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main street fairness

Illinois Internet Tax Declared Unconstitutional

By Internet Lawyer

An Illinois county judge has declared the state’s Main Street Fairness Act unconstitutional. The “Amazon Tax” imposed by this state legislation is typical class warfare by a bankrupt government looking to loot funds from ecommerce transactions.

Given a similar ruling on Colorado’s Internet sales tax, you can expect this issue to ultimately be decided by the U.S. Supreme Court.

Of course, there are special interests and corrupt politicians who are not content for the nation’s highest court to rule on the constitutionality of state taxes on interstate commerce. They intend to ignore the Court’s 1992 Quill decision on the same issue that struck down taxes that interfered with interstate sales by mail order.

You will see an unholy alliance of Wal-Mart, Amazon, and politicos like “Dick” Durbin try to ram through a federal Internet sales tax. Never underestimate the greed and corruption of those involved when there is money to be robbed from entrepreneur Peter to give to sloth Paul.

Of course these second-handers don’t realize that at some point those who produce will start asking “Who is John Galt?

Court kills Colorado Internet sales tax

By Internet Lawyer

A federal district court judge just ruled Colorado’s Internet tax (nicknamed the “Amazon tax”) is an unconstitutional burden on interstate commerce.

That’s the good news.

The bad news is that Amazon and other big online retailers have been cooperating with efforts to pass a U.S. federal Internet sales tax supported by offline stores like Wal-Mart under the term “Main Street Fairness.”

Why?

Big retailers like Amazon have the infrastructure in place to collect and remit Internet sales taxes but it would be easier if they just paid the federal government instead of 50 states and thousands of cities.

Smaller online competition gets hurt because most business website owners will not have the ability to handle collection and remittance of sales tax to places beyond their home state or province.

On the bright side, maybe this finding that the Colorado Internet sales tax is unconstitutional will encourage Amazon to grow a pair and actually fight this issue up to the U.S. Supreme Court instead of cooperating to get a federal Internet sales tax in place.

To learn more about Internet taxes, check out Chapter 27 of my book on Internet Laws: How to Protect Your Business Website Without a Lawyer.

7 Internet Law Predictions for 2012

By Intellectual Property, Internet Lawyer

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.

 

Main Street Fairness Act and Internet Sales Taxes

By Internet Lawyer

main street fairness act

Is the Main Street Fairness Act really fair?

What is the Main Street Fairness Act?

The Main Street Fairness Act is a bill sponsored by Illinois Senator Dick Durbin that would change the dynamic of buying products over the internet if passed.

As it is now, internet sales organizations like Amazon.com generally are not required to charge sales tax for products sold by their website if that internet company does not have a ‘brick and mortar’ physical building in the state. This is consistent with a 1992 U.S. Supreme Court decision concerning mail order companies.  However, if the Main Street Fairness Act were passed, this would all change, assuming the Supreme Court would uphold the law when challenged.

Why do some want to pass the Main Street Fairness Act?

Those in government, including Senator Durbin, feel that the Main Street Fairness Act is necessary to hold online retailers to the same standards non-online retailers are held to. For example, Amazon.com is able to charge less than other retailers because it is exempt from having to charge sales tax for purchases from its website. Some government officials argue that this competitive advantage was at one time necessary to stimulate fledgling internet companies, but feel that those companies, some of the largest in the world today, no longer need special tax exemptions.

Instead of damaging the now incredibly productive internet companies, Senator Durbin’s bill is said to simply hold the internet to the same standards of taxation all other companies are held to. Support for the Main Street Fairness Act might be garnered when Americans realize that many other nations tax purchases of online products. In these tough economic times, some government officials feel that the Main Street Fairness Act could help stimulate the economy as funding for government programs could be bolstered by the increased revenue generated by the new tax.

Some brick-and-mortar retailers want to handicap their online competitors by passing the Main Street Fairness Act and similar Internet sales tax laws at the state level. They have front groups that lobby on their behalf in the interest of “fairness,” such as the Alliance for Main Street Fairness.

