Time to Stop Using Your Debit Card Part II

In August, I wrote about the prospect of banks charging fees on debit cards that are used in non-ATM transactions (see Time to Stop Using Debit Cards). With several banks testing $3 fees, I predicted there was no way it would end at that. Bank of America has now jumped on the bandwagon announcing a $5 monthly fee beginning next year for all bank customers that use their debit card for purchases. There will be no fee for ATM use. Of course, this is in addition to any other fees already charged on the bank account. The discussion now suggests that debit card use fees are the industry "norm." Wow! Even before the banks implement these new fees, the media is reporting them as the new standard.

Way back when banks first rolled out debit cards as a replacement for the traditional ATM card, I asked to send mine back. My worry, of course, was that there would surely be fees associated with the cards. And, would I know the fee was coming before the bank charged me. Well, it has taken some time for the fees to hit directly on user accounts (rather than indirectly through interchange fees), but welcome to the new world.

NPR ran a piece this week about the ability of small banks to lure new customers as these new fees hit. See Smaller Banks Use Free Checking. My suspicion is that many bank customers will not even notice the new fees . . . at first, but will be unhappy when they find out. Others who keep lower balances at some times during the month will not notice the fees until they've overdrawn their account. Then the bank may collect a $35 additional fee if the customer is enrolled in the bank's debit card overdraft protection program.

As for me, when these fees hit, I will not use my debit card for over the counter purchases. I can write a check at the grocery store or use a credit card for gas. After all, do you really think it will stop at $5 a month?

- JSM

There May Yet Be Life In The Quill Due Process Prong

In February 2011, we wrote about a case (Gordon v. Holder), in which the federal Court of Appeals for the District of Columbia Circuit vacated the denial of preliminary injunction against the enforcement of the federal Prevent All Cigarette Trafficking Act (PACT Act), P.L. 111-154 (2010). The PACT Act mandates state sales/use tax compliance by “delivery sellers” of tobacco products, regardless of whether the seller has a physical presence in the state. In vacating the denial of the preliminary injunction, the D.C. Circuit also advised the lower court to address on remand the issue of whether the PACT Act’s imposition of “potentially disparate burdens on ecommerce” violates the Due Process Clause of the United States Constitution (even though Congress has the authority to impose such burdens under the Commerce Clause). It appears that the Gordon case remains on remand before the district court as of this writing.

The Second Circuit Court of Appeals has now also ruled that a federal law must satisfy a minimum standard under the Due Process Clause before it may purport to authorize the imposition of state use tax collection by remote sellers. Red Earth LLC v. Holder, __ F.3d __, 2011 WL 4359919 (September 20, 2011). In Red Earth, the Second Circuit upheld the granting of a preliminary injunction against the PACT Act’s state tax collection provisions as they apply to certain Native American “delivery sellers” of tobacco products, on the grounds that the Act may be in violation of basic Due Process standards. Although, as the Court noted, the Due Process Clause does not require that a retailer have a “physical presence” in a state before a use tax obligation may be imposed, the Court found that the district court did not err in ruling that PACT Act likely violates the Due Process Clause because it “requires a seller to collect based on its making of [only] one delivery” in the state.

Both the DC Circuit’s February remand order and Second Circuit’s September 20 ruling confirm that a federal law that purports to impose (or allow) state use tax collection obligations on remote sellers must be consistent with the dictates of the Due Process Clause. This mandate includes ensuring that such obligations do not run afoul of the requirement that a retailer must “purposefully avail[] itself of the benefits of an economic market in the state” before it may be subjected to the state’s taxing power. See Quill Corp. v. North Dakota, 504 U.S. at 307-08. Although the Supreme Court in Quill held that the retailer in that case had sufficiently targeted the North Dakota market to eliminate any Due Process concerns, the Supreme Court has recently had reason (in the context of challenges to personal jurisdiction over a defendant in a tort case), to re-evaluate Due Process standards as they apply to companies with no physical presence in the state. See, e.g. J. McIntyre Machinery, Ltd. v. Nicastro, 131 S.Ct 2780, 2792 (2011). It remains to be seen how constitutional Due Process standards may impact federal laws that purport to authorize the imposition of state use tax collection obligations on remote sellers. Stay tuned.

