Chase and Wells Fargo Waiving Some Fees

In a world where bank fees are on the rise, Chase Bank and Wells Fargo are waiving overdraft, late payment and other fees for customers in states impacted by Hurricane Irene (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, Vermont and Virginia). For instance, customers who can no longer get to a Chase ATM might have to use one from another bank.



Nice customer move.

- JSM

St. Thomas University Looking for Corporate/Commercial Faculty

ST. THOMAS UNIVERSITY SCHOOL OF LAW in Miami, Florida, invites applications from experienced and entry-level candidates for tenure-track positions beginning in the 2012/2013 academic year. The Law School especially seeks candidates in the areas of Wills & Trusts, Business Associations, Commercial Paper, Secured Transactions, Family Law, Constitutional Law, and Professional Responsibility. Applicants must possess a distinguished academic record, a dedication to excellence in teaching, and a demonstrated commitment to scholarship. Consistent with the Law School’s tradition of diversity, members of minority groups and women are especially encouraged to apply. Applicants should send a letter of application and a resume. CONTACT: Professor Tamara Lawson, Chair of the Faculty Recruitment Committee, St. Thomas University School of Law, 16401 NW 37th Avenue, Miami Gardens, Florida 33054. Email: tlawson@stu.edu. Fax: (305)623-2390.

Performance Marketing Association Suit Challenging Illinois Affiliate Nexus Law Now in State Court

On July 27, the Performance Marketing Association (“PMA”) filed a complaint in the Illinois Circuit Court for Cook County, challenging the new Illinois “affiliate nexus” law (“HB 3659”). In the complaint, the PMA asserts the same claims first raised in its complaint filed in the United States District Court in Chicago on June 1. As detailed in the complaint, the PMA alleges that HB 3659 violates the Commerce Clause and impermissibly discriminates against electronic commerce in violation of the Internet Tax Freedom Act (“ITFA”).

In connection with filing the suit in state court, the PMA has voluntarily dismissed the federal court action.  The voluntary dismissal will prevent a protracted dispute with the Defendant, the Director of the Illinois Department of Revenue, regarding whether the federal court has jurisdiction over the case. Brann & Isaacson attorneys George Isaacson and Matt Schaefer are counsel to the PMA in the case.

Practical Payments Tidbits

I like to give my first year contracts students a bit of practical knowledge about commercial transactions and consumer issues whenever possible. So, I've taken to putting up articles on the overhead screen at the beginning of class. Sometimes we have a little discussion, other times right onto contracts doctrine. Today, we began class with this little MSN news piece on 5 places to never use your debit card!

• Rental or security deposits. This goes to the heart of what a debit card does, it takes money from your checking account. Using a credit card for car rental and similar transactions, these deposits are not charged so you are not out the money at the time.



• Restaurants and bars. Just to much risk of fraud with so many people around. And, your card is likely to leave your presence leading to a greater possibility of card skimming. Again, the money comes out of your checking account, so harder to get it back in the event of theft compared to handling potential losses on credit cards. Or use cash . . .



• Regular payments. What companies do you really want to have your financial information permanently on file with an ability to hit your checking account at will. Consumers have greater rights under the Truth in Lending Act if you use your credit card. Alternatively, pay them on an automated payment out of your checking account yourself. Of course, some businesses do demand the regular payment system and you might have to give in if it is the only way to secure a wanted service.



• Wi-Fi hot spots. Quite simply, unsecured access to your account numbers.



• Any retail outlet where you choose the "credit" option. This one doesn't bother me, but the article mentions the less rapid clearing and risk of overdrafts as reasons not to use the debit card.

For my part, it is always nice to see a little consumer education on a regular basis. The big reminder here is while debit cards look like credit cards, the attributes are not the same. Consumers are wise to keep this in mind.

- JSM

What is a BitCoin? Where did Mybitcoin go?

On the way into St. Thomas University this morning, I heard an NPR piece about the Bitcoin. We live in a world where the value of money is uncertain, so some are looking for alternatives to the dollar, right? See, IMF Calls for Alternatives to the Dollar. The aim is to lessen volatility associated with the dollar as a currency and payment device, those economic and political. Some investors have rushed to gold as the easy alternative causing a rise in the value of gold, only to find that gold also has market swings tied to the dollar. See, WSJ, Gold Ends Lower on Dollar's Strength. I understand the goal. An electronic wallet, no intermediaries, completely anonymous.



