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Oklahoma Passes eTax Measure as California Tries Again
By Robert Woodsum , Friday, June 4, 2010 11:05 am
Last week, the Oklahoma State House passed several bills that would raise taxes in different areas in order to negate a $300 million deficit incurred during the fiscal year as well as an estimated $1.2 billion deficit for 2011.
 
One of these bills targets purchases made either through catalogs or online by forcing online vendors to notify their customers that they must pay the state use tax (a sales tax on for out-of-state purchases).  The bill, however, was stripped down from an original measure that mirrored an effort in Colorado and North Carolina requiring online retailers to submit private information about consumers to the Department of Revenue.  Not only did this raise significant First Amendment and privacy concerns, but it amounted to an $40 million tax hike.  Many of these provisions, however, were removed after strong opposition.
 
In a similar move, California also seeks to implement a similar tax upon state residents, this time with the privacy violations included.  As part of $4.9 billion in tax hikes, the legislature is attempting to revive Assembly Bill 2078, which would increase taxes on sales of online goods by about $100 million  a year.  These so called “Amazon Taxes”, much like the Oklahoma bill, will require retailers to notify their consumers of owed sales taxes.  The bill also states that retailers divulge the “names, addresses and purchase details of transactions to California authorities each month.”
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Tags: California, Oklahoma
U.N. Internet Tax Hits Dead End
By Robert Woodsum , Monday, May 24, 2010 3:25 pm

Last Friday, World Health Organization (WHO) delegates failed to reach any conclusive decisions in regards to a series of global internet taxes.

These UN sanctioned taxes first gained momentum in 2008, when experts where tasked with researching methods of raising funds.  Even then opponents questioned whether the WHO should be the first to initiate any global taxes.  These taxes were to include “digital or bit” tax on Internet access or activity, as well as taxes on online bill paying, financial transactions, and airline tickets, all of which were deemed “pretty sketchy.”  Where the internet is supposed to simplify life, adding these taxes will only add further headaches to distraught consumers.
 
While reading all this, you might get a sense like you’ve seen it recently.  The Internet tax is just another of the many Hydra heads in the FCC’s campaign to take over and tax the internet.  Hopefully this recent fallout in the UN will show the FCC that maybe the answer their problems doesn’t lie in more taxes and regulation.
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Gov. Quinn Backpedals on Digital Goods Tax
By Kelly William Cobb , Sunday, April 25, 2010 10:06 pm

Illinois Gov. Pat Quinn is quickly backpedaling on a plan to tax downloads of music, movies, ringtones, and books. The proposed tax hike was originally released by the Quinn administration’s Office of Management and Budget (OMB) last week, contained in a long list of potential revenue raises for the state. 

In response to rising attention by the media and public opposition, Quinn responded, “We made a list of all the possible things that could happen…I didn't advocate that. I'm not interested in doing that, frankly.” However, last week Quinn’s OMB director, David Vaught, implied the opposite.  “We think that’s an area where we’ve not kept up with technological change,” Vaught said.
 
The list of tax increases containing the $10 million digital goods tax came as legislators and the Governor met last week to discuss the state’s budget. For now, it appears Illinois consumers can rest assured that the digital tax is off the table. Instead, as budget negotiations wear on, Gov. Quinn said he remains committed to raising the state’s income tax by 33 percent.
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Tags: Illinois
E-Commerce Tax Turns into Privacy Rights Battle
By Kelly William Cobb , Thursday, April 22, 2010 5:15 pm

Earlier this year, Colorado became the first state to employ a new and controversial way to force consumers to pay tax on online purchases. House Bill 1193 required out-of-state retailers to provide the Department of Revenue with detailed customer information on purchases made, so that the state can pursue residents who fail to pay “use tax.” Use tax is sales tax on out-of-state purchases that requires the consumer, not the retailer, to collect and pay up.

Now, North Carolina has jumped on the bandwagon, though without passing any new legislation. In letters dating back last December and March of this year, the state’s Department of Revenue is demanding that retailers provide “all information” on North Carolina customer purchases dating back to 2003. This would include each consumer’s name, address, product/item code, detailed description of each purchase, and other information.
 
This is a flagrant violation of privacy rights and the First Amendment. A state has no authority to demand private information about individuals completely unrelated to tax collection. In fact, though Colorado passed the bill earlier this year, their State Supreme Court ruled in 2002 that the First Amendment ensures “an individual's fundamental right to purchase books anonymously, free from governmental interference.” Yes, that would include books bought online. The demand could also be a violation of the Interstate Commerce Clause of the U.S. Constitution, as in-state retailers would not be subject to the same information reporting requirements.
 
