The Voice of the eCommerce Industry

Congressman Hodes Hits a Home Run for Small Business

Congressman Paul Hodes stepped up to the plate for small online retailers, and took a swing at a proposed law that would force new tax collection burdens on even the smallest of businesses who use catalogs or websites to serve their customers.

Hodes' resolution is titled “Supporting the Preservation of Internet Entrepreneurs and Small Businesses,” and its main provision is:

Congress should not impose any new burdensome or unfair tax collecting requirements on small on-line businesses, which would ultimately hurt the economy and consumers in the United States.

It’s good to see that Rep. Hodes was joined by colleagues from both parties, including Reps Capito, Lungren, Pitts and Schrader. 

The Hodes resolution is a direct response to legislation from Rep. Bill Delahunt that would force small retailers—those doing just $100K in annual remote sales -- to act as tax collectors for thousands of state and local tax jurisdictions where they have no physical presence.

Curiously, the legislation is titled the “Main Street Fairness Act” and is being sold as good for small business.   But main street small retailers have been getting clobbered by Walmart and big-box stores – not by the Internet.  In fact, main street is learning that the internet is their best hope for finding low-cost supply and finding new customers around the world.

So what would the Delahunt legislation really mean for small retailers who are staking a claim in the online world?

The bill Rep. Delahunt just introduced sets no level for the small seller exception. Instead, it leaves that to the tax collectors running the Governing Board of the Streamlined Sales Tax Project (SSPTP).   On April 30 of this year, this Governing Board voted to cut the small seller exception from remote sales level of $5 Million to just …  $100,000.

But wait, that $100K is just for starters.   The Governing Board amendment included this prescription for driving the small seller exception even lower:

The exemption threshold shall be set at a relatively low level and over time adjusted downward so that only sellers making isolated or occasional sales are excluded from the collection requirement.

Run the numbers:  $100,000 in gross sales is about $8,000 per month.  After expenses for cost of goods, marketing, accounting, communications, travel, etc. there’s not much left to pay for the owner's time, let alone costs of collecting taxes for 46 states.

And what kinds of costs will SSTP bring? Advocates of SSTP say that Certified Service Providers (CSPs) have software that makes it trivial for even the tiniest businesses to collect sales tax for everyone. But again, a little investigation shows just how big these costs would be be.

A Cost of Collection study sponsored by the SSTP Governing Board shows that small sellers (under $1M) spend almost 17 cents for every dollar they collect for states. And even if CSP software works as promised, that only helps with 2 cents of the 17 cents in costs per dollar collected.  That leaves small sellers with a 15% cost burden on every dollar they collect, for things like:

• Paying computer consultant to integrate CSP software into the seller’s home-grown or customized software
• Training for customer support and back-office personnel
  Answering questions from customers who claim they should be tax-exempt
• Answering calls and emails from customers questioning the taxability of items, or sales tax holidays in remote jurisdictions.
• Handling audit questions from 46 states, since the CSP will inevitably pass those questions along to the small seller for resolution
• Paying accountants and computer consultants to help find the answers to all these questions.

These collection burdens will be a huge problem for catalog and online sellers who are collecting only their home-state sales tax today.    Ask any small business, on Main Street or online, and you’ll learn it’s hard enough to collect sales tax for one state, let alone all 46 states with sales tax laws of their own.

With a full picture of what small online retailers would face from Rep. Delahunt’s proposal, we can see why Rep. Hodes and his colleagues were ready to go to bat for internet entrepreneurs and small online sellers.

A close look at the facts show that the SSTP would impose big collection burdens on small businesses, while adding less than three-tenths of one percent of state and local tax revenues. 

Sounds like Delahunt's pitch for SSTP ought to be returned deep into the center field seats.   Swing away, Rep. Hodes!

--Steve DelBianco

When it comes to Internet taxes, where you sit determines where you stand

There's a wise adage that goes "Where you sit determines where you stand."   Keep that in mind when you hear someone advocate a new sales tax collection mandate on small out-of-state retailers.

In a post at BNET last week, Chris Dannen described how big retailers are supporting the so-called “streamlined sales tax”:

“Brick-and-mortar retailers — many of whom have operations online — are some of the most vocal proponents of the new online tax laws. The members of the pro-tax lobby, which includes Best Buy, WalMart ,Target and others, already collect sales tax online, regardless of the buyer’s state, and see Web-only retailers as having an unfair advantage.

from How to Tax E-Commerce without Killing Entrepreneurship (and eBay)”

Big-box stores like Walmart and Target support a federal mandate that forces everyone to collect sales tax, even for states where they have zero presence.  So why would these giant chains  -- who already have to collect taxes on their web sales -- stand for this? 

Because from where Walmart sits, any simplification – even a little – helps reduce their costs.  And because these big boys want to impose new tax collection costs on their small online competitors.

In his comment on the BNET post, David Campbell tells us where his company stands on these new tax collection burdens:

Our company, FedTax.net, is launching a completely FREE service named TaxCloud, which automatically calculates accurate local sales tax for every jurisdiction in the United States. Internet merchants can point their existing e-commerce systems at TaxCloud for sales tax calculation, the same way they point at USPS/FedEx/UPS for calculation of shipping rates. For those states which have come into compliance with the Streamlined Sales Tax Agreement, TaxCloud will also automatically remit collected sales taxes, file periodic sales tax returns, and FedTax.net will act as the primary responder in the event of a jurisdictional audit. - again all for FREE.

Now, think about where FedTax sits and you'll understand why they are also standing for this new tax law.  FedTax stands to gain millions in new revenue Congress forces small businesses to seek help  -- from services like FedTax. 

But don't think for a minute that a small retailer is going to find relief from the lookup and remit functions that FedTax would provide.   The real cost for small sellers starts when they have to integrate FedTax tools into their home-grown and customized online shopping carts. And after they swallow that cost, small sellers will spend loads of time and accounting fees handling exceptions, exchanges, and state tax audits.

Meanwhile, FedTax collects their fees from state tax collectors, just for giving a band-aid to small sellers suffering from mortal wounds to their cost structure.

WalMart and Target are happy, too, while they watch small online competitors follow main street retailers into the dustbin of American business history.

If you think about this from where small businesses sit, there's just no way Congress should stand for a new tax scheme like this.

--
Steve DelBianco

NetChoice to Commerce Department: Be Our Advocate Over There, Over Here

Now is a critical time for online commerce as policymakers assess their approaches to privacy. And as NetChoice says in our comments filed today, now is the perfect time for the Department of Commerce to be more involved in privacy issues.

