Virtual Currency, Crypto, and Second Life

[Abigail Longmeadow]

There was recently a $600 million hack of Poly Network, supposedly "for fun". See: $600 million gone: The biggest crypto theft in history
I think Lindens are safe, because they are entirely controlled by Linden Lab through Tilla. Lindens are a centrally controlled currency that is already heavily regulated by the US government, unlike Crypto which is mostly untraceable and unregulated. Lindens are as safe as Linden Lab itself (for better or worse).
I am not concerned about losing what few Lindens I have, but I am concerned that the government may begin taxing Second Life.
I suspect that there will be more federal attention to all forms of virtual currency.

 

[GoblinCampFollower]

more federal control of virtual currency and the naughty things we do with it is something I've been dreading forever... So far, we've been somewhat shielded from the fact that older, serious government people just can't take virtual worlds seriously enough...

 

[Free]

more federal control of virtual currency and the naughty things we do with it is something I've been dreading forever...

Why, what naughty things are you doing with it?

 

[Soen Eber]

We're someone shielded. The FBI had "The Talk" with Linden Lab a few years back, and they've been towing the line ever since. Most of the worry was about money laundering and unregulated player-initiated banking services (which kinda exploded/imploded and has since been banned).

 

[GoblinCampFollower]

Why, what naughty things are you doing with it?

NOTHING! I'm totally innocent!

 

[Abigail Longmeadow]

So innocent GoblinCampFollower!
We are really lucky Linden Lab survived, although the lab had to shut down all 3rd party exchanges. The government was cracking down on virtual currency money laundering in Mt Gox and Liberty Reserve. Neither of those survived. But Lindens survived the 2013 crack down.
The rumor I heard was that people would buy Lindens with a normal credit card, then use a third party exchange to trade the Lindens for Bitcoin, then use the Bitcoin for "whatever". Bitcoin being untraceable.

 

[WolfEyes]

There was recently a $600 million hack of Poly Network, supposedly "for fun". See: $600 million gone: The biggest crypto theft in history
I think Lindens are safe, because they are entirely controlled by Linden Lab through Tilla. Lindens are a centrally controlled currency that is already heavily regulated by the US government, unlike Crypto which is mostly untraceable and unregulated. Lindens are as safe as Linden Lab itself (for better or worse).
I am not concerned about losing what few Lindens I have, but I am concerned that the government may begin taxing Second Life.
I suspect that there will be more federal attention to all forms of virtual currency.

I don't think we have anything to worry about since the laws that have been in place for decades regarding income state that LL must file 1099 MISC on anyone cashing out over a certain amount of USD, which if I recall correctly is $600. So, if you cash out more than $600USD worth (from January 1, through December 31), LL will file a 1099 on you and YOU get to pay the income taxes on it to the IRS, state and local income tax agencies. LL doesn't want to get into having to keep book on who has taxes withheld and who doesn't so don't look for that to change.

Crypto and game tokens aren't the same thing. Linden Dollars are game tokens, not crypto.

 

[WolfEyes]

NOTHING! I'm totally innocent!

Ha! Your Pixie dust won't work on me!...

 

[Adeon Writer]

Just like Gachas eventually getting banned, Linden dollars eventually being taxed is something that everyone should expect eventually.

The IRS already name-dropped Fortnite's VBucks as something that can be taxed, and you can't even pay other players with it or cash it out for real money. Of course they'd want to tax Linden dollars, which can freely be exchanged between players for goods and services, and cash out as real income. No question about it.

 

[Noodles]

Just like Gachas eventually getting banned, Linden dollars eventually being taxed is something that everyone should expect eventually.

The IRS already name-dropped Fortnite's VBucks as something that can be taxed, and you can't even pay other players with it or cash it out for real money. Of course they'd want to tax Linden dollars, which can freely be exchanged between players for goods and services, and cash out as real income. No question about it.

