7 Internet Law Predictions for 2012

1. Hollywood Retreats

The entertainment industry thought it had bought enough politicians, plus foolish support by GoDaddy (now retracted), to ram through SOPA/PIPA legislation. Pretending to be about property rights, this horrible legislation would cripple ecommerce while allowing politicians in power to crush free speech online.

Now that Google, Amazon, Facebook, etc. are fighting back, together with civil rights groups and social media, it looks like Hollywood will retrench and regroup until after the November 2012 elections. This battle isn’t over by a long shot. Look for the entertainment industry to try one last shot to push through SOPA/PIPA when Congress critters return to D.C. More lipstick will be put on this legislative pig and it will come back in 2013 under a different name (Protect the Children Act, Save the Puppies Act, Don’t Starve Grandma Act, etc.) designed to create more sympathy.

Let’s hope large ecommerce sites continue to fight and GoDaddy has learned its lesson.

2. Privacy Changes

As Congress deadlocks on Internet privacy legislation, look for the Federal Trade Commission (FTC) to move forward with additional regulatory protection for children. Either in 2012 or the following year, look for bans or severe restrictions on GPS tracking of children by smart phone apps.

In the meantime, the private sector will come up with additional ways to both protect and circumvent Internet privacy. Whatever comes out of Washington will be obsolete before it becomes law.

3. New Biz Opp Disclosure Requirements Ignored

Effective March 1, 2012, there are new FTC biz opp/work-at-home disclosure requirements. Expect most Internet marketers to ignore this requirement. Some will make disclosures that contain misleading information designed to fool consumers. Few will get caught. The FTC will grab some headlines by suing and confiscating assets of a couple of the really bad apples.

4. Internet Sales Taxes Move Forward

The Federal “main street fairness” Internet sales tax legislation will have the support of both Wal-Mart and Amazon. Expect crony capitalists at the U.S. Chamber of Commerce to jump on the bandwagon.

Broke states (California, Illinois, etc.) will push heavily for a federal Internet sales tax on the mistaken assumption they will receive a chunk of the tax money from D.C.

The primary advantage that small business website owners have is that the November 2012 elections provide no incentive for the Republican House and the Democrat Senate to cooperate on agreeing to the time of day or anything else. Plus, there seem to be few Republicans in either house that want to face their constituents to defend imposing a new tax in the middle of an economic recession.

5. Want to bet?

It looks like the U.S. Department of Justice is rethinking its use of a 1961 law to arrest and prosecute the owners of Internet gambling sites. Expect broke state governments to push heavily for legalization of intra-state Internet gambling. In other words, these state governments are going to want the federal government to permit gambling sites to be licensed on a state-by-state basis for gambling only by residents within the one state where each site is licensed.

It remains to be seen whether traditional offline gambling interests will support or oppose such plans. Some of the major U.S. casino companies are already investing in joint ventures with European gambling sites with the expectation of rolling out U.S.-based sites once they become legal.

6. Denial of Service

In the interest of “homeland security,” the U.S. government will continue to arbitrarily shut down websites without affording due process in court. There will not be a backlash until the government overreaches and shuts down a social media website that has political backers on Capitol Hill willing to subpoena and grill those involved.

7. Icann of .Coke

The FTC will continue to pressure Internet Corporation for Assigned Names and Numbers (ICANN) about the foolish decision to sell .brands generic top level domain extensions for six figures. If ICANN proceeds, expect a wave of lawsuits to swamp the courts as Competitor A buys the .CompetitorB extension to steal traffic away from Competitor B.

…Wishing you the best in the coming year. Let’s hope the politicians don’t muck up ecommerce for small business owners. Congress doesn’t understand the Internet so it should just stay on the sidelines instead of ruining it for the rest of us.

Filed Under: Copyrights, Domain Names, Federal Trade Commission, Intellectual Property, Internet Lawsuits, Internet Lawyer, Internet Sales Tax, MPAA, Privacy, RIAA, Social Media, Taxes Tagged With: 2012 internet law predictions, 2012 internet privacy predictions, 2012 predictions, Federal Trade Commission, ftc, ICANN, internet sales tax, Internet sales taxes, main street fairness, PIPA, SOPA

Connecticut Internet Sales Tax Hurts Affiliate Marketers

What is the new Connecticut Internet Sales Tax supposed to do?

Connecticut has recently passed a bill which requires internet retailers to charge a sales tax on all goods sold in Connecticut if the internet retailer has a physical presence in the state.

Connecticut lawmakers considered the law necessary to hold Amazon.com and other online retailers accountable like all other businesses in the state. Lawmakers argue that it is not fair for Connecticut based ‘brick and mortar’ business to be subject to the state’s sales tax while Amazon.com is not. Aside from raising funds for the state in this time of economic uncertainty, the bill was also designed to protect Connecticut business from being unfairly outsold by online retailers not subject to the same tax laws.

Why did Amazon.com pull out of Connecticut?