What? We’re calling for more government involvement in a politically charged issue? Yes, and here’s why it’s an appropriate response to the Commerce Dept’s Notice of Inquiry.

Data flows today are much more complex than they were even a decade ago.  Simple one-way transfers between one country and another have been replaced by multinational corporations that transfer data across multiple jurisdictions on a daily basis.

Because of this, privacy-related laws and regulation can have a broad impact on the growth of online commerce, not just here in the U.S. but across the globe. And as a voice for commerce, the Department of Commerce should promote pro-commerce policies over there (EU, Asia, elsewhere) and over here (in the U.S.). 

Here’s what we say in our comments:

• The Commerce Department should act as an international ambassador for innovative American online companies.  The Department can play an important role as a government-to-government advocate for flexible international rules to promote continued innovation and economic growth.  And as a government agency speaking to other government agencies, the Commerce Department can bring credibility and leverage that cannot be matched by corporate interests alone.
• Domestically, the Commerce Department should work with the FTC to step-up state and federal enforcement against unfair or deceptive information practices. Aggressive enforcement will help foster a better climate for innovation than would expanded regulation. New regulations are followed only by legitimate businesses who were already complying with the old regulations. Bad actors, on the other hand, ignore both old and new regulations with impunity (e.g., Spammers are still spamming even after the FTC issued new regulations pursuant to the CAN-SPAM Act).

But whether it is overseas or here in the U.S., we advocate that the Commerce Department promote a privacy framework that is flexible enough to permit innovation, and that opposes static laws that undermine consumer interests in improved online services.

-Braden Cox

Flexibility in Innovation, Consistency in Controls: The Difficulty in Setting User Defaults for Social Networking

Companies often promote a consistent and reliable customer experience. KLM touts itself as “the reliable airline” while Michelin touts its dependability “because so much is riding on your tires.” And now we have Yahoo, who announced that it will be increasing the social networking functionality in Yahoo Mail. Yahoo has the ability to promote consistency in determining user defaults for sharing information. 

But social networking is a product much different than most – it is participatory. Passengers can’t fly airplanes and drivers don’t design tire tread, but social networking users control what and with whom they share information. 

So what happens when a social networking service changes functionality or adds new features? How does a company be consistent in carrying-over a user’s preference from the prior version to the new one? What assumptions should it make on user privacy preferences for new features?

These considerations matter whenever an online service tries to increase its social networking functionality. Last week, Facebook unveiled new privacy controls, and we blogged that it was a welcome response to clear-up confusion. In the coming weeks Yahoo will change how status updates work in Yahoo Mail. Michael Arrington’s TechCrunch article describes it well:

[C]urrently to see status updates for others in Yahoo Mail, you have to have a mutual follow, meaning both people have agreed to be “friends.” You can then see that user’s Yahoo status updates as well as updates on third party services that they have added to their Yahoo profile as well. In the new version there will no longer be a requirement for a mutual follow. So, like on Twitter, users can follow whomever they choose. This isn’t actually a dramatic change for Yahoo, since users can follow others in this way already on Yahoo Messenger.

Like Google and Facebook before it, Yahoo is adding features to make its service more “social.” And because of the scrutiny over the changes by Google and Facebook, Yahoo seems to be going out of its way to assure users that they can rely and depend on Yahoo. According to the Yahoo Corporate Blog:

Before Yahoo! Updates is expanded to Yahoo! Mail where many more people will see their Contacts’ activity, we want you to explore your Updates settings and make sure you know who can see what you’re publishing. Even if you are among the many Yahoo! users who haven’t ever generated an update, we want to encourage everyone to actively manage these settings. Because the majority of events listed within Updates are inherently public activities, our defaults are set to allow anyone to see them (that is, for people over 18; we have different defaults that are age-appropriate for people under 18 – learn more in our FAQ).

In one sense, Yahoo is trying to stay consistent: in Yahoo Messenger, user updates are public, so they’re going to make updates public in Mail too. But in another sense, Yahoo is making assumptions—that users want to have their updates be public. Hence the rationale for Yahoo’s explanation: Updates are inherently public activities, our defaults are set to allow anyone to see them.

As online services add features and functionality, they will be faced with decisions about setting defaults about what most users prefer. Google Buzz presumed that Gmail users would want to publicly reveal which people they emailed the most—but based on the wide range of user pushback, Google chose this default poorly.

In the case of Yahoo, it is trying to make it easy for users to control and opt-out of sharing status updates: “[Y]ou can easily limit who sees your Updates stream either by editing the controls for each specific activity…or by turning your Updates stream off entirely in one simple step.”

Yahoo and other online services will strive to seek a balance. They will want to respect previously expressed user preferences, while defaulting settings so that people see and are encouraged to use new features.

But if the threat of regulation—beckoned by the noisy call of privacy critics—becomes too great, companies will be afraid to take risks and introduce new service. Forcing online sites to perpetually maintain original settings prevents innovative business models and services (just ask Microsoft about how slavish consistency to decade-old software makes Windows innovation so difficult). Strict consistency is a brake on innovation.

We know that companies won’t always get the right balance. But online services need the freedom to experiment with new ways for publishing and sharing information.

As the social web matures, we’ll see more and more sites confronted with this balancing act. They’ll need to carryover preferences from old to new versions, and make assumptions on what information most users will or will not want to disclose. If sites get it wrong, some users will change their settings, while others will leave—ultimately, either is a better expression of user preferences than any law or regulation.

-Braden Cox

Stay Thirsty, My Friends (at Facebook)

Amid much anticipation, Facebook unveiled its new privacy controls today.  It's a good move for Facebook to clear-up confusion about who can see what I've shared on my pages.  They've made it easier to be sure that only my friends can see my photos, comments, or activities. 

It's also a good move to let users turn-off sharing of information with third party applications hosted on Facebook. (Now, what I'd really like is an easier way to turn-off all messages from my friends using Farmville.  Hopefully that's in the works.)

Facebook is making these moves partly to placate a handful of professional privacy critics, as we described on our post this week.  But as with most moves made in reaction to critics, there's a chance Facebook might have moved too far. 

As part of this change, Facebook is making it trivial for users to stop applications and websites from knowing anything about you.  If lots of users select this option, I'm afraid it could restrict Facebook's use of targeted advertising (those ads on the right side of your Facebook pages) and their new instant personalization program.  Here's why we should all be concerned if everyone opts-out of sharing anything:

First, we'll still see ads, only they won't be so relevant to our age, location, marital status, or interests. Admittedly this is not a big deal for users who manage to ignore most online advertising.  But in one respect I think most of us are like that guy in those great Dos Equis commercials: "I don't often look at ads; but when I do, I prefer relevant ads."

