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It’s September – Back to Work on AWFUL Internet Laws

iAwful After a quiet August recess in Washington, DC, it’s time to refocus our efforts on public policies that impact online commerce. And today we consider not the good, and not merely the bad, but the awful – iAWFUL.


The Internet Advocates’ Watchlist for Ugly Laws (iAWFUL) tracks the ten instances of state and federal legislation that pose the greatest threat to the Internet and e-commerce. Our efforts so far this year have helped to remove two of the worst offenders from the February 2010 iAWFUL list, including a federal bill giving the Federal Trade Commission more powers to make new rules for online activity without Congressional guidance, and a Maine law restricting online marketing to teenagers.


In our second update for 2010, NetChoice identifies new legislation that has the potential to stall Internet commerce. Our top two are Congressional bills:


Number 1:  Federal online privacy efforts such as Rep. Rush’s “Best Practices Act” (HR 5777) and the staff discussion draft from Boucher / Stearns.

Number 2:  The expansion of Internet taxation HR 5660, the “Streamlined Sales Tax Bill”


This iAWFUL list targets federal privacy proposals that would curtail the continued development of ad-supported content and services that consumers have come to expect from the Internet. The privacy proposals would regulate small websites that don’t collect personally identifiable information. For instance, a proposal by Representatives Rick Boucher (D-VA) and Cliff Stearns (R-FL) would regulate a tiny online startup that is adding just 100 users a week, even when users provide only a nickname and password.


And where these proposals attempt to mitigate new regulatory burdens, they don’t go nearly far enough. The proposals would grant the Federal Trade Commission broad powers to dictate the details of self-regulatory programs, effectively transforming the FTC into a “port authority” of the Internet. Moreover, the safe harbor “choice program” found in Representative Bobby Rush’s (D-IL) legislation is no real solution for online businesses, who would be forced to conform to avoid costly lawsuits enabled by the bill’s private right of action – with statutory damages of $1,000 per violation.


An updated federal push to expand Internet taxation via the Streamlined Sales Tax (SST) jumped into the number two slot of the 2010 iAWFUL list. In their hunt for additional tax revenues, a handful of states have again asked Congress to force out-of-state businesses to be their tax collectors. H.R. 5660, sponsored by Representative Delahunt (D-MA), would take money from consumers and move it to two dozen state capitols while imposing costly new burdens on small businesses in all fifty states. This new collection burden would be a jobs-killer that cannot be justified by the grossly overestimated revenues trumpeted by advocates.


Although sales tax systems are as complex as ever, SST supporters have abandoned their original promise to exempt small businesses and compensate sellers for the burdens of collecting taxes. The proposed legislation once again shows that serious simplification of sales tax systems has become just a slogan — not a standard.


Individual legislative proposals from a broad swath of states including California, Colorado, Illinois, Maryland, New Mexico, Virginia and Oregon round out the iAWFUL list through additional tax grabs that seek to use the Internet as a novel revenue source at the cost of consumer privacy and convenience.


The entire updated 2010 iAWFUL includes:


1. Federal Online Privacy Legislation – New to iAWFUL

2. Federal Legislation to Expand Internet Taxation

3. Consumer Purchase Tax Reporting Initiative (CO)

4. Hotel Taxes on Online Travel Companies (NY, FL)

5. Advertising Nexus Taxes (CO, IL, NM, MD, VA, VT)

6. New Taxes on Digital Downloads (OK, SC)

7. Nevada Encryption Mandate (NV)

8. California Data Breach Notification (CA)

9. Regulation of Free Trial Offers and Renewal Agreements (OR)

10. Component Nexus Laws (CA, CO, OK)