Fines and Jail Time for Website Employees
if Users Fail to Register with City
Washington, DC, April 25, 2018 – A Santa Monica ordinance, which forces online platforms to independently investigate and ensure every person with a listing on its website complies with the city’s licensing requirements, could be a death blow to web-based home sharing, ridesharing and a host of other online platforms, NetChoice and former Congressman Chris Cox (R-CA) argued in a in a joint “friend of the court” brief filed today in the case of HomeAway and Airbnb v. City of Santa Monica.
Cox, author of a federal law that makes such ordinances illegal, and NetChoice urged the U.S. Court of Appeals for the Ninth Circuit to invalidate the ordinance.
HomeAway and Airbnb require all persons listing a rental on their websites to acknowledge they are following all local laws. However, Santa Monica would hold the online platforms liable even if they were misled by property owners. The penalty? Employees at Airbnb and HomeAway could face fines and jail time.
The Cox-NetChoice brief explains how Santa Monica Ordinance 2535CCS violates federal law — Section 230 of the Communications Decency Act (1998).
“The Santa Monica ordinance effectively transfers each homeowner’s legal responsibility to the internet platform. This clearly violates Section 230,” said Chris Cox, author of Section 230 of the Communications Decency Act. “Sites such as Airbnb and HomeAway are matchmakers, bringing together homeowners and visitors. Their service is national in scope. When a family in Ohio plans a vacation in California or Florida or Maine, they expect Internet listings in these venues and more. And that is what the Internet delivers: it has allowed millions of homeowners across the country to list on these sites while millions of potential visitors have gained immediate, free access to those listings.
“Requiring the websites to review each of these listings one at a time,” Cox added, “will eliminate the very benefits consumers expect from the Internet. It is the homeowners’ responsibility to ensure they comply with all local rules and ordinances. Making the Internet intermediary liable for the website users’ legal responsibilities is what Section 230 rightly prohibits,” Cox concluded.
Section 230 protects online platforms from legal liability for user-generated content. Often termed “the most important internet law you’ve never heard of,” it is the law behind “Internet 2.0”. Without it, websites like Yelp, eBay, Facebook, and YouTube would not have gotten off the ground.
The impact of the Santa Monica ordinance could be widespread, setting a legal precedent that would undermine ecommerce.
“This is the slipperiest of slopes that Santa Monica is climbing. Do we hold clothing retailers responsible for manufacturers who may lie to them about child labor practices or mislead them about their fabrics?” said Steve DelBianco, president and CEO of NetChoice. “If Santa Monica wins, online platforms will face new costs and liability risks endangering an industry that has enabled millions of Americans to earn extra income from their homes.”
“The City seems to want to Make Bulletin Boards Great Again, by saddling marketplaces with new criminal liability,” DelBianco added.
Below are two excerpts from the brief:
- “The Ordinance requires Airbnb and HomeAway to review each individual posting on its website and check it against “a Registry of licensed home-sharing operators in the City.” Defendant’s Opp. to Preliminary Injunction at 14-15. This is exactly what Section 230 prohibits.” p.12
- “If further proof were needed that the Ordinance requires a one-at-a-time review of every online listing, it may be found in the criminal sanctions for noncompliance. Not only are they harsh ― the penalties for an Airbnb or HomeAway employee include half a year in jail ― but they are specifically imposed on a per-violation basis. §6.20.100(a). Each rental by an unlicensed website user constitutes a separate violation.” P.14
Steve DelBianco, NetChoice President, attended today’s oral argument before the Supreme Court in the case of South Dakota v. Wayfair.
NetChoice filed an amicus brief in the case, explaining that Congress has spoken on the online sales tax issue by enacting the Internet Tax Freedom Act (ITFA) in 1998, and by making ITFA permanent in 2016. ITFA prohibits discriminatory sales tax burdens on e-ecommerce, which is precisely what would happen if the court overturns Quill. Instead of ruling now, the court could remand the case to South Dakota to analyze conflict with ITFA.
With respect to questions and arguments in today’s supreme court session:
“Tough questions asked by the Justices today reveal that the court understands this is far more complicated than South Dakota has claimed,” said DelBianco. “Overturning Quill isn’t just flipping off a switch. It would cause national chaos.”
DelBianco summarized the strongest questions by the court. They are followed below by exact quotes from justices:
- “If we overturn Quill, isn’t it a problem that other states may apply their sales retroactively?”
- “What’s the threshold for minimum contacts that trigger state tax obligations?”
- “What happens when the software breaks down?”
- “What are the costs for smaller businesses to collect for 46 states?”