Second, and far more concerning, is the effect on Facebook's ad revenue if applications and websites can't use targeting or personalization for users who choose the most restrictive sharing option.  Targeted ads pay much better than generic broadcast ads, simply because people are far more likely to respond to targeted messages. 

Right now you might not care much about Facebook's ad revenue.  But you might start caring if falling ad revenue forced Facebook to cut spending on things like server capacity and speed, content vetting, quality control, or development of new features and access for mobile devices.

You'd also start caring if Facebook over-reacted to privacy critics by slowing-down its innovation.  I'm talking about innovations like "instant personalization", which helps selected websites customize your content based on your Facebook profile.   And innovation like a social plugin for content websites, which makes it so easy for you to refer articles or news to your Facebook friends.  Both of these innovations help create a personal, social Internet experience, and they do it though sharing of information.

Facebook users want the social network experience, and we want controls to stop our boss from seeing photos and comments we intended to share only with friends.  We should be happy with the new privacy controls Facebook announced today.   The professional privacy critics, however, won't be satisfied.   Their aim seems to be the demise of any online service that uses targeted advertising to make it free for the rest of us.

Stay thirsty, Facebook.  We need you guys to keep innovating.

--Steve DelBianco

NetChoice Takes a Plane to Maine to Testify—Againe

Yesterday, NetChoice joined the Center for Democracy & Technology and the Maine Civil Liberties Union (and PFF, who submitted written testimony) before the Maine legislature to oppose a bill that would restrict how health-related products can me marketed to minors under age 17.

The bill, LD 1677, is a repeal and replacement for current law passed last year that was the subject of strong opposition from the online industry. As I previously blogged, NetChoice was a lead plaintiff in last year’s lawsuit to enjoin the law. Though well intentioned, this law was overly-broad and wrought with constitutional concerns. As a result, Attorney General Mills agreed not to enforce the statute. In October last year, NetChoice joined others in testifying before Maine Joint Standing Committee on the Judiciary regarding this law. In short, the conclusion of all parties involved was that the current legislation could not stand and that the legislature should move to quickly repeal.

So we all arrived in Augusta, ready for the next round – after all, this bill is #9 on the NetChoice iAWFUL list! But when we arrived, we were treated to a surprise amendment from the bill sponsor and this became the focus for discussion and testimony. Here’s the amended prohibition:

A person may not knowingly collect and use personal information collected on the Internet from a minor residing in this State for the purposes of pharmaceutical marketing prescription drugs to that minor, unless the minor specifically requests that information about the prescription drug be provided to them

John Morris at CDT gave great testimony and generally welcomed the amendment. However, he cautioned the committee that it should make sure that website intermediaries would not have liability for merely displaying ads. Or for displaying ads to minors that have previously registered with the site, and the ad display was unrelated to the information contained in the registration.

While the bill’s language is better for online companies, it remains to be proved why it’s needed in the first place. There seems to be a sweeping fear among many people that advertising is bad and tries to persuade us to do things we don’t need. Magnify this fear times ten when it comes to advertising and children, and pharmaceuticals.

I understand the thoughts that we’re an overly-medicated society, but that view often ignores the many benefits of modern medicine. Regardless, when it comes to prescription drug marketing and children, there are firm checks and balances in place with what parents must consent to and what doctors will ethically prescribe.

Keep your eyes and ears open for next week’s work session on Tuesday. That’s when there will be a vote, and we’ll see whether I need to board another plane to Maine, not that it’s that much of a pain.

-Braden Cox

New Year, New Slate of “AWFUL” Internet Laws

It was an awfully bad snowfall that paralyzed Washington, DC last week. While we may curse Old Man Winter, ‘tis the season for snow.  Unfortunately, it’s also the season for bad legislation – and we have to to worry about digging out the Internet from a pile of bad proposed state and federal laws.

Today NetChoice released its first iAWFUL list of 2010, taking stock of the most serious legislative threats facing the global Internet. The Internet Advocates’ Watchlist for Ugly Laws (iAWFUL) is our top ten – or more accurately, “bottom ten” – list of the worst proposed Internet laws in America.

For the first time since we started keeping the iAWFUL list in 2009, a federal proposal has taken the infamous number one spot. The Federal Trade Commission is telling Congress to scrap long-established checks on its already extensive power. The FTC wants the power to impose burdensome regulations on communications between online retailers and consumers without answering to Congress.

State legislatures have typically had a monopoly on proposing the most outrageous and extreme burdens on Internet commerce and communication, but this effort in Congress has the potential to do serious damage to the Internet and innovation throughout the nation.

When Congress passed the Magnuson-Moss Act in 1975, it recognized that a more transparent rulemaking process must temper the FTC’s exceptionally broad consumer protection powers over all forms of trade and commerce. A repeal of Magnuson-Moss rules would let the FTC create new restrictions on longstanding retailer relationships that deliver free and targeted benefits to consumers.

But while a federal measure may have taken over the top spot on our list, statehouses from Hawaii to Virginia own the next nine spots on this year’s iAWFUL.

Colorado, Illinois, Maryland, New Mexico, Virginia, and Vermont also made the iAWFUL list for their attempts to force out-of-state advertisers to collect and file sales tax returns for sales to their residents.

Online companies and content providers are still experimenting with new models for advertising and distribution. State laws that use online advertising as a proxy for an in-state sales representative will stunt the growth of new business models and distort the evolution of Internet marketing.

But we don’t keep the iAWFUL list just to remind ourselves of all the bad laws out there. We keep it to rally the efforts of advocates around the country working to protect the Internet. In that respect, the real story of the iAWFUL list is not what’s on it, but what fell off.

The top legislation on the August 2009 iAWFUL release was a Maine bill attempting to restrict marketing to teens online. But in response to the publicity created by iAWFUL – and thanks to a lot of hard work by Internet advocates -- Maine's House and Senate Judiciary committees unanimously recommended repeal of the law in the next legislative session.

Another high-profile item on the last iAWFUL –trio of federal bills regarding organized retail crime, made a remarkable improvement and fell from the Top 10. Again, thanks to the efforts of NetChoice and other Internet advocates, lawmakers began to get the message that law enforcement needed resources – not new laws – to fight organized retail crime.

The name of iAWFUL says it all. This is a list of ugly, ugly laws. But anytime we get tired of sorting, ranking and listing them, we remind ourselves that iAWFUL is a key tool to blunting their dangerous effects.

Call it our snow shovel to dig the Internet out from a blizzard of bad legislation.

