The plot thickens. Or possibly thins a little.

It’s been a busy evening.

I’ve had a response to my queries from the Lab. Their take on this is that I only need to provide my UK tax ID number (National Insurance Number) and ID documents. This is good, but still a little puzzling to me.

If you google around about form W8-BEN most of the references are about people trying to acquire ITINs or EINs so that the royalties from their self-published e-books won’t have US tax deducted from them. I had assumed (in the absence of any better information) that Linden Lab were requiring me to fill out the form for the same reason – which is why I’ve been running around trying to get an ITIN.

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.

I have, in any case, taken the time to get an EIN from the IRS. I was looking at this whole thing the wrong way when trying to deal with the IRS – I’m not an individual, I’m a business. Thinking this way seems to be a common mistake not just for dealing with Linden Lab but with e-book publishers and all manner of internet business platforms. Once I realised my mistake it was only a matter of a phone call to get hold of an EIN.

From the response I got from the Lab it seems like an EIN isn’t necessary at the moment but all the same I’m getting the warm fuzzies from having it just in case. Things may change – it’s certainly the case that if you are publishing e-books an EIN or ITIN is vital; it may be the case that the IRS will take a similar view of business in SL before long.

For reference for anyone else interested, the procedure for requesting an EIN is as follows:

  • Review form SS-4 – when you speak to an IRS operator you’ll pretty much be filling this form out over the phone. Make sure you have all the required information to hand. I’ll include a quick cheat-sheet here:
    1 : Figure out what kind of business you are. Whether it’s a limited liability company (UK Ltd etc) or something else be prepared to give them the proper name for the type of your business. In my case “UK Sole Trader” was acceptable.
    2 : In line 10 “Reason for applying” your answer should be “Compliance with IRS withholding regulations”
    3 : Know what to say when asked what kind of business you conduct. “Digital Media sales” was an acceptable answer for my company and I think it would describe a business operating in SL well enough.
  • Call the IRS on +1 267 941 1099 and select option 1 from the voice menu. If the number doesn’t answer keep calling back – they seem to get overloaded. Be prepared to spend a long time on hold, so Skype is a good option to save some money on call charges.
  • Tell them you want to request an EIN for a foreign company
  • The IRS operator will pretty much walk you through the questions from form SS-4 in order. Be prepared to spell out everything letter by letter, so it’s handy to have it all written down in advance.

At the end of all this the operator should submit your request and issue you with an EIN there and then. Paperwork confirming it will follow in the post.

There will also be some extra questions about the kind of business you will be transacting in the US – they’ll ask if you intend to employ any persons in the US and whether you will need to operate any heavy goods vehicles there (I was tempted by this, I must admit. I can’t drive a heavy goods vehicle, but if I could get the permission easily I’m totally prepared to go Mad Max on the US Highways!)

The procedure for obtaining an ITIN has, over time, become more and more onerous (to the point of impossibility now). I would not be surprised if the process for obtaining an EIN will become more difficult as well. Right now it looks like you can continue your business in SL without an EIN but I can’t help but feel that now is a good time to go and get one just in case. It’s relatively little effort and I think it offers some insurance against things changing for the worse in future.

In the end I wish LL had offered a little more guidance and help with their request for information. I wouldn’t have gone down this path of fencing with the IRS if the information request had just said “You don’t need an EIN or ITIN, just provide your own country’s tax payer reference (e.g. UK National Insurance etc)” or something similar. One sentence would have saved a lot of hassle – not just for me but for the other business owners who have contacted me since I began blogging about this, all of whom are having the same worries. I hope these blog entries will shed some light where there was none before.

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9 thoughts on “The plot thickens. Or possibly thins a little.

  1. Pingback: w9 tax info requests from Linden Lab - Page 6 - SLUniverse Forums

  2. I was linked to your blog…because I am going through this myself. I’m in Australia – so facing the same situation as you. It sounds like many people are putting in the w-8BEN without any US tax numbers and just their own countries tax ID. Is this what you have done now? Or did you include the EIN you managed to get?

    Also, you talk about the money we make as if it is a royalty. Which is exactly what I have been wondering as it’s very much relevant to how much tax they take from us, from what I can see. Have you deduced what a SL sales income classifies as for the purposes of these forms? I’ve been trying to work that out today and so far a royalty or licence fee seems the closest to accurate. But I have no idea if that is correct or not. So just wondering what you might have worked out, or anyone else who reads this!

    Sorry if I am demanding with the questions! I am just so pleased to find your posts and any insight would be so much appreciated.

    Thank you!

    • Last night I gave LL both my UK tax ID and my EIN. They have since cleared my account and let the withdrawal go through. I don’t know which number they liked best – quite possibly both were fine.

      Ignore everything I said about getting an ITIN – including the stuff about the section 1(d) exceptions for royalties/licenses etc. Getting an ITIN is not the way to go; I just ended up going down that route because there was no guidance to the contrary. If things change and you do end up needing some kind of US tax ID then an EID is the way to go.

      The US has what looks like a pretty standard tax treaty with Australia (http://www.irs.gov/Businesses/International-Businesses/Australia-Tax-Treaty-Documents) so there should be no withholding of tax by LL. All the money should come to you and you’re then responsible for your local taxes.

      Feel free to ask more questions – I’m happy to help you or anyone else who’s having problems. Information is a bit thin on the ground for non-US citizens so I’m hoping I can save some others the same unnecessary hassles I put myself through

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  8. Kat,

    For the benefit of all, I’ve confirmed with the Lab that they do not require either and EIN or ITIN in order for W-8BEN to be submitted. I’ve published their statement on the matter.

    If also included notes and a link to your experiences here, as I think it probably a good idea that people consider getting an EIN (if they can) for future reference – and those who can’t get an ITIN going forward (which is not to say they shouldn’t submit their W-8BEN form first).

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