- “If we overturn Quill, won’t we just help the biggest online sellers at the expense of small businesses?”
- “With nearly all the big ecommerce sellers already collecting, hasn’t this problem peaked, and why act now?”
- “Isn’t this the role of Congress? And if congress has not acted, doesn’t that suggest they are okay with Quill?”
- “Should we ignore Supreme Court precedent?”
If we overturn Quill, isn’t it a problem that other states may apply their sales retroactively?
JUSTICE ALITO: [D]oes the government have a position on the question whether retroactive application of — of this would be constitutional?
- STEWART: In our view, it would be constitutional
What’s the threshold for minimum contacts that trigger state tax obligations?
CHIEF JUSTICE ROBERTS: Mr. Stewart, do you believe that there is a constitutional minimum [number of sales for physical presence]?
- STEWART: there’s no constitutional minimum
What happens when the software breaks down?
SOTOMAYOR: What happens when the tax program breaks down, as it already has for the states who are using it, and merchants can’t keep track of who they’ve sold to?
What are the costs for smaller businesses to collect for 46 states?
SOTOMAYOR: Actually, [small businesses are] put at disadvantage not by Quill but by the fact that there are massive discount sellers, not just on the Internet, but even in stores now.
SOTOMAYOR: So what are we going to do with the costs that you’re going to put on small businesses?
If we overturn Quill, won’t we just help the biggest online sellers at the expense of small businesses?
BREYER: [T]heir side puts up a certain specter which I’m sensitive to, which is that we have four or maybe five giant potential retailers in the country; I mean, there could be a very small number selling virtually anything.
And they sell over the Internet. And the hope of preventing oligopoly, et cetera, is small business, which finds it easy to enter.
Now you raise with this entry barriers, and they say a lot and you say a little. And I don’t know if it’s a little or if it’s a lot.
And if it is a lot, there might be ways of putting minimums in that would, in fact, preserve the possibility of competition and the possibility of new entry, stopping the entry barriers from raising too high.
With nearly all the big ecommerce sellers already collecting, hasn’t this problem peaked, and why act now?
CHIEF JUSTICE ROBERTS: the suggestion in some of the briefs is that this is a problem that has peaked in the sense that the — the bigger e-commerce companies find themselves with physical presence in — in all 50 states.
If it is, in fact, a problem that is diminishing rather than expanding, why doesn’t that suggest that there are greater significance to the arguments that we should leave Quill in place?
Isn’t this the role of Congress? And if congress has not acted, doesn’t that suggest they are okay with Quill?
BREYER: Well, we have briefs from three Senators and Congressman Goodlatte that says Congress was about to act. And, indeed, what stopped them from acting was our decision to decide this case. Now that’s — that’s their view of it. And between whether they know or whether I know, I guess they have a better view. They’re members of Congress and they point to many statutes. And you are 50 states. If you do not have the power to get Congress to do something, I don’t know who would.
ALITO: [I]f Quill is overruled, what incentives do the states have to ask for any kind of congressional legislation?
CHIEF JUSTICE ROBERTS: [M]aybe [Congress] already have and they’ve made a decision or at least majorities have made a decision that this is something they’re going to leave the way it has been for, whatever it is, 25 years.
KAGAN: [U]sually, when somebody says something like that, that Congress has not addressed an issue for 25-plus years, you know, it — it gives us reason to pause, because Congress could have addressed the issue and Congress chose not to. This is a very prominent issue which Congress has been aware of for a very long time and has chosen not to do something about that. And that seems to make the — your bar higher to surmount, isn’t it?
JUSTICE KAGAN: But isn’t that essentially a reason why we should leave this to Congress? In other words, from this Court’s perspective, the choice is just binary.
It’s — it’s you either have the Quill rule or you don’t. But Congress is capable of crafting compromises and trying to figure out how to balance the wide range of interests involved here.
Now the General said Congress hasn’t done that, but, again, you know, Congress can decide when it wants to craft a compromise and when it doesn’t want to craft a compromise. And then Congress, if it decides it wants to craft a compromise, can craft a compromise in ways that we cannot.
Should we ignore Supreme Court precedent?
GINSBURG: Quill, right or wrong, was this Court’s decision. And if time has, and changing conditions, have rendered it obsolete, why should the Court which created the doctrine say: Well, we’ll — we’ll let Congress fix up what turns out to be our obsolete precedent?
Washington, DC, April 17, 2018 – Earlier today, the United States Supreme Court heard oral arguments in the case of South Dakota v. Wayfair, et.al. At issue is the legality of a new South Dakota sales tax law that imposes sales tax burdens on out-of-state businesses with no physical presence in the state.