[photo above: AP Photo/Evan Vucci]

Privacy Is Not About the Size of the Pipes

Is privacy a broadband issue? We think not. Privacy is based on what consumers care about, not the speed of the pipe.

NetChoice filed comments today with the FCC, which were in response to the agency’s request for comments on online privacy issues. The FCC asked for comments on the use of personal information, identity management services and privacy protections across broadband applications. The questions raised in the request were drafted entirely by the Center for Democracy and Technology, and are an attempt to inject the privacy debate into discussion of the National Broadband Plan.

Our comments took a nuanced approached—we focused our response on the appropriateness of this inquiry as it relates to Internet privacy issues. While we assert that the FCC doesn’t have the legal authority if it were to act, we focus the bulk of our comments on how the FTC has already  established jurisdiction and occupies the online privacy issue area. We also highlight how the FCC’s ability to regulate broadband pipes as infrastructure does not convey jurisdiction to regulate that which flows over the pipes as information. Importantly, privacy is not a broadband issue:  the privacy policies of the ends (consumers and online services) are not defined by the middle (the speed of the communications pipe).

In short, our comments state:

• NetChoice members care about the privacy of our customers
• The exchange of data between and among users and online services create valuable opportunities for socially beneficial business models
• The FTC has already established jurisdiction, including in the areas of reviewing behavioral advertising practices, COPPA and adherence to privacy policies
• NetChoice will continue to engage on privacy matters at the state and federal level. Privacy is an important issue not because it is specific to broadband; rather, because privacy is a consumer-driven expectation that must be met regardless of transmission technology.

-Braden Cox

Patchwork Problems in State Laws Hurt Online Commerce

CNET reports that Amazon has halted plans to sell wine online. The reason:  too many inconsistent state laws. Per the article: 

Since the Supreme Court ruled in May 2005 that states must grant the same shipping rights to out-of-state and in-state wineries, winery-to-consumer shipping has become legal in 35 states, according to wine advocacy group Free the Grapes. But state laws governing direct wine shipping vary greatly, creating an onerous task in managing compliance.

Amazon has become a great marketplace for countless products--it's a shame to see wine makers shut out from this market due to regulatory barriers to e-commerce.

-Braden Cox

Internet Advertising Picking-up -- Just Won't be Display Ads

Two recent trends evidence the importance of targeted Internet advertising--more money going toward Internet ads, and fewer people that click on display banner ads.

First, the good news is that Internet advertising is rebounding (or at least seeing a reversal in the the decline of ad $). Tough economic times has decreased ad dollars among all marketing mediums. But online ads will be the first to see new demand from marketers. And some online companies are weathering the bad economy just fine. Google's ad revenue rose 7 percent in the third quarter.

Compare with McClatchy (the U.S.'s 3rd largest newspaper company), where according to the AP article print advertising plunged 32 percent in the third quarter, but its online ad sales increased 3 percent. 

So ad dollars are increasing. Where will money be spent? On targeted ads.

comScore released a study earlier this month that showed most people don't click on display advertisements. As someone who never does either, I don't find this surprising. According to comScore:

The act of clicking on a display ad is experiencing rapid attrition in the current digital marketplace,” said Linda Anderson, comScore VP of marketing solutions and author of the study. “Today, marketers who attempt to optimize their advertising campaigns solely around the click are assigning no value to the 84 percent of Internet users who don’t click on an ad.

This is huge. Online companies rely on advertisements to pay the bills and will need to better target ads to their users if they want to stay in business.

If we want to see the next generation of online content and services, then we need to stay vigilant to convince members of Congress (Boucher) and the FTC not to impose more restrictions on interest-based advertising, such as opt-in requirements.

-Braden Cox

The Worst Internet Laws in America, Take Two

Back in June, we introduced iAWFUL (the Internet Advocates' Watchlist for Ugly Laws) as part of a broader effort to push back against America's worst Internet legislation. Two months have passed, and while many of the bills in the top 10 have changed, they remain every bit as AWFUL.

Earlier today NetChoice unveiled the first major update of iAWFUL, which lists the 10 worst Internet bills/laws in America. The updated list includes five new items, with new laws in the top 2 slots.

But before I get to the truly AWFUL measures in the new list, it's worth mentioning a few that fell off the list, in large part thanks to the pressure that Internet advocates exerted through iAWFUL:

#2 on the June iAWFUL list was a California bill that would have forced unworkable technical restrictions on the posting of photos to social networking pages. The bill's sponsor responded by working with Internet advocates to fix problems with the measure.

#3 on the June iAWFUL list was a bill in Connecticut that would have required sales tax collection by out-of-state businesses that pay commissions to in-state affiliates. The Governor heard our concerns about the impact on in-state publishers and school charities, and has thus far kept this measure off the table in budget negotiations.

#5 on the June iAWFUL list was a Connecticut bill to let police conduct searches of homes where goods were being stored by online dealers – without having to obtain a search warrant. Thanks to iAWFUL publicity, this bill stalled in the House.

This is what iAWFUL is all about: creating positive change through informed advocacy.

Now for the bad news. For every measure that fell off the iAWFUL list, we found a truly AWFUL replacement.

Toping the list is a Maine law that will limit teens’ access to online services and expose valuable websites to a rash of lawsuits. At the end of its last session, the Maine legislature voted to require Web sites to obtain “verifiable parental consent” before asking Maine teenagers to enter just their name and age.

As is so often the case with bad Internet legislation, it seems to have been drafted without any consideration to the unintended consequences it would impose on important, socially valuable websites that provide content, communications and commerce for millions of consumers.

Web sites have no workable way to obtain "verifiable parental consent," so the real impact of the legislation is that teenagers in Maine will be denied access to valuable online tools and services ranging from college finders to the companies that sell class rings. And given the borderless nature of the Internet, its impact could be felt far outside of Maine. On a list of bad laws, this Maine measure takes the top spot.

Another new law follows closely at #2 in the new iAWFUL list. New York City is set to impose its 20% tax rate on hotel reservation service fees charged by travel agents and online travel websites. The city already rakes in 20% on the hotel room charges, but now they want 20% of any fees collected by travel agents, too. As I wrote last month, this is awful for hotels, travelers, and agents who’d have to start filing returns in every city that followed the New York’s iAWFUL example.

Beating back bad Internet laws is like playing whack-a-mole. There always seems to be a new one rearing its AWFUL head.

