When Linden Lab recently blogged about new tax requirements people still had several questions regarding many matters relating to those questions. Chief amongst those questions was what exactly a transaction is.
Over at SLUniverse Desmond Shang has posted some details from a response he received from Linden Lab:
“Thank you for contacting us with your concerns. As mentioned in the blog post Required Tax Documentation – Second Life, the reporting criteria for 1099-K is 200+ transactions AND $20,000+ in a calendar year.
Transactions are currently defined as sell orders placed on the LindeX and applies per person not per avatar. How that order is filled does not currently impact the transaction count. For example, if you place a sell order for L$5,000 and that order is matched with three different residents while being filled, it counts as one transaction.
Separately, IRS criteria on withholding taxes is only on the transaction count itself; withholding is only required if we do not have a valid W-9 or W-8BEN on file.”
So that clears up what a transaction is
Now it’s important to fill in one of these forms if you are required to do so. Failure to fill in the form can lead to Linden Lab withholding 28% of your LindeX sales, which would be a painful experience for many people. Unless you’re happy to forego 28%, which I’d imagine is very unlikely.
If you’re outside the USA and not an American citizen you will be asked to fill in form W8-BEN. This form basically tells the IRS that you don’t need to be reported to the IRS under form 1099-K. However if you don’t fill in the form, there’s no evidence that you are not an American citizen and therefore, you’ll end up short. I think that’s how it works!
If in doubt you may need to contact a tax lawyer. As things stand these forms aren’t required to be filled in by everyone so many people won’t see them at all.