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The Worst Internet Laws in America, Take Two

iawful LogoBack in June, we introduced iAWFUL (the Internet Advocates’ Watchlist for Ugly Laws) as part of a broader effort to push back against America’s worst Internet legislation. Two months have passed, and while many of the bills in the top 10 have changed, they remain every bit as AWFUL.


Earlier today NetChoice unveiled the first major update of iAWFUL, which lists the 10 worst Internet bills/laws in America. The updated listincludes five new items, with new laws in the top 2 slots.


But before I get to the truly AWFUL measures in the new list, it’s worth mentioning a few that fell off the list, in large part thanks to the pressure that Internet advocates exerted through iAWFUL:


#2 on the June iAWFULlist was a California bill that would have forced unworkable technical restrictions on the posting of photos to social networking pages. The bill’s sponsor responded by working with Internet advocates to fix problems with the measure.

#3 on the June iAWFUL list was a bill in Connecticut that would have required sales tax collection by out-of-state businesses that pay commissions to in-state affiliates. The Governor heard our concerns about the impact on in-state publishers and school charities, and has thus far kept this measure off the table in budget negotiations.

#5 on the June iAWFUL list was a Connecticut bill to let police conduct searches of homes where goods were being stored by online dealers – without having to obtain a search warrant. Thanks to iAWFUL publicity, this bill stalled in the House.

This is what iAWFUL is all about: creating positive change through informed advocacy.

Now for the bad news. For every measure that fell off the iAWFUL list, we found a truly AWFUL replacement.


Toping the list is a Maine law that will limit teens’ access to online services and expose valuable websites to a rash of lawsuits. At the end of its last session, the Maine legislature voted to require Web sites to obtain “verifiable parental consent” before asking Maine teenagers to enter just their name and age.


As is so often the case with bad Internet legislation, it seems to have been drafted without any consideration to the unintended consequences it would impose on important, socially valuable websites that provide content, communications and commerce for millions of consumers.


Web sites have no workable way to obtain “verifiable parental consent,” so the real impact of the legislation is that teenagers in Maine will be denied access to valuable online tools and services ranging from college finders to the companies that sell class rings. And given the borderless nature of the Internet, its impact could be felt far outside of Maine. On a list of bad laws, this Maine measure takes the top spot.


Another new law follows closely at #2 in the new iAWFUL list. New York City is set to impose its 20% tax rate on hotel reservation service fees charged by travel agents and online travel websites. The city already rakes in 20% on the hotel room charges, but now they want 20% of any fees collected by travel agents, too. As I wrotelast month, this is awful for hotels, travelers, and agents who’d have to start filing returns in every city that followed the New York’s iAWFUL example.


Beating back bad Internet laws is like playing whack-a-mole. There always seems to be a new one rearing its AWFUL head.


–Steve DelBianco


The full iAWFUL list for August-2009 is posted hereand below:

  1. Maine Predatory Marketing Law What’s wrong? Creates an unprecedented prohibition on collecting information about and marketing to teenagers. At the very end of its session, the Maine legislature passed a sweeping law that regulates a company’s marketing and data collection practices.  Ostensibly modeled from the federal Children’s Online Privacy Protection Act, the Maine law (10 MRSA c.1055) requires “verifiable parental consent” before any company collects or receives personal information of anyone under 18 years old . This law will impact all sorts of websites where teenagers can provide their names and other personal information. It also flat-out prohibits using that information for marketing products to minors. The law imposes strict liability that would prevent common marketing practices used to serve teens information on colleges, test prep services, class rings, etc. Moreover, the law enables private rights of action and sets minimum statutory damages that will encourage frivolous lawsuits where there is no actual harm whatsoever. The law becomes effective on September 12, 2009, but we’re advocating for a stay to examine constitutional questions and unintended consequences. See
  1. Hotel Taxes on Online Travel Companies. What’s wrong? Travel sites are being threatened with the wrong tax rate in the wrong jurisdiction.  Local governments want to levy their hotel occupancy taxes on service fees charged by online travel websites.  New York City recently passed an ordinance to impose its 20% tax on these fees, a move that’s opposed by over 100 NYC hotels and by the American Society of Travel Agents. The state of Florida also considered bills to tax service fees as hotel rentals. This is the wrong approach. Service fees should not be taxed the same as a hotel room charge.  If these service fees were to be taxed at all, they would be taxed as a service rendered to the traveler booking the room — a new tax that would have to be levied by the jurisdiction where the traveler resides. See
  1. New Jersey Social Networking Bill (A 3757) – What’s wrong? It turns social networking sites into social networking police. This bill requires social networking websites to promptly review user allegations of harassment and abusive language, and to provide a report of the result of any review “upon request” from the user. Many sites already have “report abuse” buttons and they already revoke abusive users. However, faced with adverse publicity and cost of lawsuits, many websites will be forced to lower the bar for kicking-off users. This isn’t confined to websites based in New Jersey—it will regulate any website, anywhere, that can be used by New Jersey residents. For more information, see
  1. Revenue Rulings by Colorado and Washington State Tax Administrators Create New Digital Download Taxes – What’s wrong? Discriminates against goods and services sold online versus offline.

