Amazon Wins First Amendment Challenge to North Carolina DOR Information Request

Amazon.com LLC (“Amazon”) has prevailed in its highly-publicized court challenge to a demand by the North Carolina Department of Revenue for information regarding purchases made by Amazon’s North Carolina customers during the period August 1, 2003 to February 28, 2010. The Federal District Court for the Western District of Washington (where Amazon is headquartered) issued a ruling on October 25, 2010, in Amazon.com LLC v. Kenneth R. Lay, in his capacity as Secretary of the North Carolina Department of Revenue, Case No. C10-664 MJP. The ruling enjoins the North Carolina DOR from requiring that Amazon provide the Department with names and addresses of its North Carolina customers and details regarding the products they purchased from Amazon.

The Department, in connection with an investigation of Amazon’s possible liability for uncollected use tax on sales to North Carolina residents, had requested that Amazon provide it “all information for all sales to customers with a North Carolina shipping address” for the six-and-a-half year period under examination. Amazon provided the DOR detailed records of products shipped to North Carolina for the entire period, but refused to provide the names or personal information of its customers purchasing such products. When the Department pressed for the information, Amazon sued in federal court, asserting that the Department’s request violated the First Amendment by chilling the exercise of the freedom of speech of Amazon’s customers (and of Amazon itself). On October 25, the Court agreed.

4 Bedroom Executive Home for Family Living

29 CHAPPLE STREET MOUNT LOUISA $487,500 Neg
This gorgeous 4 bedroom executive home is located in Crestbrook Estate 8klms from the heart of Townsville, 5 minutes to the airport and 3 minutes to Domain Central with the convenience of retail shopping and coffee shops.

If finding quality education facilities for your kids is a priority, then the Calvary Christian College is only 2 minutes from home and on your way to work or while picking up your groceries.

Getting access to the highway and northern beaches is very easy also for those cherished weekends away fishing, camping, swimming or just taking a leisurely drive.

Although the envy of most people, this property would be suited to the growing family or partners seeking relaxing and peaceful lifestyle with modern and convenient living.

Other features include:

* 4 generous sized bedrooms
* En-suite to master bedroom and walk-in robe
* Modern, spacious and functional kitchen with quality gas stove and oven and walk-in pantry
* Separate lounge/games room
* Large formal dining and living
* Patio and entertainment area overlooking backyard
* Split system air-conditioning throughout
* Large level rear yard (space for sparkling pool)
* Double lock up remote garage
* Built-ins in guest rooms and plenty general storage space
* Garden shed, rainwater tank and environmentally efficient devices

This quality property will not last! Why no live your dreams today and view this gorgeous property by appointment. Contact your local agent Aaron on 0414 590 110 for more information.

A sustainability declaration is avaialble upon request.

http://www.rapidrealty.com.au

3 bedroom Home with Pool, Shed, Deck and Entertainment close to City

Railway Estate, Townsville $349,000
In this gorgeous cottage Queenslander you will be situated only 2 minutes to restaurants on Palmer Street, entertainment and employment opportunities in Townsville City, the recreational benefits of the river and beach and within easy walking distance to the cultural centre of the Townsville Civic Theatre, Schools and Shops.

With your own oil stained timber deck gesturing to views of Castle Hill and rear entertainment area overlooking the sparkling in-ground swimming pool, this property offers a great inner city lifestyle and timely investment in Townsville’s robust property market.

This gorgeous property also features:

• Main bedroom with built-in wardrobe + 2 other good sized bedrooms
• Air-conditioned throughout with Split system air-conditioning to living
• Spacious kitchen and dining
• Gorgeous polished timber floors throughout
• Majestic cathedral ceilings and crafted architraves
• Modern and clean bathroom (extra toilet and shower downstairs)
• Lock up garage plus garden shed (room to expand)
• Professionally paved driveway to rear (space for 4-5 vehicles)
• Fully fenced and security screens

Contact your local agent today for a viewing on 0414 590 110.