California Governor Signs (Possibly Temporary) Affiliate Nexus Law Repeal

As we wrote recently, on September 9, the California legislature passed AB 155, which repeals (for at least the next year) the affiliate nexus provisions of the affiliate nexus law (ABX 1-28) enacted in June. The repeal may be only temporary, because the new law provides that if federal legislation overturning Quill Corp. v. North Dakota is not adopted by July 31, 2012, or if such legislation is adopted, but California does not implement the federal law’s requirements by September 14, 2012, then the affiliate nexus provisions of the repealed law, with some modifications described in our prior post, will kick back in on January 1, 2013, under the terms of AB 155.

Although Governor Brown reportedly had some misgivings regarding AB 155, he signed the bill into law earlier today. The law is effective immediately, so for now, California no longer has an affiliate nexus law. Whether federal legislation will be enacted and whether California will implement any such law’s requirements remains to be seen…

MEDIA RELEASE: RADIO REAL ESTATE HITS THE AIR IN TOWNSVILLE

MEDIA RELEASE: RADIO REAL ESTATE HITS THE AIR
Radio Real Estate went to air today on Townsville Radio 103.9 Four Triple T . Mal Charlwood, who is a Licensed Real Estate Agent and Auctioneer, has commenced a live talk back show to allow the listeners to phone in and ask questions regarding all aspects of buying and selling real estate.

Mal said “ the show aims to separate the facts from the myths about buying and selling real estate”.

The educational forum is softened with some humorous reflection by Mal of his experiences in the world of listing and selling real estate over the past 40 years.

Anyone who might have any interest in real estate should not miss this informative and free community service.

The first show this morning was well received with the phone running hot even after Radio Real Estate had finished.

Four Triple T radio station compare Clive Simpson said; “We believed that the show would be successful but the response was overwhelming”.

The show will air every Saturday morning straight after the News at 9.00am.

Contact Mal (pictured) at www.rapidrealty.com.au

British Columbia Repeals HST in Voter Referendum

As we have written previously, in 2010, both Ontario and British Columbia entered into agreements with Canada to harmonize the Goods and Services Tax (“GST”) and their Provincial Sales Taxes (“PST”) into a single Harmonized Sales Tax, or “HST.” The HST went into effect July 1, 2010, in both provinces.

But, the HST proved unpopular in British Columbia, and on August 26, a majority of voters in British Columbia passed a referendum aimed at extinguishing the HST and reinstating the PST. The transition back to the PST is expected to take “a minimum of 18 months." The reason for the long transition is that the province must develop and pass legislation and regulations to re-implement the PST and put in place systems to administer it, and the federal government and the province must pass transitional rules to return the province to the GST. Additionally, British Columbia must determine how it will refund to the federal government the $1.6 million provided to the province to aid in its initial transition to the HST.

As a result of the transition, British Columbia will again be subject to the 5% federal GST and the PST will return to its former 7% rate. Because the HST was 12% (5% federal component and 7% provincial component), British Columbians and retailers carrying on business in British Columbia will not see any change in the tax rate. However, retailers should be aware that the tax base for the reinstated PST will likely differ from the tax base for the GST. British Columbia anticipates providing quarterly updates as to the re-implementation of the PST and until implementation is complete, the HST will continue to apply.

No similar voter referenda appear to be on the horizon in any of the other harmonized provinces (New Brunswick, Newfoundland and Labrador, Nova Scotia, and Ontario), but we will continue to keep track of and inform our readers of any developments as they arise.

California Affiliate Nexus Law Repealed (At Least Temporarily) In Deal With Amazon

As we have previously reported, on June 28, California enacted an affiliate nexus law (ABX 1-28). Under the California law, an out-of-state retailer that has contracts with California affiliates to publish online advertisements linking consumers to the retailer’s website would have been required to collect California sales tax (or use tax) on all of its sales to California purchasers, if: (1) the in-state publishers also engaged in solicitation of customers in the state on behalf of the retailer through other means (such as by flyers, telephone calls, or e-mails) targeting California consumers; (2) the publishers of the advertisements were compensated based on sales made by the retailer; (3) over a 12 month period, the retailer realized at least $10,000 in cumulative sales to consumers accessing its site through such online ads; and (4) the retailer had California sales of at least $500,000 during such 12 month period.

Amazon.com responded to ABX 1-28 by supporting a campaign to repeal the new affiliate nexus law by citizens’ referendum, which was reportedly well on the way to gathering the necessary signatures to get the repeal measure on the ballot next year.