The South Dakota law breaks with Supreme Court precedent set in the 1992 case of Quill vs. North Dakota and violates the Internet Tax Freedom Act (ITFA) enacted by Congress in 1998. These protections shelter small businesses from the demands of 46 state tax auditors covering 12,000 local tax jurisdictions.
Below, please find reactions to today’s oral arguments from NetChoice and several other eCommerce and online sales tax experts.
The Wrong Fight for Trump
NetChoice President Steve DelBianco
“The Trump administration argues that Quill should only protect mail-order businesses, and not online sales. While the President may want to penalize Amazon, and make mail order great again, Congress has made it illegal to discriminate against internet sales.
South Dakota is attempting an unconstitutional online sales-tax land grab. The Quill decision and the ITFA have protected online small businesses from the demands of 46 state tax auditors covering 12,000 jurisdictions and led to a vibrant era of ecommerce that fosters economic growth across the country.”
ITFA Co-Author Speaks Out
Former Congressman Chris Cox (R-CA)
“As co-author of the Internet Tax Freedom Act, I can attest to what Congress was worried about when we made it illegal for states to impose multiple sales tax burdens on out-of-state merchants selling online.
A store in one location doesn’t have monthly tax forms due in states all over the country. But a small internet merchant would, without the rule established by the Internet Tax Freedom Act.
Congress didn’t want different tax collection burdens for e-commerce versus other commerce. When a South Dakota resident buys furniture from a store across the border in Montana, South Dakota doesn’t require the brick-and-mortar seller to remit sales tax. But it does require an internet seller in Montana to do so, for the very same piece of furniture.
Federal statute expressly prohibits what South Dakota has attempted to do. On nine occasions between 1998 and 2016, Congress affirmed and reaffirmed this policy. The Internet Tax Freedom Act, now permanent law, is the definitive statement of congressional policy in this important area of interstate commerce.
This discriminatory treatment is prohibited today by the ITFA.”
Former Governor Still Waiting for Simplified Tax Collection
Former Va. Gov. James Gilmore
“As the chair of the Advisory Commission on Electronic Commerce, we recommended back in 2000 that Congress require states to deliver substantial simplification and reform of their sales tax systems before erasing the physical presence standard of Quill.
But the states have not simplified, and have actually increased complexity and contradiction among the 46 sales tax states.”
The Voice of the Small Business Owner
Online small business owner Kathy Terrill
“I’m grateful for the protections that Quill provides for my online business. If Quill is overturned, sales tax is weaponized against small businesses like mine.
It is, in effect, taxation without representation. That is un-American and fundamentally unfair.”
Etsy Stands with Microentrepreneurs
Jill Simeone, Etsy, General Counsel and Secretary
“Overturning Quill would open a floodgate; thousands of inconsistent state and local tax regulations would suddenly apply to small business owners across the country. Requiring Etsy sellers and other microbusinesses to calculate, collect, and remit sales tax in states where they have no physical presence will create stifling administrative burdens and thwart entrepreneurship.
We stand with our community of 1.9 million Etsy sellers—and all microentrepreneurs—and ask the U.S. Supreme Court to support small businesses and leave Quill intact.”
NetChoice is a trade association of eCommerce and online businesses that share the goal of promoting convenience, choice, and commerce on the net.
Deems South Dakota Sales Tax Law Unconstitutional, and Highlights Trump Administration Desire to Stifle Online Commerce and Make Mail Order Great Again
Washington, D.C., April 4, 2018 – A South Dakota law is unconstitutional and breaks with settled law – the Internet Tax Freedom Act (ITFA), per an Amicus brief filed today by NetChoice, former Congressman Chris Cox (R-Ca) and former Virginia Governor James Gilmore, in the case of South Dakota v. Wayfair, Overstock.com, and Newegg.
A central question in the case is whether the U.S. Supreme Court should maintain its current holding that states can only impose sales tax on businesses with a physical presence within their borders. This physical presence rule was most recently affirmed in the 1992 case of Quill vs. North Dakota. In 2016 South Dakota enacted a law that defies the Quill physical presence standard.
In their brief, Cox, Gilmore, and NetChoice explained: “Congress has repeatedly expressed itself through statute on the tax issues in this case. Exercising its constitutional authority over interstate commerce, Congress enacted ITFA in 1998, after the Supreme Court’s Quill decision. On eight subsequent occasions, Congress revisited this law and reaffirmed its policy.”