Why are some people opposed to the Main Street Fairness Act?

Anti-tax groups, internet companies, and consumers have all expressed their disapproval of the Main Street Fairness Act. These groups claim that it is not fair to force an internet company to charge taxes especially since most internet companies do not have set locations in the particular states that would levy taxes against the companies. It is the responsibility of out-of-state clients to pay any taxes to their state of residence instead of having the online company become tax collector for thousands of state and municipal government bodies.

People opposed to the Main Street Fairness Act stress that much of the growth the United States has recently experienced has resulted from the fact that the internet has remained relatively immune from restricting taxes and regulations. These groups further tout that instead of bolstering the economy, the Main Street Fairness Act would instead stifle growth. By forcing internet companies to charge taxes, it has been argued, prices of their goods will increase, and people will be less able to buy things over the internet. They further argue that while the government would earn more in tax revenue, that money would be better spent if it were in the private hands of individuals rather than spent on government programs.

One thing is clear. If the Main Street Fairness Act becomes federal law, it will fundamentally change e-commerce.

Alliance for Main Street Fairness: Internet Tax Lobby

By Internet Lawyer

Alliance for Main Street FairnessWho could possibly be against an alliance for main street fairness? You should be in this case because “fairness” to this DC-based lobbying group means that you pay more taxes.

The Alliance for Main Street Fairness starts off from the faulty logic that the government should loot more money from online business transactions in order to be “fair” to those selling in brick-and-mortar stores.

According to the Alliance for Main Street Fairness, offline businesses are at an unfair advantage because Internet businesses don’t collect and remit sales taxes on transactions. This is a twisted half-truth at best.

Here’s why…

1. Many brick-and-mortar businesses sell online too. They have the same advantages in ecommerce as Internet-only businesses.

2. Like their offline competition, most legitimate Internet businesses collect sales taxes for transactions with residents of the states where they are based and remit those taxes to the state government.

3. If you’re going to cheat the government out of sales taxes, you can just as easily do it offline as online.

Let’s say that you own both a brick-and-mortar shop and a related website that both sell widgets. Both are based in New York City. If a California client phones your shop and orders a widget, when you ship it to California, it should be the responsibility of the client to remit any sales/use tax for that transaction due to California.

But what if the same California client ordered the widget from your New York City-based website? The Alliance for Main Street Fairness wants you to become the tax collector for California by charging sales tax on the transaction to the California resident and then remitting the sales tax to California’s state government.

Now imagine trying to handle the paperwork and tax collection for all 49 states where your business is not based plus the hundreds of cities that will jump on the bandwagon and require you to collect taxes and fees for transactions with their residents.

Not only is this unfair, the tax and regulatory burden will kill most online business, including business websites owned by brick-and-mortar companies.

What you’re seeing here is an unholy alliance between special interest groups and cash-strapped governments looking to raise your taxes instead of cutting spending.

Perhaps even more noxious is the unconstitutional interpretation of the Interstate Commerce Clause to permit state governments to interfere with online business in this manner. In the quest to raise revenue, the U.S. Constitution is conveniently ignored.

What are you going to do? Spend hundreds of thousands of dollars of your money and years of your life litigating the issue to the U.S. Supreme Court against taxpayer-funded lawyers representing the state?

There’s nothing fair about making business website owners become tax collectors for 50 welfare states and their municipalities. Let’s hope that Amazon or another big online retailer takes a stand one of these days and gets this misconduct stricken down as unconstitutional.

Regardless, don’t be deceived by the Alliance for Main Street Fairness. If your neighbor’s car gets stolen, this type of “fairness” insists that your car should be stolen too so you can both walk.

Socialism disguised as “e-fairness.” Pay what you owe but don’t be suckered into paying more or becoming a tax collector if you don’t have to.

To your online success!

-Mike the Internet lawyer