US income tax

[Madelaine McMasters]

Hi Crain,

Yep, it's not considered real money until you bring it out of SL. LL does not report money paid out, because they've no way to know whether the money was earned, or the result of a sale, or a return of money you brought in-world but never spent.

It's up to you to categorize the money and pay the appropriate taxes (whether sales or income) to the IRS and your State. And I don't think any state (yet) recognizes the sale of virtual goods as taxable, so for the time being, it's only income tax and the IRS that you must think about.

[Madelaine McMasters]

Hi Crain,

Yep, it's not considered real money until you bring it out of SL. LL does not report money paid out, because they've no way to know whether the money was earned, or the result of a sale, or a return of money you brought in-world but never spent.

It's up to you to categorize the money and pay the appropriate taxes (whether sales or income) to the IRS and your State. And I don't think any state (yet) recognizes the sale of virtual goods as taxable, so for the time being, it's only income tax and the IRS that you must think about.

[Freya Mokusei]

I'm not a US citizen, so I have no idea.

I would caution against taking what could be 'serious advice' from this support portal - the US loves to put people in jail for getting this kind of thing wrong.

You should probably check with... an accountant? The IRS? Whoever helps explain your economy to you.

[Rolig Loon]

The easy answer to your question is in the TOS (Sect. 5.): "You acknowledge that Linden Dollars are not real currency or any type of financial instrument and are not redeemable for any sum of money from Linden Lab at any time."  Linden dollars are in-world tokens, like poker chips.  They have no monetary value until you sell them to other SL residents through the Linden Exchange.  As long as your "earnings" stay in world, no RL agency is going to be concerned about taxing them.  This is of course the big reason why LL remodeled its policies last winter, making it impossible for an SL resident to sell L$ to anyone except through the Lindex.  As long as L$ can never leave SL, they truly are just "in-world tokens"  That not only gets the government of your back at tax time, but it protects LL from being regulated as a bank or a monetary exchange. They just make poker chips for us to play with.