“South Dakota is attempting an unconstitutional online sales-tax land grab. The Quill decision and the ITFA have protected online small businesses from the demands of 46 state tax auditors covering 12,000 jurisdictions and led to a vibrant era of ecommerce that fosters economic growth across the country,” said Steve DelBianco, president of NetChoice.
DelBianco added, “The Trump administration now says that Quill should only protect mail-order businesses. While some may want to make mail order great again, Congress has made it illegal to discriminate against internet sales. We’d prefer to have laws that foster a brighter future instead of forcing us to return to the past.”
Below are key quotes from the amicus brief of former Congressman Chris Cox, Former Virginia Governor Jim Gilmore, and NetChoice:
Prevent new burdens on small businesses and discrimination against online sellers:
South Dakota has enacted a law that it acknowledges violates this Court’s precedents. Its transparent purpose was to provoke litigation that, it hopes, will be rewarded by the Court’s reversal of its prior rulings. [p.2]
Regarding the Internet Tax Freedom Act (ITFA), first enacted by Congress in 1998 — after the Quill ruling:
South Dakota’s law violates the ITFA by imposing burdens on internet transactions that retailers using other channels are not required to bear. [p.3]
A small business that maintains a website cannot choose whether to purposely avail itself of one or another jurisdiction. [p.10-11]
The law specifically prohibits assigning the tax collection burden to a different person in internet and non-internet transactions. [p.13]
The discriminatory effect of South Dakota’s law is explained on pages 13-14:
When, for example, a resident of South Dakota buys furniture from a retailer in Montana—picking up the goods herself, and bringing them home—South Dakota law requires her to pay use tax. But South Dakota does not impose a use tax collection burden on the out-of-state seller.
Unless, that is, the out-of-state seller is an Internet vendor.
In that case, the rule is different. If the furniture purchase is accomplished via the Internet (or via the telephone, or the mail), South Dakota’s new law does require the Montana seller to collect and pay, even though Montana has no sales tax.
This differential treatment is what the ITFA prohibits.
The result of overturning Quill would be to force small Internet sellers to comply with the conflicting rules of thousands of differentiated taxing sub-jurisdictions. The non-Internet merchant would have no such burden. This is precisely the result ITFA sought to avoid as a matter of national policy. [p.4]
The Trump Administration wants to preserve physical presence protection only for mail orders:
The Trump administration’s suggestion “that the Court can simply limit Quill to catalog sellers and discriminate for Commerce Clause purposes between catalog sellers and internet commerce also would violate the ITFA.” [p.3]
The Solicitor General proposes that the Court limit Quill’s nexus requirement to mail-order catalogs. This would permit South Dakota to impost unique tax-collection obligation on remote internet sellers that don’t apply to other remote sellers. The ITFA flatly prohibits this. [p.20]
The Solicitor General’s proposal runs afoul of the ITFA in yet another way. His idea that remote Internet sellers are “virtually” present in every State where a consumer can access its website violates the express prohibition against using as a factor for determining nexus the “sole ability [of persons within a State] to access a site on a remote seller’s out-of-State computer server.” [p.21]
There are significant due process problems with the South Dakota law:
An out-of-state seller may establish contact with an individual South Dakota purchaser online, but that does not show any relationship with the State itself. [p.23]
South Dakota’s law imposes tax collection obligations on out-of-state sellers without regard to whether they intentionally created a substantial relationship with that State. [p.24]
Not only would the increased burden on these sellers cause “practical problems” that Due Process protections are meant to curb, but by imposing steep costs and driving some companies out of the market, it would, ironically, reduce the States’ potential for increasing their tax revenues. [p.27]
Congress alone has the constitutional role to determine state taxation of interstate commerce:
As Justice Ginsburg has recently observed, “there is nothing nuanced” about what courts do by deciding a case one way or the other, while Congress “can write a statute that takes account of various interests.” [p.6]
The Internet Tax Freedom Act (ITFA) “is intended to provide “certainty” that the rules of Quill’s physical-presence test “will continue to apply to electronic commerce just as they apply to mail-order commerce, unless and until a future Congress decides to alter the current nexus requirements.” [p.13]
On page 9, former Congressman Cox further explains congressional intent for enactment of the ITFA:
Congress and the White House, in 1998 and 2016 and all points in between, believed otherwise. The specter of multiple States and municipalities all simultaneously taxing and regulating commerce on the Internet was seen as the far greater concern
The fact that large in-state sellers would be challenged by small enterprises via the Internet was seen as a boon to competition and consumers alike.