North Carolina and Colorado’s push to collect sales information stems from a failed effort last year to begin taxing out-of-state purchases. Last fall, North Carolina joined Rhode Island and New York in passing an “affiliate nexus tax” law, which requires online retailers to collect tax on consumers if company advertises on an in-state website. This effort too raises serious constitutional concerns, as retailers with no physical presence in a state cannot be required to collect taxes on consumers under the U.S. Supreme Court’s ruling in Quill v. North Dakota.
 
In North Carolina and Rhode Island, retailers subsequently stopped advertising to avoid what many – including us – regard as an unconstitutional tax collection scheme. Both states have failed to collect any additional revenue from the tax hike, which is probably why the NC Department of Revenue began its pursuit to gather private consumer information. Meanwhile, a similar consumer information reporting bill is pending in California.
 
It appears states will stop at nothing in pursuit of taxing online shoppers. First, with the affiliate nexus tax, states tossed aside the U.S. Constitution’s Commerce Clause and long standing legal precedent. Now their “Plan B” is to trample all over the First Amendment and privacy rights.
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Tags: California, Colorado, North Carolina, Rhode Island
Illinois Gov. Quinn Targeting Digital Goods for More Revenue
By Kelly William Cobb , Wednesday, April 21, 2010 4:11 pm

Governor Pat Quinn of Illinois is well known for his massive 33% income tax increase proposal, but quietly behind the scenes his Office of Management and Budget (OMB) has a whole host of tax hikes in the queue, including on digital goods.

Last night, legislators emerged from a meeting with the Governor and presented a list of tax increases he has proposed, including on downloaded goods.  While a bill has yet to be filed, Illinois's OMB has concluded that the state could raise as much as $10 million a year by taxing downloaded music, movies, books, and ringtones.

Stay tuned for futher updates, or follow us on Twitter and Facebook.

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Tags: Illinois
Public Overwhelmingly Opposes Internet Taxation
By Kelly William Cobb , Monday, April 12, 2010 11:37 am

A new poll was released this weekend showing that Americans are fundamentally opposed to taxing Internet commerce.  Rasmussen Reports has found that a mere 20% of individuals support taxing e-commerce, such as books, movies, music, and ringtones purchased online, while 61% oppose it.

The poll comes as numerous states continue pushing for taxes on goods purhcased online.  Additionally, the Federal Communication Commission's National Broadband Plan released last month contains a section discussing the future tax treatment of digital goods and services:

Recognizing that state and local governments pursue varying approaches to raising tax revenues, a national framework for digital goods and services taxation would reduce uncertainty and remove one barrier to online entrepreneurship and investment. (pg. 58)

While this goal is fairly ambiguous, we hope the effort would work in the same way as the Internet Tax Freedom Act, which prevented states from further taxing Internet access.  As noted by the poll above, a nationwide effort to ensure e-commerce is taxed in all states would be completely unwelcome.

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Connecticut Joins the eTax Fray
By Kelly William Cobb

Last week, Connecticut joined a growing chorus of states considering a tax on e-commerce to help shore up budgets.  The state's Joint Finance, Revenue and Bonding Committee held a hearing on Thursday where legislators hinted at eventual support for advancing the bill (HB 5481), which would require e-retailers to collect taxes on residents if they advertise through a third party based in the state.

While a fiscal note for the bill has not yet been provided, state lawmakers around the country seem more entranced with the potential revenue projections on paper that permit them to maintain current spending, rather than the real world implications of affiliate nexus tax laws. As we've argued before, e-retailers will simply sever their advertising agreements and avoid paying what is likely an unconstitutional tax increase.  This means no actual revenue increase for the state and a decrease of tax revenue from businesses who no longer profit from ad contracts. This has been evidenced in both Rhode Island and North Carolina. A fiscal impact statement on a similar bill in Virginia that, for the first time, highlighted some of these implications helped to kill that measure last month.
 
While the Connecticut bill is still being held in committee, lawmakers wisely decided to stall similar legislation (SB 806) last year. Connecticut residents: remind your state lawmakers why they didn’t enact an e-tax last session. CLICK HERE to take action.
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Tags: Connecticut
How the FCC Plans to Tax the Internet
By Kelly William Cobb , Wednesday, March 17, 2010 1:46 pm

Today, the Federal Communications Commission (FCC) released its National Broadband Plan (PDF), an outline for the federal government to become significantly more involved in universal broadband access. The plan, which the FCC estimates will cost $350 billion, claims it pays for itself (a point already called into question), but the plan itself calls for raising taxes on the Internet, as well as enacting some that have yet to exist.

