Over the last few weeks Linden Lab have announced some changes for account holders. The first, back on November 11th was that new marketplace merchants would be required to put payment info on file before being able to open a store.
The second was more recently, on November 19th Linden Lab blogged about required tax documentation. These issues aren’t linked but I feel they should be and in doing so, Linden Lab would be killing two birds with one stone.
Wait wait wait, the tax documentation is only for those who have gross income of USD$20,000 and make 200 transactions in a calendar year, right? Well not quite, the tax documentation is certainly required if people meet that threshold, but at that point Linden Lab will file a 1099-K with the IRS, the documentation is required for Linden Lab to be able to file a 1099-K, but Linden Lab can ask for this information anyway.
Amazon do this with Kindle Direct Publishing. I haven’t yet published my international best seller and award winning novel, but if I wanted to do that via KDP, I have to fill out a W8-BEN for Amazon to file. The W8-BEN is the non US Citizen equivalent of a W9 form. When I logged into KDP today I saw this:
The missing account information was soon revealed to me after I clicked Update Now:
You may need to squint to read that so I’ll type it:
“Amazon is required by US tax regulations to request information regarding your tax status under US law. Required US tax identification and information has not yet been submitted. Complete your tax information to begin selling on Amazon.”
Let’s just bold that last sentence to emphasise the point: “Complete your tax information to begin selling on Amazon.” So that’s before I’ve sold a single book, before I’m anywhere near 200 transactions, indeed it prevents me from making 1 transaction.
This is where I think Linden Lab may have missed a trick. If Amazon can request this information from potential merchants, why can’t Linden Lab? Personally I think this is better than asking for payment information to be put on file, a potential fraudster is now not just deceiving Linden Lab, they’d also be defrauding the IRS, which is a pretty damn serious offence. There are potential legal penalties for falsifying this information so there’s some oomph to it.
The information I filled in led me to the W8-BEN form, as I’m not a US citizen. This is the same form that some non US citizens will be filing for Second Life anyway. After filling in the form online, my account was updated:
If you need to update any information you can go back and update the form. I haven’t got a tax information number for non US citizens, you can apply for one and it slows down the process but it should mean you can reduce the withholding rate of 30%, that’s something I need to look into but the form in its basic format does not take long to fill in.
Tying this to the new Marketplace requirement would have definitely helped Linden Lab in collecting information and placing a barrier in front of the fly by nights. I also think it may be useful to allow people to enter this information voluntarily to their account, no matter what their account status. Some people will happily provide such information and by making it voluntary Linden Lab can break people into the habit gently, so that if they ever do find themselves in a situation whereby they really need anyone who sells on the Marketplace or LindeX to provide this information, people in the community will be able to answer questions in the forums about it.
There are still a few questions regarding the new tax documentation policy, as exemplified in this forum post: New tax Policy?? One question I’ve seen raised more than once is what exactly a transaction entails. People don’t know whether it’s a cash out, a sale on the LindeX or a combination. This is something that Linden Lab really should clarify. When I filled the form out on Amazon there were guidance notes and links to useful information, Linden Lab should follow Amazon’s lead here, of course it’s a bit more straight forward to understand what a transaction is on Amazon.
Overall people shouldn’t be worried about providing this information, it’s a legal requirement in some circumstances and filing the information just makes the process flow more easily if you do reach those thresholds.
Hell no. I generally trust your judgement Ciaran but there is no way in hell most people, myself included, are going to trust Linden Lab with their social security number unless absolutely positively required to do so by law.
Every piece of evidence to date leads me to believe that LL is going to use a stricter standard than the IRS requires because of the issue of multiple accounts (although I guess they could cross-reference two or more other pieces of information from each form with little risk of collisions).
With that said, they’re already liable to be called on it when they start sending forms out to people who are nowhere near the IRS limit. Remember that LL has absolutely zero goodwill remaining with content creators so smaller contents are going to say “fuck this”, or more likely “fuck you” to LL and just stop creating and bigger merchants will challenge them on it which will force LL to either back down or threaten to ban the biggest merchants on the exchange for not having “required” paperwork.
This idea came to me because Amazon KDP ask for this info before you’ve even sold a single bean.
As LL want new requirements for new marketplace merchants, I feel this is the ideal time to get that information from new marketplace merchants, over time I can see this requirement becoming a requirement for anyone who uses the LindeX.
Having said that, confusion reigns as to when these forms are sent to people, not just from LL, I’ve seen people questioning Amazon about it too. What is more difficult to find is at what point this information becomes a requirement. I can see you’ve visited the forum thread I linked to and can therefore see the post from the guy who is way below the thresholds, LL should really explain why the information is now required.
Different type of business, and different attitude though. People know that if Amazon is asking for their Social Security number they have a good reason for it, even if they are doing it preemptively at account creation (which I personally don’t agree with but I understand Amazon et al.’s point of view on since it’s easier than getting it later.
LL on the other hand is instantly subject to suspicion, with good reason, both because of its small size relative to Amazon and because time and time again it, really they referencing the staff that works for LL, have proven that they shouldn’t be trusted. You’ve been around roughly around the same amount of time as me Ciaran so you know that is not just implementing a solid policy but actually enforcing it in a fair, equitable, and most importantly consistent manner.
I certainly understand where you’re coming from and you’ve reminded me of my own reluctance to furnish LL/Aristotle Integrity with this information.
I’m sure you remember the age verification issue of a few years back. I had early access to filling out the identity form. One of the fields was for a SSN or Passport Number or Driving Licence number. There was no way I was going to provide that information to Aristotle, so I decided not to age verify.
However as the form was at the early access stage, that field although marked as mandatory, wasn’t mandatory. Someone posted this information on the SL forums, so I filled in the rest of the form but left that field blank and it went through, I was age verified, they didn’t even need that info.
So yes, I do understand your concerns.