I don't understand how something you can't even transfer to other players would ever be taxable. Hell WoW Gold is probably more taxable than VBucks.

Also as Beebo likes to remind everyone, L$ have no actual value.

 

[GoblinCampFollower]

I don't understand how something you can't even transfer to other players would ever be taxable. Hell WoW Gold is probably more taxable than VBucks.

Also as Beebo likes to remind everyone, L$ have no actual value.

L$ can be sold for real money... but, I do agree taxing L$ and other virtual currency directly makes no practical sense. Too hard to keep track of too little money. It makes more sense to only tax it when sold for real dollars and only when above a certain threshhold.

 

[Noodles]

L$ can be sold for real money... but, I do agree taxing L$ and other virtual currency directly makes no practical sense. Too hard to keep track of too little money. It makes more sense to only tax it when sold for real dollars and only when above a certain threshhold.

True but legally, L$ have no value. For example, if SL disappeared tomorrow, Linden Lab owes you nothing for your L$, too bad too sad. You can sell them for money because other people are willing to buy them.

 

[WolfEyes]

Just like Gachas eventually getting banned, Linden dollars eventually being taxed is something that everyone should expect eventually.

The IRS already name-dropped Fortnite's VBucks as something that can be taxed, and you can't even pay other players with it or cash it out for real money. Of course they'd want to tax Linden dollars, which can freely be exchanged between players for goods and services, and cash out as real income. No question about it.

If you cash out more than (IIFC) $600.00 USD from Jan1 through Dec 31. LL must file a 1099 MISC on you. That is the reason they have to have your personal info, including your SS#. That info is required only for those who cash out, not for those who do not cash out. LL must file a 1099 MISC on anyone who cashes out the minimum amount (and above), by IRS regulations.

LL has income taxes covered and doesn't need to do more than they already do. Filing the 1099s gives the IRS the info they need to know if someone needs to pay taxes on what they cashed out. The IRS looks to the individual to pay those taxes (because it constitutes self employment) not LL. The 1099 is a federal form that includes state and local forms. ALL are filled out and sent to the appropriate tax agency so states and local gets their cut too.

People are already having to pay the taxes that are normally withheld by an employer. Doing what you are saying would be double taxation as taxes owed by the individuals are being reported to the IRS by LL. If other companies haven't figure it out, then maybe they should look at hiring a better comptroller.

 

[Adeon Writer]

I see. Given that they are going after VBucks (that have no possible way of cash out) my assumption was they were gunning for sales tax, not income tax.

Since currently you can trade USD for Lindens, and buy and sell to your heart's content for buying and selling goods and services, and not pay anything in sales tax the whole time.

 

[WolfEyes]

I see. Given that they are going after VBucks (that have no possible way of cash out) my assumption was they were gunning for sales tax, not income tax.

Since currently you can trade USD for Lindens, and buy and sell to your heart's content for buying and selling goods and services, and not pay anything in sales tax the whole time.

There is no federal sales tax. There is no sales tax in my state. No local sales taxes either. Sales taxes are enacted and enforced on state and local levels NOT federal.

 

[Adeon Writer]

then I have no idea with the rationale is

 

[Aribeth Zelin]

then I have no idea with the rationale is

Someone not knowing what they are actually looking at, at a guess.

 

[WolfEyes]

towing the line

Toe the line - Wikipedia

en.wikipedia.org

TOE the line. TOE. Not tow. And don't give me that crap about "but they're right next to each other on the keyboard" either!

 

[WolfEyes]

then I have no idea with the rationale is

There isn't one.

 

[Andi]

There is no federal sales tax. There is no sales tax in my state. No local sales taxes either. Sales taxes are enacted and enforced on state and local levels NOT federal.

Which needs to change, it needs to be federal level so it's even across the board and everybody pays teh same amount of taxes like it should be. my state thinks they are funny and taxes on things like fuel are nuts. it's not been under 2/3 dollars in years, even when gas prices where under a dollar for a while. all because of taxes.