--Steve DelBianco

The full iAWFUL list for August-2009 is posted here and below:

1. Maine Predatory Marketing Law – What’s wrong? Creates an unprecedented prohibition on collecting information about and marketing to teenagers. At the very end of its session, the Maine legislature passed a sweeping law that regulates a company’s marketing and data collection practices.  Ostensibly modeled from the federal Children’s Online Privacy Protection Act, the Maine law (10 MRSA c.1055) requires “verifiable parental consent” before any company collects or receives personal information of anyone under 18 years old . This law will impact all sorts of websites where teenagers can provide their names and other personal information. It also flat-out prohibits using that information for marketing products to minors. The law imposes strict liability that would prevent common marketing practices used to serve teens information on colleges, test prep services, class rings, etc. Moreover, the law enables private rights of action and sets minimum statutory damages that will encourage frivolous lawsuits where there is no actual harm whatsoever. The law becomes effective on September 12, 2009, but we’re advocating for a stay to examine constitutional questions and unintended consequences. See http://www.mainelegislature.org/legis/bills/bills_124th/chapters/PUBLIC230.asp

2. Hotel Taxes on Online Travel Companies. What’s wrong? Travel sites are being threatened with the wrong tax rate in the wrong jurisdiction.  Local governments want to levy their hotel occupancy taxes on service fees charged by online travel websites.  New York City recently passed an ordinance to impose its 20% tax on these fees, a move that’s opposed by over 100 NYC hotels and by the American Society of Travel Agents. The state of Florida also considered bills to tax service fees as hotel rentals. This is the wrong approach. Service fees should not be taxed the same as a hotel room charge.  If these service fees were to be taxed at all, they would be taxed as a service rendered to the traveler booking the room -- a new tax that would have to be levied by the jurisdiction where the traveler resides. See http://blog.netchoice.org/2009/07/discount-hotel-rooms-a-great-deal-for-you-but-a-disappointment-for-tax-collectors.html

3. New Jersey Social Networking Bill (A 3757) – What’s wrong? It turns social networking sites into social networking police. This bill requires social networking websites to promptly review user allegations of harassment and abusive language, and to provide a report of the result of any review "upon request" from the user. Many sites already have “report abuse” buttons and they already revoke abusive users. However, faced with adverse publicity and cost of lawsuits, many websites will be forced to lower the bar for kicking-off users. This isn’t confined to websites based in New Jersey—it will regulate any website, anywhere, that can be used by New Jersey residents. For more information, see http://blog.netchoice.org/2009/04/new-jersey-bill-requires-myspace-to-be-mypolice.html

4. Revenue Rulings by Colorado and Washington State Tax Administrators Create New Digital Download Taxes – What’s wrong? Discriminates against goods and services sold online versus offline. The Colorado Department of Revenue recently issued a ruling that would impose sales tax on any service or subscription where users can download or print documents or web pages. Services aren’t taxed in Colorado, but this ruling makes them taxable if the service is provided online. Just emailing a document to a customer would make an otherwise nontaxable service into a taxable digital good.

In addition, the Washington Department of Revenue issued a draft rule that taxes all digital products, regardless of how they are accessed (downloaded, streamed, subscription service, networking, etc.). Washington broadly defines “digital good” to encompass a variety of things, even digital schematics of a lawnmower transferred electronically to a repair shop! What’s more troubling is that the ruling suggests that payments for displaying online advertising would suddenly become a taxable event.

5. North Carolina Digital Downloads Tax Bill (HB 558/S 487) – What’s Wrong? Discourages the Greenest Way to Purchase Music and Other Content. This bill would discourage the most environmentally friendly way for consumers to purchase movies, music, and software by applying a sales tax to the digital download of these goods. The bills would also place local businesses that sell these goods at a disadvantage to out-of-state competitors. For more information, see http://blog.netchoice.org/2009/06/yes-north-carolina-lets-be-fair-about-digital-downloads.html

6. North Carolina Tickets Tax Bill (SB 99) – What’s wrong? Taxes the Internet (and only the Internet) resale of tickets. SB 99 violates federal law because it explicitly targets Internet—and only Internet—ticket sales. The Internet Tax Freedom Act Amendment Acts of 2007 (Public Law No: 110-108) provides a moratorium through November 1, 2014 on any “multiple or discriminatory taxes on electronic commerce.” This law bars federal, state and local governments from imposing discriminatory Internet-only taxes such as bit taxes, bandwidth taxes, and email taxes. It also prohibits the sort of prima facie discrimination exhibited by SB 99—“Reselling or offering to resell admission tickets on the Internet…”). For more information, see http://blog.netchoice.org/2009/05/north-carolina-bill-could-be-first-law-to-be-a-multiple-or-discriminatory-tax-on-the-internet.html

7. Federal & State Bills on Organized Retail Crime – What’s wrong? They create unwarranted, extraordinary burdens on online marketplaces. Federal: The Combating Organized Retail Crime Act of 2009 (S 470), the Organized Retail Crime Act of 2009 (HR 1173) and the E-Fencing Enforcement Act of 2009 (HR 1166). State: Massachusetts HB 1344. These bills would mandate online and off-line marketplaces to investigate suspicious sales, place disclosure requirements on online marketplaces, impose obligations upon online marketplaces to police small retailers absent evidence of criminal activity. The Massachusetts bill provides for the forfeiture of any property used or intended to be used to commit or facilitate a violation, and is so broad that it could encompass a company's servers and domain names. For more information, see http://blog.netchoice.org/2009/02/everything-old-is-new-again-big-retailers-going-after-ecommerce-again.html

8. Massachusetts Online Advertising Bill (HB 313) – What’s wrong? It threatens the viability of new business models on the Web. Massachusetts seeks to regulate “online preference marketing” in which information is stored from consumers’ online searches and used by advertisers to target specific advertisements toward them. But there is nothing nefarious or dangerous to consumers about advertising that is more relevant to them. The bill is unnecessary because industry is already working toward self-regulatory best practices. Consumers—not legislators—should decide whether or not this type of service succeeds in the marketplace.

9. North Carolina Advertising Nexus Proposal. What’s wrong? Unconstitutionally expands sales tax burdens to out-of-state businesses. North Carolina is the latest state (after New York and Rhode Island) to rule that Internet advertising triggers a nexus for sales tax collection and remitting obligations for out-of-state businesses. States think that they are expanding their revenue base, but they are wrong—fewer advertising dollars would flow to in-state publishers and websites. Online companies and content providers are still experimenting with new models for advertising and distribution. State laws that use Internet advertising as a proxy for an in-state sales representative will stunt the growth of new business models and distort the evolution of Internet marketing.