First, the plan expressly calls for a digital goods tax:
 
Recognizing that state and local governments pursue varying approaches to raising tax revenues, a national framework for digital goods and services taxation would reduce uncertainty and remove one barrier to online entrepreneurship and investment. (pg. 58)
 
Instead, how about “not enacting a tax would remove one barrier to online entrepreneurship and investment”? To date, 18 states have enacted laws to tax digital goods and services, like downloaded music, books, and ringtones, within their own borders. A national framework could amount to spreading this nationwide, permitting all states to begin taxing digital goods and even allowing states to collect taxes on e-commerce made across their borders (something currently deemed unconstitutional by the U.S. Supreme Court in Quill v. North Dakota).
 
Secondly, the National Broadband Plan calls for significant expansion of the Universal Service Fund (USF), a tax on urban and suburban consumers redistributed predominantly to rural areas. Currently, phone companies, including wireless and VoIP, “contribute” to the fund (read: are involuntarily taxed and pass the tax onto consumers). The goal is to expand this to all types of telecom service, including Internet service, and to shift this pool of money toward subsidizing the cost of broadband. The executive summary states that the FCC will “reform current universal service mechanisms to support deployment of broadband and voice,” and adds on pg. 136:
 
Stage Two: accelerate reform (2012–2016)
- The FCC should broaden the universal service contribution base.
 
Translation: tax Internet access to fund the USF as well.  While it goes on to state that “the FCC should manage the total size of the USF to remain close to its current size,” this goal of fiscal responsibility is clearly last on the list of priorities. Five days ago, just before the plan was announced, the FCC raised the USF tax to 15.3% – a record high. The USF started at only about 5.5% in 1998 and rose by 4% over the next decade. Since President Obama’s new FCC took over in 2009, it’s risen by 5.8%.
 
Third, the plan calls for Congress to “consider providing optional public funding…such as a few billion dollars per year over a two to three year period.” You know, tax-and-spend just a few extra billion here, a few billion there. Whatever gets it done.
 
However, on the bright side, the plan does call for expanding the Research and Experimentation (R&E) tax credit (pg. 122) to help service providers expand private investment in broadband. The report notes that a permanent 5% R&E credit would lead to a 10% to 15% increase in private spending to boost broadband research and deployment.
 
So, there you have it. At best, you’ll have a 15.3% tax on your Internet service and a tax every time you buy a digital good online. Tax credits like the R&E incent broadband deployment, while the digital goods and USF tax hikes simply raise the overall cost of service and activity in the digital realm, per the FCC’s own admission. One can’t help but wonder how higher taxes on consumers and industry – instead of more tax credits – will effectively expand broadband access.
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California Lawmakers Really Want to Tax the Internet
By Kelly William Cobb , Tuesday, February 23, 2010 11:35 am

Last year, when Gov. Arnold Schwarzenegger vetoed a proposal (AB 178) to extend the sales tax to all online sales, the California legislature vowed a rematch.  That time has now come.

Currently in Special Session, lawmakers have taken the language from last year's measure and inserted it into a new bill (ABX8 8), pushing a tax hike under the guise that they are simply clarifying current tax law.  The affiliate nexus tax (or "Amazon" tax) has been tossed back and forth between legislative chambers, but now is scheduled for final passage in the State Assembly.

While vetoing the bill last year, Gov. Schwarzenegger rightly noted that it will cause much more harm to California businesses than it will do to raise revenue. Since the bill assumes out-of-state retailers who advertise with in-state websites are obligated to collect tax, those out-of-state retailers can simply sever their relationships with California companies.  This means no tax collected for the state, a huge profit loss for California based advertisers, and another subsequent decline in tax revenue collected from these advertisers' profits.

This appears to be of less concern to money-hungry lawmakers in Sacramento than to maintaining current spending levels. Proponents claim the bill will raise $150 million, knowing full well for reasons above that the measure will actually raise next to nothing.  The only possible justification then is to fake tax revenue numbers to maintain current spending baselines, almost guaranteeing at least a $150 million "budget shortfall" next year - all while hurting California businesses and consumers.  This is objectively horrible and deceptive public policymaking.

In recent days, the Governor has stated his reluctance to sign off on the same bill he vetoed for good reason last year. Should this pass the Assembly, we hope he carries this veto out.

CLICK HERE to write your state lawmakers in opposition to etaxes.