So, what about the Bitcoin? A Bitcoin is simply a made up cash in an online universe. You use an online exchange in order to trade dollars for Bitcoins. Apparently, some restaurants in New York city will even accept Bitcoins in payment for lunch. Not so fast, though. "Hackers" allegedly hit MyBitcoin back in June, making off with $500,000 in funds. And now, MyBitcoin itself is processing claims to liquidate the remainder of the accounts. Apparently, that will be somewhere around 49% of their deposits. In the NPR piece, Ron Mann commented (correctly of course) that he would not expect Bitcoin to be around in 5 to 10 years. Well mostly correct, as at least mybitcoin was gone a mere months after the original interview. Perhaps others will take up the space left by mybitcoin, but how secure is any payment system?



Here is the story of one mybitcoin user who lost a substantial amount of money from his e-wallet:

As I advise my students, be wary about any new (or even existing) payment device . . . scammers . . .or anywhere you park your money for that matter. There are no quick fixes or easy roads to avoid market volatility and economic instability.

- JSM

After An Earlier Veto, Texas Enacts Nexus-Expanding Legislation In Response To Dispute With Amazon Over Distribution Center

As many readers may be aware, last October, the Texas Comptroller issued a $269 million assessment against Amazon.com for uncollected use tax for the period December 2005 to December 2009. News reports indicated that the assessment was based primarily on the grounds that a related entity, Amazon.com KYDC LLC, operates a distribution center in Irving, Texas (near the Dallas/Forth Worth airport). Amazon disagrees with the assessment, and later sued to obtain the Comptroller’s audit file containing information regarding the basis for the assessment.

July 19 marked the latest volley in the battle between Amazon.com and the State of Texas. Other e-commerce sellers and direct marketers should now ensure that they do not suffer collateral damage.

In response to the contentious dispute that had developed between the State and Amazon, the Texas legislature introduced a number of bills in its 2011 legislative session intended, in effect, to make clear that Amazon.com is obligated to collect and remit Texas use tax. One version of such legislation made its way to Texas Governor Rick Perry in late May, only to be vetoed by the Governor, who has expressed opposition to Amazon nexus legislation. The Texas legislature, however, re-inserted the nexus-expanding language from the bill Perry vetoed into a broad budgetbill, SB 1, which passed in late June.

Governor Perry, after waiting until the final day on which he could act, signed SB 1 on July 19. The bill includes various revisions to the Texas Tax Code that appear to be intended to subject a retailer to an obligation to collect Texas use tax if the retailer uses a distribution center in the state which is maintained by a related company (or even an agent of the retailer), such as was the case for Amazon. The new provisions are broadly-written and arguably redundant in many respects, suggesting that the legislature wanted to be certain that the new law encompasses any conceivable legal arrangement between a retailer and distribution company. (Or, perhaps more cynically, the legislature wanted to be certain that the law covers whatever legal arrangements Amazon, specifically, may have with its distribution center.) Thus, the law provides that a retailer is “engaged in business” in the State, and thus obligated to collect use tax, if the retailer:

• maintains or uses in the state, either directly or indirectly, or through a subsidiary or agent, a distribution center or any other physical location where business is conducted;


• derives receipts from the sale of tangible personal property situated in the state;


• holds a substantial (50% or greater) ownership interest in, or is owned in substantial part by, a person who maintains a location in the state from which business is conducted, if:


• the retailer sells a similar product line under a similar trade name as the in-state entity; or


• the in-state entity promotes or facilitates sales or otherwise assists the retailer in maintaining market in the state, including by receiving returns; or


• holds a substantial ownership interest in, or is owned in substantial part by, a person that maintains a distribution certain or similar facility in the state and delivers property sold by the retailer to consumers.

See Texas Tax Code § 151.107(a)(1), (3), (7), (8). SB 1 also amends the definition of “retailer” to include a person who, under an agreement with another person, (A) is entrusted with possession of tangible personal property in which the other person has title and (B) is authorized to sell the property without additional action by the person having title.Id. § 151.008(b)(6).

While apparently drafted in a manner intended to target Amazon, Internet retailers and direct marketers that contract with a Texas business or use a Texas location, particularly for distribution purposes, should review the law and consult with their counsel to determine if they may be affected by new definitions. Given the high stakes battle between Amazon and the State, other companies could be caught in the cross-fire or even be targeted themselves. Best not to become an unwitting victim.

Time to Stop Using Debit Cards?

While my gripe about debit cards used to be the tricky overdrafts, apparently there is a new fee in town. . . . The debit card usage fee. Now that we've moved to a very cashless society, some banks are now looking to charge customers who want to use a debit card. Wells Fargo is now testing a $3 monthly debit card fee and JP Morgan has already tested the $3 fee! Ouch. Just $3 right? But overtime . . . And, we all know that $3 would just be the start. Surely, I am a cynic.



