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The Beginning Of Internet Sales Tax

A story titled Appeals court: Borders must pay Calif. tax on online sales may be the straw that breaks the camel’s back in the controversy over collecting sales tax on internet purchases. Businesses can avoid paying sales taxes to states where they have no physical presence, according to a 1992 U.S. Supreme Court ruling. Borders books online division has no physical presence in California and as such has decided not to charge tax in California.

Borders Group Inc. says it has never collected sales tax for books and music sold over the Internet to California residents, even though the Ann Arbor, Mich.-based corporate parent operates 129 California stores under the Borders and Waldenbooks brands, as well as a 414,000-square-foot distribution center in the state.

"We've done everything within the confines of the tax law. We have always believed that what they did was correct under the Constitution," said Borders lawyer Scott Brandman.

California's 1st District Court of Appeal in San Francisco rejected that argument, ruling on May 31 that the Borders' Web site and retail stores have been too intertwined to call themselves separate companies. The three-judge panel cited in-store advertising for the Web site, receipts that said "Visit us online at www.borders.com" and the ability of customers to return online merchandise at retail stores.

The judges also noted that the companies had board members in common and shared a similar logo.

States and local governments have lost $15.5 billion in sales tax revenues because of Internet sales, according to conservative estimates by researchers at the University of Tennessee. The loss is projected to increase to $21.5 billion by 2008 as e-commerce continues to grow.

Borders is also fighting online sales tax disputes in Nevada and Illinois, according to documents filed with the Securities and Exchange Commission, and has warned that profits might drop if it's forced to pay taxes on its past online sales. But the company said any adverse rulings won't affect its ability to pay its bills or undermine its financial strength. Borders earned $131.9 million on sales of $3.9 billion last year.

"The notion that these were separate companies was nothing more than a tax dodge," said Oren Teicher, chief operating officer for the American Booksellers Association, a Tarrytown, N.Y.-based nonprofit organization of independently owned bookstores. "We just think everyone ought to be treated the same."

Whether this is an isolated incident focusing on Borders or this is an indication that states will be trying o get the rest of the $15.5 billion being lost each year is unclear. It seems that for now the states are going after the low hanging fruit, the companies with some indirect physical location in their state. We will see how this story unfolds over time.

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Telco stock options a conflict of interest for Rep. Pete Sessions

I don’t know why any politician would want to prevent cities from providing wireless Internet access to its citizens. Here is a release I received that if true is pretty damaging to U.S. Rep. Pete Sessions from Texas. If these allegations are true, it would be an unprecedented conflict of interest. Somehow I have trouble believing anyone would have so obvious a conflict out there for the press to pick up on so I remain skeptical:

http://www.freepress.net/press/release.php?id=73

Congressman behind bill to ban municipal broadband holds more than $500,000 in SBC stock options; Free Press calls on Congress to reject HR 2726

WASHINGTON - Free Press, the national, nonpartisan media reform group, reported today that U.S. Rep. Pete Sessions (R-Texas) – sponsor of a federal bill that would prohibit cities and towns from delivering high-speed Internet service to their citizens – owns more than $500,000 worth of stock options in telephone giant SBC.

If passed, the legislation (HR 2726) would be a windfall for SBC and other major telephone and cable companies, allowing them to veto locally supported efforts to provide affordable broadband services. Sessions spent 16 years as an executive at SBC (and its predecessor, Southwestern Bell) before joining Congress. The Texas-based company also ranks as Sessions' second-biggest career patron, pouring more than $75,000 into his campaigns.

"Congressman Sessions is the latest poster child for corruption on Capitol Hill,"
said Josh Silver, executive director of Free Press. "He has put personal greed ahead of his responsibility to the public. This legislation boosts the bottom line of companies like SBC by stifling free-market competition, slowing innovation, and taking away the right of local communities to decide which technologies best serve their interests. Sessions should come clean about his conflicts and abandon this bad bill."

The legislation, titled the "Preserving Innovation in Telecom Act," would "prohibit municipal governments from offering telecommunications, information or cable services" if a corporation or private company offers a "substantially similar service" in the area.

Telephone and cable companies have tried to introduce similar bills in statehouses across the country. In 2005, anti-municipal broadband legislation was rejected in nine of the 13 states where it was introduced –including Texas, where SBC dispatched more than 100 lobbyists and even its CEO in failed push for a bill.

"Soon, nearly all information – TV, radio, telephone and the Web – will be delivered via high-speed broadband," said Free Press Policy Director Ben Scott.
"Community Internet connects rural communities, attracts new businesses, and serves schools, libraries and public safety sectors. It will make access to the information superhighway affordable and accessible to everyone."

Free Press discovered Sessions' stock options on his House financial disclosure form for 2003, the most recent year available (see http://www.opensecrets.org/pfds/pfd2003/N00005681_2003.pdf). Sessions also reports owning considerable stock in other companies that would benefit from HR 2726, including Verizon and Bell South. (2004 disclosures will not be available until June 15.)

Free Press is circulating a petition asking members of Congress to oppose HR 2726 and not "stand in the way of local governments serving the needs of local citizens." So far, more than 25,000 concerned citizens have signed the petition, which will be delivered to their representatives.

A copy of the petition is available at http://www.freepress.net/action/sessionsbill.

"These telephone and cable companies are not preserving innovation – they're preserving profits," Scott said. ""This bill is about cementing their stranglehold on future of communications in America. These telephone and cable companies will stop at nothing to stifle local efforts to bridge the digital divide."

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Intel Invests in China

$200 million is nothing to sneeze at Intel has decided this is the correct amount of money to invest in the Chinese market via their Intel Capital China Technology Fund. The fund will be used to invest in companies that complement Intel's technology initiatives and to further build out the

Internet infrastructure in China. The fund will also provide local businesses with capital to help nurture important technologies and products developed in China. Examples of initial focus areas include cellular communications, broadband applications for consumers, and semiconductor design.

Intel Capital, which has investment managers based in Hong Kong, Shanghai and Beijing, made its first strategic investment China in 1998 and since then has invested in close to 50 Chinese companies across nine cities in mainland China and Hong Kong. Eleven of these companies have since gone public or have been acquired, including AsiaInfo Holdings Inc., a telecom software supplier; Chinacast Communications Holding Ltd., a total solution service provider for remote education; Sohu.com, an Internet portal; Techfaith Holdings Ltd., an independent cell phone design house; and UTStarcom Inc.

I recently met with the folks from UTSTarcom and they are one of the few companies that have developed a WiFi telephony phone for the consumer market. It is a really sleek design and I believe it will do very well.

For more please see: Intel Establishes $200 Million China Venture Fund; Intel Capital China Technology Fund to Accelerate IT Innovation, Growth of Internet Economy in China.

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Nokia And Apple Smart Phone Browser

Nokia is working with Apple to provide an open-source smart phone browser that utilizes components from the Apple Safari browser. Nokia will provide the new browser to its Series 60 licensees. Companies such as Panasonic and Samsung are included on this list.

Apple has been desperately trying to get into the phone business for quite some time with an that would have many of the features of the iPod. Rumors abound that the wireless carriers are in no way interested in an Apple device that allows users to listen to music that isn’t downloaded over the cellular airwaves and thus charged for by the wireless carriers.

The browser launch may be Apple’s way of gaining legitimacy in the mobile world.

TechSpot
PC Advisor

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