A Sustainability Declaration is available upon request.

http://www.rapidrealty.com.au

Bernanke Speaks in Boston

Fed Chair Ben Bernanke spoke today in Boston at a conference sponsored by the Boston branch of the Federal Reserve Bank about bank policies and options in a low inflation economy (see transcript). Here is the video:

- JSM

Nice Teaching Case: Home Sold Twice

Ben Davis sent this link out to the contracts professors list serve. http://www.msnbc.msn.com/id/39381416/. The case involves a home sold twice . . . apparently by mistake: once as a short sale and then at foreclosure days later. The new owners, thankfully, recorded their deed and bought title insurance, but it has been quite a headache for them. The lender, not surprisingly, is claiming no wrong-doing in the matter.

I am getting ready to start methods of avoidance in the next couple of weeks and will be sure to mention this one to the class.

- JSM

New York’s “Other Affiliate” Nexus Law

By now, many of our readers may be aware of the New York “Affiliate” Nexus law, which provides for a presumption of nexus under certain circumstances; i.e. where a remote seller uses a New York resident (an “affiliate”) to link to its website and pays commissions of more than $10,000 per year to such New York affiliate as a result of sales the affiliates facilitate. See N.Y. Tax Law § 1101(b)(8)(k); and Amazon.com v. New York State Department of Taxation and Finance, 23 Misc. 3d 418, 82 N.Y. S.2d 842 (2009) (on appeal to the New York Court of Appeals).

In 2009, the New York Assembly enacted another law to address a second kind of “affiliate.” This time, the definition of affiliate is based upon the more common usage of the term in which the affiliate is related to the out-of-state company by an ownership interest. The law is found in Tax Law §1101(b)(8)(i)(1). In particular, the statute, when enacted, provided two separate “conditions” or situations for establishing that a remote seller is deemed a vendor required to collect sales and use tax based upon the activities of the seller’s New York affiliate. In the first condition, the out-of-state seller is deemed a vendor required to collect sales and use tax if any person or entity owns, directly or indirectly, more than 5% of the retailer, and a New York sales tax vendor uses a trademark, service mark or trade name in New York that is the same as that used in New York by the remote seller. This condition is designed to address multi-channel vendors, and is similar to statutes adopted in other states.

In the second situation, the person or entity must own directly or indirectly at least 50% of the equity of the remote seller and a company with nexus in New York (the New York affiliate). If the New York affiliate engages in activity in New York that benefits the remote seller in its development or maintenance of a market for its goods or services in New York, to the extent that those activities are sufficient to satisfy the nexus requirement of the U.S. Constitution, then the out-of-state seller is deemed a vendor required to collect the New York sales tax. TSB-M-09(3)(s) outlines the kind of activities that relate to the development or maintenance of a market for the remote seller’s products, They include the affiliate: referring New York customers to the remote seller; accepting merchandise returns on behalf of the remote seller’s customers; distributing catalogs on behalf of the remote seller; and accepting orders on behalf of the out-of-state company.

Recently, the Assembly adopted a law, Chapter 57 of the Laws of 2010, that amended the 2009 law on affiliates, to narrow the definition of companies that are deemed sales tax vendors. Specifically, the 2010 statute provides that if the in-state New York affiliate only provides accounting or legal services or advice, or directs the activities of the remote seller insofar as making decisions about strategic planning, marketing, inventory, staffing, distribution or cash management, the remote seller will not be deemed a vendor required to collect sales and use tax. TSB-M-10(12)(S), issued on August 19, 2010, provides an informational statement about the Department of Taxation and Finance’s views on the 2010 law.

Under the 2010 clarification, therefore, if a New York-based holding company of a direct marketer with facilities located outside of New York were to provide traditional administrative and management services to the remote seller, the remote seller would not be deemed to have nexus under New York law. This, of course, is a significant, favorable clarification for New York-based enterprises that wish to own and control remote sellers located outside of New York without creating nexus in New York.