The United States Supreme Court has ruled that a state can only tax an entity if that entity has some kind of a physical presence in the state. Regardless of whether Amazon.com has an actual physical ‘brick and mortar’ presence in Connecticut, the Connecticut legislature’s bill considers Connecticut-based bloggers and other internet content providers who advertise for Amazon.com a sufficient physical presence to subject Amazon.com to the tax. These bloggers and others or ‘affiliates’ advertise for Amazon.com because they receive a portion of the revenue generated by users accessing Amazon through their site.

After the new Connecticut Internet Sales Tax was passed, Amazon.com decided that it would rather give up on Connecticut based affiliates than be forced to pay Connecticut’s sales tax. In its economic calculation, Amazon probably found it more profitable to continue selling goods in Connecticut without having to pay the tax, than it would have been to continue advertising with Connecticut-based affiliates, while being subject on all sales to Connecticut’s new tax.

What effect will the Connecticut Internet Sales Tax have on Connecticut and on Amazon.com?

The immediate effect of the Connecticut Internet Sales Tax has been both a loss to Amazon.com and a loss to the Connecticut based affiliates that had previously generated income from Amazon’s advertisements on their websites. Amazon.com suffers to some extent because it can no longer advertise on the popular Connecticut blogs and websites it on which it had previously been an active advertiser.

To the Connecticut based affiliates, the Connecticut Internet Sales Tax will be perhaps even more traumatic. Not only is Amazon.com prevented from advertising on Connecticut based websites, but other online retailers might also fear subjugation to the Connecticut Internet Sales Tax, and avoid placing any advertisements on Connecticut affiliates websites. Perhaps the law is fair in the long run, as it prevents online retailers from having an unfair advantage, but in the short term, the Connecticut Internet Sales Tax cannot be said to be popular with either online retailers or the Connecticut-based affiliates that were once dependent on them.

Filed Under: Internet Lawyer, Internet Marketing, Internet Sales Tax, Marketing, Taxes Tagged With: Affiliate Marketing, affiliate-marketers, connecticut internet, connecticut internet sales, connecticut internet sales tax, connecticut internet sales tax hurts affiliate marketers, internet sales tax, internet-lawyer, new connecticut internet, sales tax

Amazon Supports Federal Internet Sales Tax Bill

Amazon.com supports a federal internet sales tax

Why have lawmakers proposed to initiate a new internet sales tax?

Responding to pressure from states and from organizations, members of the United States Congress are considering passing a federal internet sales tax bill which would force internet companies to pay a sales tax.

Traditional ‘brick and mortar’ retail stores specifically feel that they are at a disadvantage when competing against internet retailers who are not bound by the same tax laws as the ‘brick and mortar’ stores. Though some states have worked on bills which tax online retailers, most states do not as of yet tax purchases made over the internet. Responding from pressures by ‘brick and mortar’ stores, and from individual states who feel that an internet tax would raise state revenues in this difficult economic time, those in Congress have considered passing an internet tax law.

Why does Amazon support the federal internet sales tax bill?

Surprising to many observers has been that Amazon.com, one of the world’s largest online retailers, supports some federal effort to subject internet retailers to taxation. This comes as a particular shock considering Amazon’s opposition to internet sales tax proposals that have arisen in different individual states, including Illinois and Connecticut. Amazon has even stopped conducting business with land based ‘affiliates’ in states mandating an internet sales tax, so as to avoid being subject to those state taxes.

Despite these efforts and the fact that the company could potentially lose business as a result of a tax on online goods, Amazon has consistently supported a federal effort to subject online retailers to an internet sales tax. Representatives of the company claim that Amazon already is subjected to a sales tax in around 50 percent of its total sales across the world, and that sales tax has not adversely affected business. The company also claims that a single internet sales tax policy in the United States would enable Amazon to more effectively sell products in accordance with the law, since the company would not have to deal with the tax policies of each individual state.

What problems could occur if the new internet sales tax proposal became law?

Critics, however, fear that a federal internet sales tax would serve as an undue burden on internet companies. Some argue that small online businesses would be subjected to heavy taxation which could, in turn, stifle the innovation the internet has come to represent. Those opposed to the new tax further contend that the tax subjects these small internet retailers to the same massive tax obligations that large retailers, such as Amazon, are more capable of enduring.

Small companies feel that Amazon’s support of the tax might stem from the belief that Amazon’s small competitors might be forced out of business if a tax was implemented. Companies such as eBay, free-market enthusiasts, and many concerned about the future of the internet have all voiced their concern about what they perceive as a biased and counterproductive internet sales tax.

Filed Under: Internet Lawyer, Internet Sales Tax, Taxes Tagged With: amazon supports federal internet sales tax bill, amazon tax, brick and mortar, counterproductive internet sales, federal internet, federal internet sales, federal internet sales tax, internet, internet retailers, internet sales tax, internet tax, internet tax law, largest online retailers, new internet sales, sales tax, sales tax bill, sales tax policy, sales tax proposal, small internet retailers, small online businesses, tax, tax online retailers