26,000. However enough of this, what of these celebrations, well I’ll post the press release after the cut.

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April 18, 2014

Transaction ID’s Should Be Preserved On The Transaction History Page

One of the issues that has been raised regarding the new Transaction History page is the issue of transaction ID’s not being present. The argument goes that as only a portion of the transaction ID is present on the page, it’s not guaranteed to be a unique value and therefore is not as useful as it could be. The full ID is available in downloads and will continue to be available in downloads.

However, part of the transaction ID being present is better than none of it being present. Here’s a scenario, a customer has an issue, the merchant asks them for the transaction ID from the SL website, the customer complies, the merchant finds the transaction and from there, they can see what happened with that transaction or at least engage with the first steps in finding out what happened.

Some people seem to believe it’s better to ask customers for date/time, item, price etc. instead of trying to go for a single lookup via a transaction ID. I’m finding this all somewhat bemusing as the chances of the portion of the transaction ID on the SL website not being unique in a certain range is minimal for the vast majority of merchants and customers, the only strong argument against their inclusion is that they are incomplete, but as the issue of duplicates is not likely to happen often, it seems odd to want to withdraw this.

Again this seems like it’s something that busier merchants may find less useful, but busier merchants are in the minority. There should be a happier compromise here, collapsable fields. Therefore those who don’t want to see a certain field can hide it, but for those who still find it useful, it will still be there.

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April 18, 2014

Which Merchants Have Got Linden Lab’s Ear?

The greatest trick the FIC ever pulled was convincing the world they did not exist.

There are rumblings afoot regarding just whom Linden Lab are talking to and trying to appease with some of their recent changes. Let’s take a look at the recent initiative to standardise clothing descriptions. In the blog post Linden Lab said :

In order to make this easier for shoppers, we have worked with Second Life content creators to define a way to clearly communicate this to customers.

This seems completely reasonable to me, but there is a concern regarding just whom these selected Second Life content creators are, prompting Sassy Romano to post a thread in the merchants forum : Commerceteam Linden and the secret meetings :

So, let me get this straight…

There was a “project” that merchants helped with (who?) yet not one single mention of this project or initiative mentioned here, in what should be considered one of the primary communication vehicles and now…

NOW… LL asks that all merchants standardise on the outcome of this covert project when they were all but nearly all excluded.

Here’s the thing, Sassy has a point. Why wasn’t this discussed in the merchants forum? Where was it discussed? Who were the merchants involved? Where’s the transparency? I have been one of the few who sees the merit in this initiative and I do think this sort of standardised labelling is a step in the right direction, but surely the discussion should have been made more public considering it’s an initiative that Linden Lab want the wider public to embrace.

Then there are the changes to the transaction history page, which some now suspect is being changed in the interests of some of Second Life’s most successful merchants.

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