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Tags: California
Virginia and Colorado Online Tax Bills Take Interesting Twists
By Kelly William Cobb , Thursday, February 11, 2010 12:14 pm

A Colorado measure aimed at requiring consumers to pay tax on all online purchases took an interesting and disturbing twist on Wednesday. As we previously reported, the Colorado House passed an unconstitutional bill (HB 1193) to require out-of-state Internet retailers to collect tax on Coloradoans, known as the affiliate nexus or “Amazon” tax. Yesterday the Senate also approved the measure, but not without making some significant changes.

Colorado’s Senate stripped the etax bill of sections that require retailers to collect the tax, and instead expanded upon a section that would permit the state Department of Revenue to subpoena these retailers to collect personal and private information about their Colorado customers. The goal is to collect sales receipts from consumers so that the state can go after Coloradoans who owe “use tax,” which is tax collected on out-of-state purchases. Companies that don’t comply (read: protect your information) are fined significantly. Ironically, the intent of the bill is to raise revenue for the state, but it includes over $200,000 in annual appropriation to the Department of Revenue to go after consumers and out-of-state businesses.
 
Meanwhile, across the country, and braving the east coast winter storm, the Virginia Senate Finance Committee on Wednesday met and signed off on an affiliate nexus tax bill requiring out-of-state retailers to collect tax on Virginia residents. Perhaps most interesting was the bill’s fiscal impact statement, which for the first time of any state all but explicitly told legislators to oppose the measure, as the state would likely lose tax revenue:
 
When similar legislation was enacted in Rhode Island and North Carolina, large online retailers ended their affiliate programs. If this were to happen as a result of this bill, there would be no additional revenue from the enactment of this bill. In fact, by ending the affiliate program with Virginia vendors, such vendors would likely lose business and remit less Retail Sales and Use Tax to Virginia.
 
The fiscal statement also warned that enactment of the measure could trigger a costly lawsuit, similar to the lawsuit currently in New York challenging the law’s constitutionality.
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Tags: Colorado, Virginia
Colorado House Disregards U.S. and State Constitutions; Passes eTaxes
By Kelly William Cobb , Tuesday, February 2, 2010 11:48 am

Yesterday, the Colorado House of Representatives signed off on a package of tax hikes that included applying the state’s sales tax to all internet transactions and software purchases. It was a brisk start to the legislative year, where a single committee hearing was held on the tax measures only a few days prior.

The new tax on e-commerce, the “affiliate nexus tax”, will require out-of-state sellers to collect taxes on Coloradoans if they advertise through an in-state advertiser. The tax attempts to circumvent the 1992 Supreme Court case Quill v. North Dakota that ruled a company must have a substantive physical nexus in order for the state to require that company to collect sales taxes, something out-of-state retailers do not. The same tax is currently undergoing legal challenge in New York.
 
While the “affiliate nexus tax” already likely violates the U.S. Constitution’s dormant commerce clause, it also – along with the entire tax hike package – expressly violates the Colorado Constitution. The state constitution's Taxpayers Bill of Rights, approved in 1992, requires that a “tax policy change” that raises revenue (which all of these measures are slated to do) must be put on the ballot and voted on by Coloradoans. None of these measures appear headed in that direction, however, and during the House Finance Committee hearing last week, members reportedly dismissed those who stated they must be put on the ballot.
 
To make matters even worse, the measures were deemed necessary to raise revenue for “vital” and “essential” services; however the “affiliate nexus tax” has failed to raise revenue in both Rhode Island and North Carolina, since retailers simply forgo advertising with in-state businesses to avoid the unconstitutional tax collection scheme. It’s almost laughable that the legislature expects to raise over $10 million through the tax hike, and more probable that they will have at least another $10 million “budget shortfall” in the coming year. Allowing the House Finance Committee to fake budget numbers this year to pass an unconstitutional tax increase is simply horrible and deceptive policy making.
 
In addition, the measure to expand the sales tax to include computer software was made to appear to protect government services, with 40% of revenue funding K-12 public education. And the other 60%? The general (slush) fund.
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Tags: Colorado
Colorado Legislature Kicks Off 2010 with an eTax
By Kelly William Cobb , Thursday, January 28, 2010 2:43 pm

Here we go again!  Colorado has officially became the first state this year push a bill to collect taxes on all internet purchases.  Yesterday, the House Finance Committee considered "affiliate nexus tax" legislation in a hearing amongst a number of other tax proposals.  The measure would require out-of-state online retailers with no physical presence in the state to collect taxes on Colorado residents.