The Newest Identity Thief: Grandma

Identity theft by relatives appears to be on the rise. One young lady was shocked to find out that her 71 year old grandmother opened a credit card in the grand-daughter's name: and did not pay the bill (See, Family Credit Card Fraud). While wrong, the difficulty of the whole matter is obvious. Who wants to put grandma in jail for fraud? Other common identity victims are children, whose parents sometimes open accounts in their names and don't pay (See The Newest Identity Thieves: Parents; All in the Family). Crime and wrong-doing in one's own family is not unheard of. After all, I just taught Gimpel v. Bolstein this week where the family ousted one relative from employment at the family farm after he embezzles some $80,000+. The thief ultimately sues on a claim that his stock is worthless in a company without a job or dividends and the court agrees (at least as to dividends or buying him out). So, stealing in one's own family . . . yes it happens.

Here though, the problem is not only might the relative have to shoulder the financial loss, but sustain damage to their credit score if they don't turn in grandma. Most card issuers require a police report in order to document the account fraud. There is definitely a heavier loss here than presented in Gimpel where the thief lost his job but was not prosecuted . . . and the family farm just lost the money. While I condemn the thieves here, card issuers have some responsibility as well for issuing cards in children's names in the first place. While card issuers have responsibility for fraud, they seem to find clever ways to shift it back to consumers (See credit card skimming).

- JSM

DOJ Sues AmEx, MasterCard, and Visa

The United States Department of Justice, Antitrust Division, has sued American Express, MasterCard, and Visa, alleging that each credit card network imposes anticompetitive rules prohibiting merchants from (1) encouraging customers to use a different form of payment or brand of credit card by offering a discount or any other incentive; and (2) expressing a preference for a particular brand, or informing their customers about the merchant's relative cost to accept, particular card brands. The complaint further alleges that each defendant independently possesses market power and that the merchant restraints thus constitute anticompetitive vertical agreements violating Section 1 of the Sherman Act.

Along with the complaint, the Division filed a proposed consent decree with Visa and MasterCard that broadly prohibits blanket rules that would bar a merchant from incentivizing its customers to use a particular credit card brand or, interestingly, card type. The consent decree defines card type as a category of credit card such as "traditional cards, reward cards, or premium cards." The decree would thus empower merchants not only to steer customers to a particular card brand, but also to steer customers to particular types of cards within a card brand. For example, merchants might attempt to steer card users toward lower priced (for the merchant) traditional cards and away from reward cards. The decree explicitly permits Visa and MasterCard to continue to prohibit merchants from discriminating among particular bank issuers. It also allows the settling defendants to negotiate individual merchant agreements that include the prohibited restraints, so long as acceptance of the card brand is not conditioned on the merchant's agreement to the restraints.

American Express has vowed to fight the case.

By seeking to promote a competitive solution to what many consider unjustifiably high merchant card acceptance fees, the Division has staked out an alternative ground to the regulatory approach to merchant fees that Congress recently imposed for debit cards. The relief sought is cautious, however, in that the card networks may continue to prohibit (1) surcharges for particular brands or card types, and (2) efforts by merchants to discriminate in any way against particular card-issuing banks within the Visa and MasterCard systems.

New York Tax Department “Clarifies” Sales Tax on Reports Derived from Public Documents

The New York Department of Taxation and Finance recently issued a “clarification of existing Tax Department interpretation,” concerning the application of New York’s sales and use tax on “information services” to reports derived from publicly-available documents. For many companies, this “clarification” may well constitute a complete reversal of prior Department advice, as the Department itself has acknowledged.