The Colorado Department
of Revenue recently issued a ruling that would impose sales tax on any service or subscription where users can download or print documents or web pages. Services aren’t taxed in Colorado, but this ruling makes them taxable if the service is provided online. Just emailing a document to a customer would make an otherwise nontaxable service into a taxable digital good.

In addition, the Washington Department of Revenue issued a draft rule that taxes all digital products, regardless of how they are accessed (downloaded, streamed, subscription service, networking, etc.). Washington broadly defines “digital good” to encompass a variety of things, even digital schematics of a lawnmower transferred electronically to a repair shop! What’s more troubling is that the ruling suggests that payments for displaying online advertising would suddenly become a taxable event.

  1. North Carolina Digital Downloads Tax Bill (HB 558/S 487) – What’s Wrong? Discourages the Greenest Way to Purchase Music and Other Content. This bill would discourage the most environmentally friendly way for consumers to purchase movies, music, and software by applying a sales tax to the digital download of these goods. The bills would also place local businesses that sell these goods at a disadvantage to out-of-state competitors. For more information, see
  1. North Carolina Tickets Tax Bill (SB 99) What’s wrong? Taxes the Internet (and only the Internet) resale of tickets. SB 99 violates federal law because it explicitly targets Internet—and only Internet—ticket sales. The Internet Tax Freedom Act Amendment Acts of 2007 (Public Law No: 110-108) provides a moratorium through November 1, 2014 on any “multiple or discriminatory taxes on electronic commerce.” This law bars federal, state and local governments from imposing discriminatory Internet-only taxes such as bit taxes, bandwidth taxes, and email taxes. It also prohibits the sort of prima facie discrimination exhibited by SB 99—“Reselling or offering to resell admission tickets on the Internet…”). For more information, see
  1. Federal & State Bills on Organized Retail Crime – What’s wrong? They create unwarranted, extraordinary burdens on online marketplaces. Federal: The Combating Organized Retail Crime Act of 2009 (S 470), the Organized Retail Crime Act of 2009 (HR 1173) and the E-Fencing Enforcement Act of 2009 (HR 1166). State: Massachusetts HB 1344. These bills would mandate online and off-line marketplaces to investigate suspicious sales, place disclosure requirements on online marketplaces, impose obligations upon online marketplaces to police small retailers absent evidence of criminal activity. The Massachusetts bill provides for the forfeiture of any property used or intended to be used to commit or facilitate a violation, and is so broad that it could encompass a company’s servers and domain names. For more information, see
  1. Massachusetts Online Advertising Bill (HB 313) – What’s wrong? It threatens the viability of new business models on the Web. Massachusetts seeks to regulate “online preference marketing” in which information is stored from consumers’ online searches and used by advertisers to target specific advertisements toward them. But there is nothing nefarious or dangerous to consumers about advertising that is more relevant to them. The bill is unnecessary because industry is already working toward self-regulatory best practices. Consumers—not legislators—should decide whether or not this type of service succeeds in the marketplace.
  1. North Carolina Advertising Nexus Proposal. What’s wrong? Unconstitutionally expands sales tax burdens to out-of-state businesses. North Carolina is the latest state (after New York and Rhode Island) to rule that Internet advertising triggers a nexus for sales tax collection and remitting obligations for out-of-state businesses. States think that they are expanding their revenue base, but they are wrong—fewer advertising dollars would flow to in-state publishers and websites. Online companies and content providers are still experimenting with new models for advertising and distribution. State laws that use Internet advertising as a proxy for an in-state sales representative will stunt the growth of new business models and distort the evolution of Internet marketing.
  1. New York Online Employment Services Taxation Issue – What’s wrong? Discriminates against services provided over the Internet. The New York Tax Department asserts that online job-seeking and resume services may be subject to sales taxation. New York currently taxes “information services” and maintains that the providing of employment information falls within this definition. We disagree. Online companies fulfill the traditional role of a “headhunter” (which is a non-taxable service) only using non-traditional means. The fact that information is provided or utilized digitally does not change the fact that their service is designed to establish an employment relationship between an employer and a job seeker.