Tax Cliffhanger – The Conclusion

Recap : Yesterday I blogged about the confusion users were facing with trying to fill in forms to comply with Linden Lab’s new tax and account requirements. At the end of that post I had to leave matters on a cliffhanger, Kat Fetisov was hanging on the telephone with the IRS whilst trying to find out whether she could obtain an Employer ID Number (EIN), which rumour has it can be obtained during a phone call, rather than having to get an Individual Taxpayer Identification Number (ITIN), which can take several weeks to obtain and would therefore mean missing the Linden Lab deadline of 30 days …..

The result, Kat got an EIN! However, there have been more twists to this plot and they may or may not be good, on the face of it they are good. A user called Jerry commented on my original post and said:

“I tried to transfer some money and it did never arrive within 3 weeks. So I filed a support ticket. That is how I found out that there was an open ticket where they requested the tax form. I filled it out and I got my money, but as you said, I left the ITIN blank. Still, one month later I sent another payment and it worked.”

So Jerry didn’t need to fill in an EIN or an ITIN, and here is where a little guidance may have been useful. Kat has also discovered she didn’t need an EIN or ITIN , for the purposes of filling this form in for Linden Lab. However Kat was advised by Linden Lab that she should put her UK National Insurance number on the form. There is a section on the W8-BEN that has space for a foreign tax ID number.

Kat also has an excellent blog post with some helpful information for those who may be struggling with this : The plot thickens. Or possibly thins a little. However Kat is, rightly in my view, a little suspicious of the way Linden Lab are dealing with matters, it’s not that she thinks Linden Lab have got matters wrong, it’s just that the process is unusual when compared to other American based companies who ask you to fill in forms such as this.

I can see exactly where Kat is coming from on this matter because, as I’ve mentioned before, I’ve had to fill this form in for Amazon KDP and this is how my status there looks:

As you can see, I have an applicable withholding rate of 30% and that is because I haven’t provided Amazon with an EIN or an ITIN, I’ve left that field blank. This means if I publish anything on Amazon and it sells to Amazon US customers, they will hold back 30% of my royalties. However it looks like, this isn’t the case with Second Life, which should be cheered.

Now as I said previously, Amazon pay royalties to publishers on KDP, so they may be a different category to the income people receive from Second Life. Indeed I believe they must be because the withholding rate Linden Lab have mentioned is 28%, rather than the 30% Amazon KDP mentions. Therefore it does seem we are dealing with different beasts. However it is somewhat troubling, in the absence of any officially published clarity from Linden Lab, as to exactly why they don’t require an EIN or ITIN to avoid having to withhold and Kat Fetisov has similar concerns:

“Why LL’s position on this is different from any of the e-book publishers is a matter of mystery at the moment. I hope they have the right of it because it’s a lot simpler their way than Amazon’s way.”

However I can only assume that whatever Linden Lab pays out to people, it is not considered to be the same as royalties. I’m not sure exactly what it is that they pay out in terms of reference, other than obviously it is paid in US Dollars, but what category it falls under remains a mystery.

However the bottom line is that it seems much easier to be in compliance with Linden Lab’s requests than it is for Amazon KDP, which should mean good news for all.

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