Those small businesses – in South Dakota and elsewhere – can only compete if they are not overwhelmed with a nationwide tax compliance burden simply by virtue of selling via the internet. [p.33]
NetChoice is a trade association of eCommerce and online businesses that share the goal of promoting convenience, choice, and commerce on the net.
NetChoice’s Internet Advocates’ Watchlist for Ugly Laws (iAWFUL) Targets Worst Bills and Laws for Online Consumers and Entrepreneurs
Washington, D.C., APRIL 4, 2018 – Online tax burdens on small businesses, regulatory hurdles for Internet platforms and the preservation of entrenched monopolies are all possible outcomes from the seven worst internet advocacy laws – the iAWFUL list – release by NetChoice today. The iAWFUL list describes the seven bills and laws most harmful to online consumers and entrepreneurs.
“To earn a place on the iAWFUL list, a bill or recently passed law must show an active disregard for principles that make the internet a vibrant and competitive ecosystem,” said Steve DelBianco, President of NetChoice. “Unfortunately, this year we had several strong competitors for the top spot. iAWFUL points out the worst cases of anti-tech sentiment taking priority over good lawmaking. We hope that lawmakers all over the country will see the iAWFUL list as examples of what not to do.”
Tax Burdens on Small Businesses
Bills and laws in multiple states could prove disastrous for small, online businesses. Topping the list is South Dakota’s “Kill Quill” law which mandates that out-of-state merchants must pay sales tax when they serve South Dakota customers. NetChoice sued the state in 2016 to challenge this law, which is being reviewed in the US Supreme Court on April 17, 2018.
Later this month, South Dakota’s Kill Quill Law (SB 106) will have its constitutionality decided by the U.S. Supreme Court. A ruling in favor of South Dakota would create chaos for every small business that sells online. Overnight, any retailer with a website store would be subject to tax audits from 46 states and could be held liable for retroactive sales taxes on sales made years ago – a cost many small businesses wouldn’t be able to afford.
In addition, the federal Remote Transactions Parity Act (RTPA) (H.R. 2193), recently rejected from inclusion in the spending omnibus, would force businesses with no physical presence in a state to pay sales taxes on purchases by customers in those states. And just like South Dakota’s “Kill Quill” law, small businesses would suffer most from new RTPA burdens
Regulatory Burdens for Internet Platforms
Regulatory burdens that claim to be focused on improving consumer privacy and security, yet not accomplishing either, have been front and center in 2018 as well.
The Stop Enabling Sex Traffickers Act (SESTA) (SB 1693), while well-intentioned, would create numerous unintended consequences, such as taking away “Good Samaritan” protections from platforms that try to police their websites for sex trafficking content. SESTA does little to help prosecutors prove criminal intent of websites where sex-trafficking appears. Worse, SESTA makes it significantly easier for trial lawyers to sue online platforms for big payouts, and discourages online platforms from monitoring their sites for illegal content.
Additional bills that that will inhibit the ability for consumers to leverage the power of Internet platforms include:
- New York (NY AB 9793) – This made the iAWFUL list because it intends to enable massive lawsuits against online platforms for using a new innovative technology.
- Massachusetts Directive 17-1 – The Massachusetts “cookie nexus” tax rule makes the iAWFUL list for its attempt to mask discriminatory treatment of businesses that sell online with rhetoric calling for “equality.”
- A New European Tax on Technology and Innovation – Taxation of the Digital Economy – The “Fair Taxation of the Digital Economy Directive” is a blatant attempt by the European Union to tax large American tech companies and to reduce tax competition among EU countries.
Old Media Strikes Back
In a variety of industries from the sharing economy to retail, we have seen how entrenched market leaders have attempted to leverage laws and regulations to prevent the influx of new competition. Next up? Big media. The so-called Journalism and Preservation Act (HR 5190) threatens to undermine a competitive media ecosystem and harm the social media platforms that Americans enjoy.
More details about the iAWFUL list can be found at iAWFUL.org.
Washington, D.C. – NetChoice welcomes yesterday’s decision by the District Court of Massachusetts to allow a lawsuit against Backpage to proceed for violating the Trafficking Victims Protection Reauthorization Act of 2008. In this decision, the judge affirmed that Section 230 of the Communications Decency Act (CDA) does not stand in the way of a civil suit against the website.
“Section 230 as written makes clear that bad actors who are involved, even in part, in creating or developing illegal web content are liable to both civil suit and criminal prosecution,” said former Congressman Chris Cox, the author of Section 230.
