NY cyberspace tax analyses

[ld231782@longs.lance.colostate.edu]

These msgs were taken from miscellaneous mailing lists. Most importantly, this
tax does *not* simply affect `phone sex' 900 lines, as a sort of `sin tax' as 
supposed by some. To the contrary, BBSes, online services, even *shareware* 
is affected by the tax.

Authors below report

- BBSes *are* subject if computer & users are in NY
- CompuServe, Prodigy, America Online *subject* to tax (Newsday 9/6)
- SHAREWARE is *taxed* under the rate if downloaded from NY board
- relevant court cases that struck down similar taxes based on 1st amendment
- one person complains of `poor wording' in law -- no kidding.

I propose that a mailing list dedicated to the topics of cyberspatial 
regulation and taxation be created ASAP.

===cut=here===

Date: Sat, 11 Sep 1993 23:01:40 -0400 (EDT)
From: Jean Armour Polly <jpolly@nysernet.ORG>
Subject: Re: NY tax on information services


[...] I called the NYS Tax and Finance folks on Friday and they
faxed me info on this bill.
Briefly (though I am not a lawyer, pun intended), based on a phone
conversation with them:
 There is a tax if
-- the "bbs operator" charges a membership fee AND
-- the host computer is in NYS AND
-- the operator sells to NYS residents.

If the host computer is out of state it does not apply at all.
If the host is in NY but the customer is out of state it does not apply.
If the service is run by a non-profit it does also not apply.

Also, SHAREWARE is affected. If you download shareware and subsequently
send in the registration fee, the software producer has to charge you NYS
tax-- if he's in NY and the customer is in NY. This particular part is
written very poorly IMHO.

Hope this helps. I have the text of the memo and some examples I can send
to you monday if you want.

Best,
JP


Date: Sat, 11 Sep 1993 19:50:35 -0500
From: farber@central.cis.upenn.edu (David Farber)
Subject: NY tax on information services


Russell Nelson writes:
 
>> September 1, 1993  New York Newsday
>> By Joshua Quittner
>>
>>   Starting today, metropolitan New York residents will pay a hefty
>> 13.25% sales tax on information services they get over phones and
>> computers - the highest tax on information services in the country,
>> experts say.
>
> IMHO, this is not true (but it sure makes good press). 
> Reading over the text of the law, it appears to be 
> targetting the 900/800 oral information providers.  It 
> specifically excludes anything customized for the particular 
> user, and it specifically excludes written materials. 
 
Yes, but apparently the New York authorities disagree with you. 
See _Newsday_, 9/6:
 
"    The  Budget  Division  and the Department of Taxation and 
Finance agree that  the  5-percent surcharge also applies to such 
wildly popular computer services  as  CompuServe,  Prodigy  and 
America on Line. So, in addition to taxing  the  poor  souls who 
use those sex-phone services, the new law goes after  a  more 
sophisticated  and  altogether  more resourceful crowd, the 
computer literate."
 
Steve Haynes
 
* Stephen L. Haynes            Internet:  shaynes@research.westlaw.com
* Manager, WESTLAW Research    MCI Mail:  221-3969
*   & Development              Compuserve:  76236,3547
* West Publishing Company      Phone:  612/687-5770
* 610 Opperman Drive           Fax:  612/687-7907
* Eagan, MN  55123


Date: Sat, 11 Sep 93 23:45:14 -0700
From: djb@silverton.berkeley.edu (D. J. Bernstein)
Subject: Taxing the First Amendment

The First Amendment _does_ prohibit taxes aimed at the press.

See, for example, Grosjean v. American Press Co., 297 U.S. 233 (1936).
A law whose effect was to impose fees on several large newspapers was
declared void on its face.

This protection is not limited to the press; it is a common theme in 
many First Amendment cases. See, for example, the important case of
Freedman v. Maryland, 380 U.S. 51, footnote 3 (1965): ``Appellant also
challenges the constitutionality of Sec. 6, establishing standards, as
invalid for vagueness under the Due Process Clause; Sec. 11, imposing
fees for the licensing and inspection of a film, as constituting an
invalid tax upon the exercise of freedom of speech; and Sec. 23, 
allowing exemptions to various classes of exhibitors, as denying him
the equal protection of the laws.''

The Supreme Court didn't rule on these issues---it didn't have to,
because it struck down the entire Maryland film censorship statute as an
invalid prior restraint. But Freedman's appeal would probably be a good
model for an attack on the New York cyberspace tax. The latter tax is,
after all, aimed directly at the exercise of freedom of speech, and its
exemptions deny equal protection to certain information providers. (Note
that the aim of a law is judged by its operation and effect, not by the
motives of the legislators, at least for First Amendment purposes.)

---Dan