New York tax law has, for many years, included a broadly-worded tax on “information services” that, by its terms, and under much of the Department’s prior authority, made the service of providing information reports (whether written, electronic, or even oral) taxable, unless the reports were comprised of information that was uniquely “personal” to the recipient. See N.Y. Tax Law § 1105(c)(1). In that regard, even if the particular compilation of information would be of interest only to the recipient, when the source data used to create the report was information that would be useful to many different entities or persons (such as public documents), a report was not deemed to be sufficiently “personal” to be exempt from tax.

Per to the Department’s new “clarification,” which took effect on September 1, 2010 (see TSB-M-10(7)S (July 19, 2010), the Department had previously articulated its policy that “the sale of public documents by private entities” does, indeed, constitute the sale of a taxable information service. See State Farm Mutual Automobile Insurance Co., Adv. Op. Comm. T&F, TSB-A-04(29)S (December 28, 2004). However, as the Department went on to explain in its recent clarification:

“Despite the issuance of this Advisory Opinion in 2004, some taxpayers may have continued to reasonably rely on correspondence from the Tax Department predating this Advisory Opinion. That correspondence, which gave advice to the contrary, also indicated that the Tax Department would provide notification if the advice in the letter was reversed.”

Thus, the Department acknowledges that it was actively advising companies in a manner that it now admits is contrary to New York tax law and its own existing policy, and that, despite such advice, tax is due on the sale of information services derived from public documents.  It is not entirely clear what prompted the Department to “clarify” its policy on the sale of information culled or compiled from public documents at this time. But, the recent TSB suggests that the Department feels the clarification serves to “better reflect controlling judicial case law and administrative decisions.”

In light of this express mea culpa from the Department, the Department has determined that it “will not assess any sales tax due that was not collected, or any related penalty and interest, for sales of public documents made during” tax periods prior to September 1, 2010. Thus, while sellers of information services must begin (or continue) to collect sales and use tax on such information services as of September 1, 2010, companies will not be exposed to liability for uncollected/unpaid tax for prior periods.

Making Deposits by Phone

No need to drive to the bank? Making bank deposits using your phone is here for some banks. Chase has been advertising its service (See, Chase IPhone App) and USAA also has it (See USAA Takes Mobile Banking). While the other large banks haven't yet offered the service, it is sure to be the next big thing. The process takes a few minutes since you have to take a photo of the front and back of the check, so I would not recommend it if you have a few of these to do. And, if the photo is not quite clear enough, it can be unsuccessful. But overall, the draw is clear in terms of saving the run to the bank.

Of course, Check 21 makes the digital image of a check the same as the paper version. The digital imaging of checks by consumers will not prevent the banks from processing the check just like any other as the paper check is not needed in any event already. While the process cuts down the float time for the person writing the check, the advantage of saving time at the bank is a draw. I couldn't find the app on the Blackberry, but would bet that it will come along as well in time.

So, how do you do it? See this video on how to deposit on an IPhone.

- JSM

Piracy in Mexico takes a Different Twist

One of the aspects or piracy near the Gulf of Aden has been its lucrative commercial nature, the taking of cargo and hostages for ransom (see Fighting Piracy With Private Security Measures). The commercial nature of the piracy has often led to substantial ransoms paid with crews and cargo released afterwards. The possible favorable outcome for individuals lives has led to a sort of capitalistic approach by some pirates (See Ploch, Piracy Off the Horn of Africa). The protocol of piracy off Africa certainly affects the response of governments to the problem of piracy there.

This weekend, though, drug cartel pirates in Mexico killed a jet-skier on a border lake (See, jet-skier and Fox News, Pirates). While this new hot-spot of piracy surely affects businesses on the ground where customers steer clear of the area, it also serves as a reminder of the brutal nature of piracy and that is not a "business"). Pirates, historically, are the enemy of the human race - hostes humani generis - posing a longtime threat to shipping and commerce. The violence in Mexico-U.S. waters is a reminder.

- JSM

Small Business and the Recession

The New York Times did a short piece on small businesses in New York during the recession, focusing on the problems the current environment presents.

- JSM