“This federal court decision in Massachusetts is the latest in a string of rulings that, consistent with the original intent of Congress, Section 230 is no barrier to justice for victims of sex trafficking and other illegal acts,” continued Cox, who serves as outside counsel to NetChoice.
“While the recently-enacted Allow States and Victims to Fight Online Sex Trafficking Act (FOSTA) has provided useful new tools for prosecutors, its amendment of Section 230 was never necessary to reach its goal,” said Carl Szabo, Vice President and General Counsel for NetChoice. “If the President signs FOSTA next week, this court ruling sets the stage for a signing statement to affirm both that Section 230 is no bar to prosecutions for any illegal acts using the internet, and that the original Good Samaritan purpose of Section 230 remains intact.”
Washington D.C. – Today, NetChoice has welcomed the filing of Wayfair and Overstock’s brief in the case South Dakota v. Wayfair, Inc., Overstock.com, Inc, and Newegg, Inc.
“The brief shows that removing Quill’s physical presence protection would fundamentally undermine small businesses serving customers outside their state,” said Steve DelBianco, President of NetChoice.
“The states are so wrong to claim that small businesses would be unaffected,” continued DelBianco. “States may provide “free” tax software, but the costs of integration and answering to 46 state auditors would be a significant burden to any small business going online to reach new customers.”
Below are key quotes from Wayfair and Overstock’s brief, providing a strong introduction to the points that will define this Supreme Court case:
“What occurs inside a state’s borders has always been the critical foundation for a state’s taxing and regulatory authority; in short, borders matter.” [p.11]
“Changed conditions in the retail marketplace also cannot justify the abrogation of the physical presence rule where the constitutionally-significant conditions remain unchanged.” [p.25]
“Congress is the institution best-suited to resolve the competing interests in remote sales tax collection and to select the proper policy outcome… Overruling Quill would complicate, if not prevent, a congressional solution.” [p.26]
“Small businesses seeking access to a national market, not the massive multi-channel retailers that already report sales tax across the country, will be harmed most by the new compliance burdens, new barriers to entry, and new obstacles to growth.” [p.27]
Washington D.C. – NetChoice is disappointed that the U.S. Supreme Court has denied cert for Ajemian v. Yahoo. The case, originating in Massachusetts, reversed the privacy expectations of residents and held that next of kin automatically gets access to data of deceased users.
“The U.S. Supreme Court missed an important opportunity to clarify the privacy rights of Americans over their data when they die,” said Carl Szabo, Vice President and General Counsel at NetChoice. “Massachusetts made the wrong decision last year in obligating Yahoo to disclose private data to those managing the estate of Ajemian. Unfortunately, without legislation, the state’s residents will see privacy protections disappear when they pass away.”
Washington, D.C. – Today, NetChoice welcomed the news that the Clarifying Lawful Overseas Use of Data (CLOUD) Act has passed Congress as part of the omnibus spending bill and makes its way to the President’s desk to be signed into law.
“When signed into law, the CLOUD Act will improve civil justice in foreign countries while helping law enforcement solve crimes and save lives,” said Carl Szabo, Vice President and General Counsel at NetChoice. “We’re excited for the CLOUD Act to clarify the relationship between law enforcement and cross border data.”
In our op-ed in Morning Consult, Carl explains how the CLOUD Act will encourage strong civil justice protections by requiring high standards for access to U.S.-held data.
Washington, D.C. – Today, NetChoice applauded the news that the Clarifying Lawful Overseas Use of Data (CLOUD) Act would be included in the spending omnibus bill.
“The CLOUD Act is a commonsense bill that will improve civil justice in foreign countries while helping law enforcement to solve crimes and save lives,” said Carl Szabo, Vice President and General Counsel at NetChoice. “We’ve seen the failure of trying to force civil justice reforms on foreign countries. The CLOUD Act takes a new approach by positively incentivizing them instead.”
As written in our op-ed in Morning Consult, by requiring high stands of civil justice protections to be able to access U.S.-held data, the CLOUD Act will incentivize foreign countries to adhere to these standards.
“The inclusion of this legislation in the omnibus ensures that this pressing issue can be solved as soon as possible,” continued Szabo. “We look forward to the CLOUD Act being enacted, ensuring law enforcement has clear tools to access data held abroad while protecting the rule of law and civil justice.”
Washington D.C. – Today, NetChoice congratulated House and Senate members for their work on the Allow States and Victims to Fight Online Sex Trafficking Act (FOSTA). The bill has been made stronger since its introduction, although caution is warranted as the courts now assess the meaning of the congressional handiwork.
