The iAWFUL 7: State, Federal and International Legislation Placing Barriers to Innovation and Commerce

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.

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