10. New York Online Employment Services Taxation Issue – What’s wrong? Discriminates against services provided over the Internet. The New York Tax Department asserts that online job-seeking and resume services may be subject to sales taxation. New York currently taxes “information services” and maintains that the providing of employment information falls within this definition. We disagree. Online companies fulfill the traditional role of a "headhunter" (which is a non-taxable service) only using non-traditional means. The fact that information is provided or utilized digitally does not change the fact that their service is designed to establish an employment relationship between an employer and a job seeker. 

Book your hotel online? If you paid less, tax collectors want more.

Online travel companies (like Expedia, Orbitz, and Travelocity) are intermediaries between hotels and consumers. They offer big discounts on hotel rooms, and they charge service fees for making the booking.  Millions of consumers are now using these services, especially for leisure travel. 

Now, local governments where these hotels are located want to impose new taxes on these service fees.  We’re not talking just about the local sales tax here; these guys are demanding the hotel & occupancy tax PLUS the regular sales tax, which amounts to 15-22% in taxes on your hotel bills.

Thing is, these online travel companies aren't running hotels – they’re offering a service like any other travel agent.   If a state or local government wants to tax service fees, they have to enact a sales tax on services.  No way should online travel companies or travel agents have to deal with the multiple rates, rules, and filing systems across several thousand hotel tax jurisdictions.

That’s the message we delivered this week in Philadelphia, at the annual meeting of the National Conference of State Legislators (NCSL).

Online travel companies (OTCs) operate what is known as the "merchant hotel model." This model has been around for decades in the offline world. Travel sites don't buy or sell rooms--instead they negotiate for deep discounts on room rates, usually much lower than the walk-in rate. These travel sites work to attract travelers to their web sites, and offer the discount rooms, often bundled into a travel package that includes airfare and auto rentals. 

This model is a win-win for both the hotels and consumers. Hotels have a new distribution channel to help fill rooms that would otherwise go empty. Consumers get the advantage of much cheaper room rates. It's what we've come to expect from the Internet--new business models and distribution efficiencies that create added value for both buyers and sellers. Isn’t everyone happy about that?

Well, the tax collectors aren’t so happy. One group that represents government tax collectors--the Fair Hotel Tax Collection Coalition--wants consumers to pay more taxes when they book rooms through sites like Expedia and Orbitz. At the NCSL meeting, Martin Morris of the coalition said that state and local governments are losing $8 billion in taxes that should be collected by online travel companies. He endorsed the Multistate Tax Commission (MTC) proposal to tax these service fees at the 15-20% rates levied on your hotel bill.  In his testimony, Morris refused to acknowledge the difference between the actual cost of the hotel room and the service fee charged by travel agents and online travel sites.

Hotel operators--such as Marriott, Hilton, and Holiday Inn--already collect state and local occupancy taxes on every room they rent. And online travel companies already collect these taxes as part of their charge to consumers, and pass it along to the hotels. Travelocity describes it this way on its web site:

What is a "tax recovery charge?" Well, it is our travel suppliers, and not us, that have the obligation to collect any applicable taxes, governmental fees and other charges and remit them to the government. Therefore, what we're collecting from you is a "tax recovery charge" that is equal to the amount we expect our travel suppliers to bill us so they can pay those taxes, governmental fees and other charges to the government.

Seems simple enough, but some state and local tax authorities say that occupancy taxes should apply to the total price that online travel sites charge (including service fees), not the negotiated rate that hotels actually get for the room.  But cities and states can't tax service fees like they tax hotel rooms, and they shouldn’t impose new collection burdens on travel websites. 

First, online intermediaries shouldn't be confused with the parties they intermediate. Expedia and Orbitz are not hotel operators, and therefore shouldn't be forced to collect and file occupancy taxes that apply to hotels. Allowing this doublespeak sets a bad precedent for other websites that act as intermediaries or platforms for connecting buyers and sellers.  

States should recognize that anything above what the hotel actually receives is a fee for service.  If a state want to tax service fees, they know exactly how to do it: by expanding their sales tax base to include service fees.   States also know who should get the tax revenue: the jurisdiction where the purchaser received the service, most likely at their home or office where they went online to make the reservation.   (see this detailed analysis from the nation’s top tax professor, Walter Hellerstein).   

This method follows the Streamlined Sales Tax Project, which is the basis for "fair" taxation of e-commerce.  Yet for some reason it's not acceptable to the "Fair" Hotel Tax Collection Coalition.  Go figure.

Over 100 million people visit online travel sites every month!  States and cities that are struggling through a recession should be looking to grow their travel and tourism business, not taxing them with extreme prejudice.

 

Amazon Threatens to Leave the Affiliate Tax Jungle in North Carolina

Welcome to the jungle
We take it day by day
If you want it you're gonna bleed
But it's the price you pay

Amazon.com announced yesterday that it won't be paying the price of affiliate advertising in North Carolina if the state uses it to assert nexus for sales tax collection. It will stop using affiliates in the Tar Heel state, which is what Overstock did in New York when the state was considering the affiliate nexus approach.

States are wrong-headed when it comes to asserting tax nexus just because some companies use a web-based network of affiliates to help advertise their products. As I've discussed before, affiliates are more akin to in-state advertisers, not sales reps.  

Furthermore, states that pass these affiliate nexus bills really end up hurting in-state companies that rely on Internet advertising.  At a time when companies are struggling for ways to make money on the Internet, we think now is a particularly bad time to tax Internet marketing.  

North Carolina's affiliate nexus tax proposal is #4 on the NetChoice iAwful list of bad legislation. We think it should stay out of the affiliate tax jungle. It's constitutionally messy, bad policy...and as Guns 'N Roses mildly stated, it' gonna bring you down- huh!

-Braden Cox

NRF Peddles Organized Retail Crime Survey; We’re Not Buying

Yesterday, the National Retail Federation came out with its annual Organized Retail Crime survey of big box retailers. Once again, it’s a monument to the old adage about “lies, damn lies, and statistics.”This one’s our favorite – straight from the study:

“According to the survey, one-third of retailers believe that more than 50 percent of “new in box” merchandise sold through online auction sites is stolen or fraudulently obtained”

Think about this – the NRF asked its members, who are big box retailers that view online marketplaces as the competition, to guess what percentage of new in-box goods are stolen. Their responses are biased beyond belief and backed with zero evidence or analysis. And despite the retailers’ belief that most goods online are stolen, they reported a big drop in the number who have identified stolen goods sold online.

Other thoughts we had in response to the NRF “study”:

·     Despite retailers’ claims that theft is getting worse, nearly 6 in 10 retailers say they now spend less on loss prevention compared to last year. Yet while cutting spending on loss prevention, these same retailers doubled their spending on lobbying over the last three years, according to the Center for Responsive Politics. And they are lobbying for new laws to restrict competition from online sellers.