“We are pleased with the progress made since the introduction of FOSTA,” said Carl Szabo, Vice President and General Counsel for NetChoice. “In the House Judiciary Committee, several concerns of prosecutors were aired and addressed.”
“FOSTA clarifies the original intent of Congress in enacting Section 230,” continued Szabo. “It was never meant to be used as a shield for criminal activity despite some judicial decisions that misread both the law’s text and congressional intent.”
“FOSTA shores up Section 230, eliminating the need for further carve outs for specific federal crimes.”
“Bill sponsors offered multiple assurances against potential unintended consequences and that the Good Samaritan feature of Section 230 will continue in full force. We’re glad that these assurances will be a part of the legislative history of FOSTA.”
However, the White House, U.S. Department of Justice, tech advocates, and women’s advocacy groups raised concerns that the final version of FOSTA does not address. NetChoice strongly recommends that both the Senate and the House take the opportunity to add report language and other expressions of the sponsors’ intent.
Washington D.C. – Today, NetChoice welcomes news that the Remote Transactions Parity Act (RTPA) will not be included in the spending omnibus, allowing Congress to come up with a real solution to collect sales tax from online sales.
“RTPA never deserved a seat on the omnibus, since it was ridiculously hard for America’s small businesses that sell online,” said Steve DelBianco, President of NetChoice. “Congress should now find a better way to stop state tax collectors from harassing any business anywhere in the country, whichever way the supreme court rules on Quill.”
Washington, D.C. – Today, NetChoice called on the Senate to pass amendments introduced by Sen. Ron Wyden to the Allow States and Victims to Fight Online Sex Trafficking Act (FOSTA). His amendments would safeguard the Good Samaritan component of Section 230 and would allocate extra funding toward the fight against sex trafficking.
“These amendments are common sense,” said Carl Szabo, Vice President and General Counsel for NetChoice. “Wyden’s amendments will prevent a serious unintended consequence of FOSTA while also providing increased funds in the fight against sex trafficking. There is no good reason to oppose these amendments and we look forward to the Senate accepting them this afternoon.”
Washington D.C. – Today, NetChoice welcomed results from an opinion poll commissioned by the National Taxpayers Union showing that 65% of likely voters are opposed to rules that allow states to burden out-of-state businesses with in-state sales tax collection.
“This poll backs up what we have already found in our own research, that the public sees new sales tax burdens as a tax increase on small businesses and consumers,” said Steve DelBianco, President of NetChoice. “These measures would pass costs onto the consumer, in the form of taxes and limits on consumer choice and market competition.”
New burdens on small businesses to collect sales tax for states in which they have no physical presence would open them up to the compliance burdens of 12,000 taxing jurisdictions and subject them to audits from 45 states. Compliance costs would force many to take their goods and services offline.
“Opposition to this new tax burden was shared by members of both political parties. Liberals, conservatives, moderates, and independents all oppose this policy by a majority,” continued DelBianco. “We hope that lawmakers understand what these results mean for them – if they want the public to enjoy the benefits of recently passed tax cuts, don’t create new tax burdens that will undermine them.”
Washington D.C. – Today, NetChoice welcomed the Senate’s efforts to address the problems of sex trafficking via the Allow States and Victims to Fight Online Sex Trafficking Act (FOSTA) but called for more work to address technical faults with the legislation.
“Sex trafficking victims deserve a law that stands up to constitutional scrutiny and provides the protections necessary to ultimately end a scourge that has harmed so many,” said Carl Szabo, Vice President and General Counsel at NetChoice. “Unfortunately, FOSTA includes a provision the Department of Justice has said is unconstitutional. At a minimum, Congress should not deliberately pass unconstitutional legislation. This provision can easily be fixed through a simple amendment and clear report language.”
If the Senate takes the time to amend the bill in this way, NetChoice looks forward to working with legislators on another straightforward fix. The Senate should add a single sentence to the bill making explicit what the sponsors have said publicly many times: the Good Samaritan provision of Section 230 remains intact. Otherwise the legislation, well-intended though it is, is likely to interfere with the desired result of stopping sex trafficking.
Washington D.C. – Yesterday, NetChoice responded to an amicus brief from Trump’s Administration backing a reversal of Quill Corp. v. North Dakota, 504 U.S. 298 (1992), an important US Supreme Court precedent protecting out-of-state retailers from being forced to collect in-state sales tax.
“In their brief, the Trump administration feeds into an anti-tech narrative by asking the court to tax online retailers while exempting catalog mail-order businesses. They justify this anti-tech position by saying that any American who puts up a website is creating an electronic presence in all states.”