While the bill is a tax increase on consumers and a significant burden on online businesses (and interstate commerce), it also will likely fail to raise revenue.  Last year, when the bill passed in Rhode Island, the tax was estimated to raise no additional tax revenue and this has been confirmed by the Department of Revenue.  In fact, there was even a bill introduced in Rhode Island this year (House Bill 7071) that would repeal the tax.

Unlike other nexus tax bills, however, Colorado's House Bill 1193 goes one disturbing step further to allow the Department of Revenue to issue subpoenas to any out-of-state business that would require them to provide personal information about their Colorado customers.  Who doesn't love sharing their personal information including possibly credit card numbers and purchase details with the government?  Presumably, it would allow the state to come after residents to collect "use tax" on the products.  Even worse, if a business doesn't provide the information and chooses to protect the proprietary information of their customers, they can be held in contempt.  It also would apply regardless of the fact that the same internet tax bill is currently being challenged as unconstitutional in New York.

Similar bills have also been introduced in New Mexico, Virginia, and Mississippi this year.  No matter where you live, click here to write your state legislature now and oppose taxes on internet commerce.

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Tags: Colorado
USA TODAY Shills for E-Commerce Tax
By Kelly William Cobb , Friday, December 18, 2009 5:10 pm
 
Today's USA TODAY opinion page sounded more like it was written by a politician than an editorial writer.  Citing a boom in internet sales over the past decade, USA Today called for taxing internet transactions.  The primary justification: "Hard-pressed states could use the money to reduce budget deficits."
 
The paper completely dismissed a 1992 U.S. Supreme Court ruling that such taxation is a clear violation of the dormant commerce clause and unconstitutional given the burden of tracking nearly 8,000 tax districts that aren't aligned with zip codes and change constantly.  But, the Court of USA TODAY ruled instead that "it's hard to imagine that today's software wizards couldn't figure out a solution."  Yes, they probably could, but the potential for "software wizards" to figure this out in the future doesn't make it any less of a current constitutional violation in some states.  And even after they do figure it out, the service would come with a hefty price tag - one that brick-and-mortar retailers wouldn't have to pay.
 
Most proponents of the tax (including the New York Times and Pittsburgh PostGazette) have argued that it’s a question of fairness; that online retailers should collect because brick-and-mortar stores have to as well.  This ignores the fact that brick-and-mortar retailers have to collect one tax, while online retailers would have to collect nearly 8,000 taxes at multiple rates (including combinations of state, county, and city taxes).  That's not very fair either.  Further, as an opposing view op-ed points out, states already have "use tax" laws on the books to require purchasers to remit the tax themselves.  Just because a state has enforcement problems doesn't make forcing out-of-state retailers collect thousands of different taxes any less unfair.
 
So, what's the real justification for taxing internet sales?  As USA TODAY put it: “Internet sales have skyrocketed, from $27 billion in 2000 to $133.6 billion last year.”  That said, their entire editorial could have been summed up by one famous Willie Sutton quote. When asked why he robbed banks, Sutton simply replied "because that's where the money is."
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The California "Amazon Tax" Returns
By Kelly William Cobb , Monday, December 14, 2009 10:47 am

It’s baaack! The affiliate nexus tax has reared its ugly head again in California.
 
The legislation (AB 178) would require an out-of-state online retailer who advertises through a website in California to collect sales taxes on all Golden State residents.  It was initially stalled prior to a hearing in the California Assembly last April. However, the legislature has kept the bill on the docket moving into 2010 and has another hearing scheduled in the Assembly’s Revenue and Taxation Committee for January 11th.
 
We’ll keep you abreast of more details as they unfold, but in the meantime, California residents should contact their legislators in opposition by clicking here.
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Tags: California
Happy Birthday, Internet!
By Patrick M. Gleason

StopeTaxes.com wishes the Internet a very happy 40th birthday! 

What started in a lab in UCLA in 1969 has transformed human civilization. The internet has changed the way we work, learn, communicate, conduct commerce, and live. One of the most significant developments in human history, it has facilitated tremondous prosperity, innovation, and is bringing change to even the most closed, cruel, and opaque regimes in the world. 

StopeTaxes.com is committed to preserving liberty online. Indeed, the internet is the last best example of a truly free market. However, efforts are afoot that will hinder all that has made the internet a boon to the economy and humanity.

Whether it's "Net Neutrality" in Washington or proposals to tax internet access and e-commerce in the states, the internet and online community are under assault.

StopeTaxes.com is here to combat and educate the public about these nefarious efforts. Join us in this crucial fight for freedom online and stay tuned to StopeTaxes.com for latest information.

 

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