People have raised the question of whether the way European residents are being billed for VAT is, in fact, in accordance with the laws of those countries.
There seemed to be two points on which people are reaching general agreement:
1) EU Directives mean that VAT can (and perhaps should) be charged to comply with EU law.
2) The way in which Linden Lab have done and are doing this is in danger of infringing EU (and possibly national) laws.
On this second point, I can’t speak for all countries but, in fact, I received a message from someone who has done some research into the position in the UK, looking at the relevant Statutory Instruments:
I think that we would all have a case to refuse to pay until they alter their billing information on the website and in-world. I bought some land just a few days before and the “buy land” dialogue box came up with the usual “This will keep your tier at $40”; it did not say “… at $40 plus VAT at the rate charged by the country in which you reside”.
This is not legal: the Statutory Instrument [S.I. 2005 No.2705: The Consumer Protection (Code of Practice for Traders on Price Indications) Approval Order 2005] states in Part 2. Actual Price to the Consumer, sub-section 2.2 Incomplete information and non-optional extras:
“Value Added Tax
(i) Price indications to consumers
2.2.7 All price indications you give to private consumers, by whatever means, should include VAT.
(ii) Price indications to business customers
2.2.8 <business to business info snipped>. If you also conduct business at that outlet or through these advertisements with consumers, however, you should make it clear that the prices exclude VAT and you
(a) display VAT inclusive prices with equal prominence; or
(b) display prominent statements that the quoted prices exclude VAT and state the appropriate rate. It should be noted that VAT inclusive prices for all goods offered by traders to consumers are required by the Price Marking Order 2004 (further information can be obtained from your local Trading Standards Service).”
 refers to Statutory Instrument 2004/102 but I haven’t had a chance to look at that yet.]
I did have a look at Statutory Instrument 2004/102, and just one section will show you what a quagmire we’re getting into:
Scope of application of the Order
3. – (1) This Order shall not apply:
- (a) to products which are supplied in the course of the provision of a service; or
Could this apply to Second Life?(b) to sales by auction or sales of works of art or antiques.
(2) The Electronic Commerce (EC Directive) Regulations 2002 shall apply to this Order notwithstanding Regulation 3(2) of those Regulations.
Or should we be looking at this instead?
What seems to be emerging is that this is very bumpy legal ground which probably needs to be tested in the courts (personally, my least preferred option) or that needs to be tackled through the EU – with the sort of action I’ve outlined in my previous posts: The EU, VAT and Second Life: What can we do? and More news about the EU and VAT.