Now, political maneuvering between Amazon and the California General Assembly has resulted in a compromise. On Friday, September 9, the General Assembly enacted AB 155, which will become law immediately if Governor Brown signs the bill (as he is expected to do, despite some reported misgivings). AB 155 repeals, at least for a year (on the conditions described below), the California affiliate nexus law (i.e., ABX 1-28 described in the first paragraph), and also provides that the law will not be enforced for the period between June 28 and the effective date of AB 155. The bill also repeals (on the same conditions) the “controlled group” of corporations provisions of ABX 1-28. Those provisions purported to require use tax collection by any out-of-state retailer that is part of a group of corporations that includes a member that performs services in California in connection with tangible personal property to be sold by the retailer.

The repeal of the California affiliate nexus law is contingent upon the enactment by Congress of federal legislation to overturn the “physical presence” nexus requirement of Quill Corp. v. North Dakota, which prohibits a state from imposing a sales/use tax collection obligation on a remote seller or Internet retailer without a physical presence in a state. Amazon has reportedly agreed to lobby for such federal legislation and, in a press statement, said: “This [California] legislation will allow us to continue to work with Congress and the states to obtain a federal resolution to the sales tax issue as soon as possible.”

Here’s how the repeal works (if signed by Governor Brown):

• The California affiliate nexus provisions of ABX 1-28 enacted on June 28 are repealed and no longer of any effect, and also will not be enforced with respect to the period from June 28 through the effective date of AB 155 (i.e., the date Governor Brown signs the bill);

• If no federal legislation is adopted over-ruling Quill before July 31, 2012, then the California affiliate nexus provisions (as re-stated in AB 155, with one important change, noted below) will become law on September 15, 2012;

• If federal legislation overturning Quill is adopted by July 31, 2012, and California does not implement the requirements of such a federal law by September 14, 2012, then the California affiliate nexus provisions (again, as restated in AB 155, with the change noted below) take effect January 1, 2013; 

• If federal legislation over-turning Quill is adopted by July 31, 2012, and California implements the requirements of such a federal law by September 14, 2012, then the affiliate nexus provisions of AB 155 will NOT take effect.

Note that the affiliate nexus provisions of AB 155 that may later take effect ― in the event that Congress either does not enact federal legislation overturning Quill or California does not act to implement such federal legislation ― have been modified under AB 155 to increase the minimum sales threshold, so that they now will apply only to retailers that have in excess of $1,000,000 in cumulative sales to California residents in a 12 month period (although only $10,000 of those sales need to come from sales referred by in-state web affiliates).

This is a lot to take in, and remote sellers making sales to California residents should consult their legal advisors with any questions. At a high level, as a result of AB 155, e-commerce businesses and direct marketers that engage in online advertising through California affiliates get a temporary reprieve of at least 12 months from the effects of the California affiliate nexus law, and can continue to use California publishers of online advertisements during that period. But, they will likely need to scrutinize their California web affiliate relationships again before September 2012 and keep track of federal and California legal developments until at least January 2013.

The larger issue confronting each remote seller, however, may be whether the compromise struck in California is consistent with their own company’s goals and interests, and with the continued development of e-commerce more generally. Affected online retailers and publishers should stay informed and engaged regarding developments affecting the authority of all states to impose use tax collection obligations on out-of-state businesses. The time for sitting on the sidelines and watching the contest play-out between retail behemoths and the states has passed.

Business Lawyer Seeks Additional Editors

The Business Lawyer (TBL) plans to appoint at least one additional editor beginning with Volume 67. The responsibilities of an editor will be to:

(i) edit approximately sixty manuscript pages of each of the four issues that TBL publishes in each volume;

(ii) ensure that each statement of fact has an accurate citation that supports it;

(iii) conform all citations to the Blue Book; and

(iv) make sure that manuscripts satisfy TBL Author Guidelines.

Over the course of a volume, each editor should expect to work on a combination of articles, reports, and surveys that are published in TBL.

Since Volume 64, Professor Gregory Duhl of the William Mitchell College of Law has been responsible for all style editing, cite-checking, and Blue-Booking of TBL. Professor Duhl is the current Associate Editor-in-Chief, and the editors would work in collaboration with him, the Editor-in-Chief, who rotates yearly, and the Production Manager, Diane Babal, to ensure that TBL maintains its high quality and timeliness. The editors would also work closely with the Associate Editor-in-Chief to update the TBL Author Guidelines to maintain consistency in the journal.

TBL seeks editors from all business law disciplines, who have experience editing an academic publication, a keen attention to detail, and an ability to meet deadlines. Each editor would receive an honorarium upon completion of his or her work for that issue. If interested in this position, please e-mail a resume to Diane Babal, at Diane.Babal@americanbar.org. Any questions about the position can be addressed to Professor Duhl at Gregory.duhl@wmitchell.edu.

- JSM