·     A leading loss prevention consultant told retailers that over 2/3 of all store shrink is preventable, mostly by improving business practices, according to Larry Miller, Director of National Retail Research Group.

·     Retail theft is not being caused by the Internet. According to the NRF’s survey, retailers don’t identify stolen goods online any more than in traditional places like street corners, swap meets, and pawn shops.

·    The NRF says that criminals use online marketplaces because they are anonymous, but these sites know exactly who the seller is, and disclose all that data to law enforcement officials whenever they ask.  The truth is, an online auction is the last place a criminal would try to hide the sale of stolen goods.

·     The NRF claims that online sellers “threaten the health and safety of innocent consumers”, yet Rite Aid, CVS, Target, and Walgreens have paid millions in fines for selling expired products—often by putting stickers over the expiration dates.

·     Overall, there is no evidence that organized retail crime has actually gone up — the study only asks retailers whether they think it has increased. And that perception has only increased over the last two years — concurrent with the worst economic downturn since the Great Depression. Isn’t it much more likely that any increase in store theft may be a result of employees and consumers desperate to make ends meet?

As we’ve said again and again, while the NRF likes to say that they are concerned with loss prevention, we believe this is really about competition prevention. They’ve gone so far as to paint millions of hard-working Americans who’ve sold goods online as drug-addicted criminals.

And the NRF has lobbied hard for federal  legislation that would let any retailer force online marketplaces to interrogate their sellers about how they legally acquired the stuff they’re selling.  Big-box retailers want this information so they can stop their suppliers from helping small online competitors offer discount prices to shoppers around the country.  

Just this week, we included the NRF’s preferred federal legislation on our iAWFUL tally of the worst proposed Internet laws in America.

As the battle over organized retail crime heats up in Congress, we’ll be watching and acting to shine the spotlight on the NRF’s anti-competitive tactics. 

Steve DelBianco

Nothing Nice on This List -- Introducing iAWFUL, a NetChoice Initiative

Some of the biggest threats to the Internet have always come from well-meaning lawmakers looking to "fix" it. And lately, there’s been a whole lot of fixin’ efforts going on.

At NetChoice, we've always been committed to challenging legislation that threatens our vibrant industry. Today more than ever, we need a more unified and systemic approach to combat bad legislation.

That's why we've created iAWFUL, the Internet Advocates Watchlist for Ugly Laws. 

iAWFUL identifies America's 10 worst legislative and regulatory proposals targeted at the Internet. Through iAWFUL, NetChoice will urge citizens to join the fight to defeat bills and proposals that threaten the future of ecommerce and online communication. The list will be continually updated to reflect the most immediate dangers, based on regulatory severity and likelihood of passage.

While misguided Internet legislation is nothing new, the threat that such legislation poses has increased dramatically. The latest breed of legislative proposals are among the most restrictive we've ever seen; they can crop up anywhere, as state lawmakers increasingly take the lead; and they threaten an Internet that increasingly lies at the heart of global commerce and communications.

State-based legislative efforts account for the majority of entries on iAWFUL, a stark indication of the growing push in statehouses to regulate and tax nearly every aspect of online behavior.

Topping the inaugural iAWFUL list is New Jersey's Social Networking Bill (A 3757), which would require the operators of social networking sites to aggressively police their users. In addition to stifling the free exchange of information and communication on social networking sites, the proposed bill would impose a massive burden -- particularly on smaller, upcoming services that lack the resources to take on such an unnecessary and invasive task.

We encourage anybody who cares about the Internet, really to head on over to the iAWFUL site, check the full list, suggest laws that should be included, and join the fight to uphold innovation and Internet freedom. 

Yes, North Carolina -- Let's Be Fair About Digital Downloads

Last week, the Winston-Salem Journal published an editorial supporting a tax on digital downloads. The editorial claims that this tax is a matter of fairness. 

We agree that fairness is a good goal to have — which is why we are fighting hard against adding yet another tax burden to North Carolina consumers and businesses.

Contrary to the argument made by the paper’s editors, this new tax ONLY hurts in-state companies, since out-of-state sellers wouldn’t have to collect tax for sales they make to North Carolina consumers.   So the burden of collecting this new tax falls only on North Carolina companies, while any consumers who want to avoid the tax will get their downloads from out-of-state or foreign websites.  Forcing North Carolina businesses to charge higher prices by collecting incremental taxes is fundamentally unfair.

It is also unfair — and unwise -- to claim that digital goods are identical to physical goods.  First, digital goods are not permanent property like tangible goods.  ( If you’ve ever lost your iPod or run it through the laundry, you know what I mean). You can’t re-sell your downloaded game or movie like you can re-sell a CD or DVD. And it’s nearly impossible to play your downloaded movie on your car DVD player. The experience of ownership for digital goods is vastly different from tangible goods, which needs to be taken into account by state tax authorities. 

Finally, the impact that digital goods have on the environment is significantly lower than that of physical goods. When you buy a song on iTunes or a digital book on Amazon, you don’t contribute to creaton of harmful chemicals used to burn a CD, or the destruction of trees used to print a book. You burn no gas driving to the store. You dispose of no plastics or packaging when you get home. According to the Recording Industry Association of America, in 2007 nearly 100 million full albums’ worth of music was digitally downloaded by Americans.  In 2007 alone, more than 200 million pounds of natural resources were saved by US consumers buying music digitally instead of driving to the store for a CD. This works out to more than 380 pounds of natural resources every minute.

The digital economy is growing fast and the tiny carbon footprint of downloads is something that benefits all of us.  Digital downloads are the most environmentally responsible way to get movies, music and software; and tax policy is one of the ways we promote environmentally sound decisions.  For instance, hybrid vehicles are just a small share of the car sales, but nobody thinks we should end tax credits that favor hybrid cars.

The state of New York realized this, and earlier this year shelved its plan to tax iTunes, because it was too much pain for so little gain — only $15M of revenue, and new tax collection burdens that would fall only upon NY-based sellers. North Dakota just went in the opposite direction, explicitly exempting digital downloads from Sales Tax, mainly to increase their state’s attractiveness for economic development. 

So, we echo the call to North Carolina legislators to be fair — fair to their state's businesses, fair to cash-strapped North Carolinans trying to make ends meet in this harsh economy, and fair to our battered environment. Stop the effort to tax digital downloads. 