Banks argue that these new fees are in response to the Fed's cap on the fees they can charge retailers on card transactions. An Associated Press survey, though, says that 61% of consumers will find another way to pay if banks charge for using the debit card. Way to go consumers! I wonder, though, if this will turn out to be a tricky fee. For instance, do you get the monthly fee if you use your card in your own bank's ATM? In other ATMs?



At least at this point, Bank of America has not yet jumped on the debit card fee bandwagon.

Tax Agencies Should Read the Language of the Statute and May Not Expand the Law’s Requirements

As some of our readers are aware, on June 28, 2011, California’s Governor Brown signed into law a bill (ABX1 28) that provides for “click-through nexus” under certain circumstances. This law is similar to “click-through nexus” legislation adopted in New York, Rhode Island, North Carolina, and Arkansas (which we have written about extensively in the past), inasmuch as it creates a rebuttal presumption of nexus if a company’s annual sales to California exceed $500,000 and if the company’s California sales exceed $10,000 from links or other referrals from companies (“affiliates”) who receive a commission from such referrals.

Unlike the Illinois and Connecticut statutes, which automatically create nexus in the event that sales from affiliates exceed the threshold, the California law provides that the retailer can rebut the determination of nexus based on affiliate relationships. Nevertheless, in a recent notice issued by the California Board of Equalization (Notice L-284, issued July 2011), the Board states that there are only two conditions to a finding that a retailer must be registered for sales and use tax collection: (1) that sales from affiliates exceeded $10,000 in the last 12 months; and (2) that the retailer’s total sales to California exceed $500,000 in the last 12 months. According to the Board, if a business meets the foregoing requirements and is not already registered with the Board, it must complete a “California Certificate of Registration—Use Tax.”

The Board is simply wrong. It misses two sections of the newly-enacted statute. Section 6203(5)(E) provides as follows: “This paragraph shall not apply if the retailer can demonstrate that the person in this state with whom the retailer has an agreement did not engage in referrals in the state on behalf of the retailer that would satisfy the requirements of the commerce clause of the United States Constitution.” This is similar (but not identical) to the clauses in the New York statute that permit the retailer to show that the affiliates do not engage in any solicitation in the state. Similarly, Section 6203(5)(C) provides that “an advertisement on a web site will not create nexus if the person entering the agreement with the retailer also directly or indirectly solicits potential customers in this state through use of flyers, newsletters, telephone calls, electronic mail, blogs, microblogs, social networking sites, or other means of direct or indirect solicitation specifically targeted at potential customers in this state.” Many affiliate relationships are based on advertisements placed on web sites.

In short, it is important to read not only the notices you may receive from a state tax agency, but also to review the underlying legislation and regulations. State tax agencies simply cannot expand a law. Legislatures and Governors adopt laws. State tax agencies are entrusted with enforcing the laws, not creating them.

Bills Introduced in Congress to Override Quill in Favor of Streamlined Sales and Use Tax Agreement

On July 29, 2011, the so-called “Main Street Fairness Act” was introduced in both houses of Congress. The bills, introduced as H.R. 2701 in the House of Representatives and as S. 1452 in the Senate, are identical. Under the proposed law, Member States in the Streamlined Sales and Use Tax Agreement (SSUTA) would be authorized to require remote sellers (i.e., Internet retailers and other direct marketers with no physical presence in the state) to collect and remit state and local sales and use taxes notwithstanding the substantial nexus standard established by the Supreme Court in Quill Corp. v. North Dakota. There are currently 24 full and associate member states in the SSUTA, representing approximately 36% of the population of the United States. Many larger states, including California, Florida, Illinois, New York, Pennsylvania and Texas are not SSUTA members.

Similar bills have been introduced in past sessions of Congress, including in 2003, 2006, 2007 and 2010. Brann & Isaacson Senior Partner, George Isaacson, has testified with regard to such prior legislation in 2003, 2006, and 2007 that the SSUTA has not achieved the goal of genuine simplification and uniformity of states sales and use tax systems.  The requirements imposed on states by the current Congressional bills are substantially identical to prior versions and, in some respects, are even less demanding for states. In addition, H.R. 2701 and S. 1452 contain no express minimum level or “small seller” exemption that would protect smaller retailers from the obligation to collect use tax in all member states. Instead the bills defer to small seller exemptions established by the SSUTA states themselves.

We will keep you apprised of further developments regarding the bills.