“Overturning Quill would unleash tax collectors from 46 states and 12,000 local jurisdictions to demand audits and taxes from any small business-owner in the country who dares to use the internet to sell their products or services,” continued DelBianco.
“It’s truly troubling that the administration wants the Supreme Court to support South Dakota’s attempt to reach across its borders to tax any business anywhere in the country.
Polling has shown that Americans oppose mandating tax collection by all online sellers, including almost 75% of young people, and studies as recently as September 2017 show this sentiment isn’t moving.
[UPDATED 3/7/18] Washington D.C. – Today, NetChoice voiced its renewed support for legislation to combat sex trafficking on the internet, and welcomed attempts by the House of Representatives for taking action to address this urgent national priority.
With the House action today, it remains to be seen how courts will interpret both the sex trafficking provisions and the broader law of which it is a part. “With the final architecture of the bill now coming into focus,” Carl Szabo, Vice President and General Counsel at NetChoice said, “we hope and expect that courts will take its sponsors at their word that the new law protects consumer privacy, user-generated content, smaller web enterprises, and freedom of expression. Protecting these bulwarks of a healthy internet will be a proud accompaniment to this final step toward ensuring justice for sex trafficking victims.”
As a voice for consumers who rely on user-generated content across the internet, NetChoice is pleased that the original Senate bill, the Stop Enabling Sex Trafficking Act (SESTA), has been strengthened with the addition of new criminal authorities for both federal and state prosecutors. These additional provisions are designed to ensure that cracking down on websites engaged in illegal activity is accomplished in a way that does not threaten legitimate and socially useful websites, compromise consumer privacy, unfairly disadvantage smaller web enterprises, or chill freedom of expression.
“The House Judiciary additions to the legislation were crafted after listening to the concerns of advocates of sex trafficking victims, law enforcement, and tech experts,” said Szabo. “While we are concerned with additions such as the Walters amendment, we look forward to the Senate taking the opportunity to make adjustments based on concerns raised by the Department of Justice and echoed by the White House.”
Washington, D.C. – Today, NetChoice welcomes the news that Turo, an online platform enabling people to share their personal cars with others, has countersued the city of San Francisco over attempts to treat and tax the startup as if it were a car rental company.
“This is yet another example of an entrenched cartel boxing-out a new competitor, just to limit consumer choice and keep prices high,” said Steve DelBianco, President of NetChoice. “If the city could force Turo owners to pay these exorbitant airport fees, then it could likewise impose the fee on anyone driving into SFO to pick up friends or family. That’s ridiculous, but so is the aim of this lawsuit.”
Unlike car rental companies, Turo is not in the business of renting passenger vehicles to the public – it owns no fleet of cars to rent. This distinction between a peer-to-peer car sharing platform and a car rental company has been observed by the State of California in its creation of a personal vehicle sharing framework in AB 1871. It has also been recognized by the U.S. Department of Transportation which has observed that “peer-to-peer” car sharing programs are distinct from rental car companies. But, the city is ignoring this distinction with a tax that violates California law and the state’s constitution.
“Turo is not remotely like Enterprise or Hertz,” concluded Steve DelBianco. “The big rental companies convinced California tax authorities to let them avoid half a billion dollars annually in sales taxes on their fleet purchases. That lost tax revenue could go a long way to help airports such as SFO pay for services and infrastructure.”
Washington D.C. – NetChoice is concerned by reports of plans to amend the “Allow States and Victims to Fight Online Sex Trafficking Act” (FOSTA) to adopt problematic and controversial provisions of the Senate bill, “Stop Enabling Sex Trafficking Act” (SESTA).
“While we hope that SIREN retains the core provisions of FOSTA and its language on Section 230, we worry that some may try to pass a last-minute amendment that undoes the House Judiciary Committee’s hard work and coordination with law enforcement, victims groups, and experts in the tech industry,” said Carl Szabo, General Counsel and Vice President of NetChoice.
FOSTA is a bill that was crafted using guidance from law enforcement, victim advocates and the tech industry, working together to find the best solution to an incredibly pressing problem. It answers the problematic provisions of SESTA while strengthening the ability of state, local, and federal law enforcement agents to stop sex trafficking both on the internet and on the streets.
“We’ve already seen that Section 230 is not a bar to discovery in Jane Doe v. Backpage. And we’ve seen that Section 230 is not a bar in other civil suits against Backpage. Hopefully law makers will look past the plaintiff bar’s fiction about Section 230 and instead take the Judiciary committee’s unanimously approved FOSTA language,” Szabo concluded.