North Carolina Targets Digital Goods

 In the Whack-a-Mole game that digital  goods taxation  has become, North Carolina is the latest state in which  proposed legislation has popped up.  Right now, North    Carolina’s House and  Senate are considering bills HB  558 and S 487, bills which would create a new  sales tax  on digitally downloaded goods such as books, consumer  information services, and music, such as iTunes  downloads. as well as expand tax burdens on retailers who seek to advertise on North Carolina properties, via an “affiliate nexus” bill.

 NetChoice has been heavily engaged in these debates, both in North Carolina and around the country. Taxation of digital goods is 1) bad for the environment - digital  downloads don’t require a drive to the store, delivery vans, plastics, paper, or packaging; 2) bad for consumers already struggling to make ends meet in a deteriorating  economy, especially one in which online information and services can be used to help them stretch their already-thin dollars; and 3) encourages the scourge of digital piracy --  people should be encouraged to download content legally. Taxing it and making it more expensive only serves to drive more people to readily available, illegal copies of music and movies.

And bills which seek to require any out-of-state retailer that uses a network of affiliates to drive traffic via advertisements on North Carolina-based websites to collect North Carolina sales taxes, would have the unintended consequence of reducing ad revenues for North Carolina companies, including media outlets, without increasing sales tax collections.

Maryland, Virginia, and New York have all flirted with the idea of imposing onerous taxes on innovative, green, and growing component of the economy. Ultimately, they all decided that the negatives outweighed the benefits, and changed or abandoned their plans. NetChoice will do its best to make sure North Carolina joins them.

Photo credit to terren in Virginia via Flickr

Breakdown, Takedown -- California Wants to Give Social Networking Sites the Shakedown over Uploaded Photos

Today California is holding a hearing on a bill that would require social networking websites to implement certain technologies and procedures to remove photo images upon notice from a user.

AB 632 would force a broad range of websites to establish mechanisms to remove photos, videos, and even caricature or satiric images of its users. As we know, many if not most online sites are incorporating some sort of social networking functionality. This bill would therefore encompass a number of community events, news, sports, and travel sites in addition to more commonly regarded social networking sites.

Apparently the bill's sponsor is upset that people can right click on photos, and save them to their computer or email to friends. In addition to takedown mechanisms, she wants websites to disclose to users that uploaded photos may be copied by persons who view the image.

As we detailed in our NetChoice letter, the takedown component is most troubling. It would force thousands of websites to redesign their sites to encompass a number of considerations:

1. A specific image must be readily identifiable on a specific page—this is a non-trivial exercise. Photos may be buried deeply in a user’s album containing thousands of other images, and URLs of particular pages often change.
2. Sites must determine whether an image is actually of the particular user requesting removal. Otherwise, users could request removal of a number of photos that bear their likeness, but do not actually include them, for a number of political, religious, or abusive reasons. Yet, even trained experts have difficulty identifying persons in photos, as images are affected by lighting, clothing, and changes in hair style or makeup.
3. Removal must respect copyright law. Websites would face potential lawsuits from copyright owners if removing their copyrighted images negatively impacted them.
4. How to deal with group photos, where the user is just one of many people in the image?

The above considerations required by AB 632 place websites in an untenable position, since they would face potential liability for both removing and not removing images.

Furthermore, consider the freedom of speech implications. As more people use the Internet to communicate and engage in social networks, including legislators, policymakers, journalists, celebrities, and business leaders, it is important to provide greater protections for speech online. Yet, AB 632 has serious loopholes that provide an end-around the First Amendment:

• A legislator views certain photos as damaging to his chances for reelection, and demands them to be taken down.
• A celebrity does not like an unflattering image of her, and flags it for removal.
• A weblog engages in investigative journalism on local government corruption, posts photos associated with the story, but the local official demands takedown.
• A cartoonist sketches a satiric cartoon that includes the image of a CEO who wants it removed.

Social networking sites are not equipped to deal with the intricacies of the above situations, and our public figures would know this. As a result, society would be the real losers under the approach dictated by AB 632.

Instead, we suggest that a legislative approach focused on the harms of certain conduct, not a mandate on technology or business mechanisms. If an image is abusive or harassing, there may be better ways to update harassment and stalking statutes for electronic images so that law enforcement can effectively react. Moreover, the judiciary may need clearer guidance on how to deal with defamation law with regards to digital images.

-Braden Cox

State legislators seem to be always looking out for the kids. That is, until they stop looking out for the kids

In a yet another misguided attempt to grab tax revenues, there’s a Connecticut bill (SB 806) designed to increase collection of sales taxes when Connecticut residents purchase from out-of-state retailers.  The law re-defines what it means to be a “retailer” in the state, and creates a presumption of nexus when an out-of-state company advertises through Connecticut websites.

Unfortunately, it has momentum and, worse, it comes loaded with unintended consequences.  Let’s look at one.

For years, kids around the country have been collecting box-tops from cereal and snack boxes as an easy way to raise money for school trips and new school equipment. Box Tops for Education has raised over a hundred million dollars -- by collecting just a few cents on every box top.

Now, this fundraising function has gone online, with the Box Tops Marketplace, to generate commissions when parents shop at their favorite e-commerce websites. Here’s the Box Tops Marketplaces webpage:

The Box Tops Marketplace has grown to over a hundred participating websites, offering parenting essentials such as pet supplies, shoes, books, clothing, and household goods.

Online stores that participate in the Box Top Marketplace stores give a percentage of sales to support good causes, including several based here in Connecticut.

Thing is, few of the online stores participating in Box Tops Marketplace have any physical presence in Connecticut, and are therefore not required to collect, file, and remit the state’s sales tax on purchases made by Connecticut residents. Would the out-of-state retailers in Box Tops Marketplace continue to work with Connecticut schoos and PTAs if the state enacts SB 806? Or would they follow the example of nearly 200 retailers who simply stopped their online advertising in New York after that state enacted a similar law?

Keep in mind that online and catalog retailers can avoid the unreasonable burden of collecting and remitting remote state sales taxes by cutting-off their ad spending with Connecticut websites. And Connecticut consumers could still buy from these out-of-state retailers who stop advertising on statebased websites. That means SB 806 could have the unintended consequence of reducing ad revenue for Connecticut-based groups like the schools in this example – without increasing sales tax collections.

Uncork New Jersey

If you're from New Jersey and you like to drink wine -- or just feel strongly that government shouldn't be protecting alcohol distributors at the expense of competition and consumers -- go to the UncorkNJ website and send a letter to your local representative in the General Assembly. New Jerseyans are barred from buying wine over the Web, and having it shipped to their home. The time to disintermediate is now!

-Braden Cox