Florida Introduces Affiliate Nexus Legislation

For the sixth year in a row, Florida legislators introduced a billthat (like many states before it) would create a rebuttable presumption that any out-of-state Internet retailer or mail order seller which enters into an agreement with a Florida resident (an “affiliate”) for paid referrals is subject to the State’s sales and use tax.  Referrals which subject out-of-state sellers to Florida tax are broadly defined and can be via “a link on an Internet website, an in-person oral presentation, telemarketing, or otherwise.”  Out-of-state sellers who have cumulative gross receipts of $10,000 or less from the referrals would not be subject to Florida tax.  As in several other states, the bill would allow sellers to rebut the presumption that they are subject to tax by submitting evidence that the affiliates “did not engage in any activity within [Florida] which was significantly associated with the dealer’s ability to establish or maintain the dealer’s market…during the 12 months immediately before the rebuttable presumption arose.”

As we have written previously, in response to a challenge by Amazon.com to a similar law enacted in 2008 in New York, a New York State appeals court held that the law was not unconstitutional on its face because it allows a retailer to rebut the presumption of solicitation.  The court remanded the case to the lower court to determine whether the law violated the Constitution’s Commerce and Due Process Clauses as applied to Amazon.com.  In the meantime, as similar affiliate nexus laws have been passed in a handful of other states, many retailers have terminated their affiliate relationships.  Also, last spring, in a case argued by George Isaacson and Matt Schaeferof Brann & Isaacson, an Illinois court found that Illinois’ affiliate nexus law, which does not allow an affected retailer to rebut the statute’s conclusive determination that having affiliates in the state creates nexus, violates the Commerce Clause as well as the Internet Tax Freedom Act.

On the federal front, where Congress is considering legislation which would authorize states to impose use tax collection obligations on remote sellers and ecommerce vendors with no physical presence in the states, each of the three bills introduced remain in committee at this time. But, none of the bills requires significant simplification of state tax systems.  In any event, with the end of the year fast approaching and Congress facing arguably more pressing matters such as the so-called “Fiscal Cliff,” it is unclear whether any of the remote collection bills will move forward.  A proposal to add one of the bills to a defense appropriations bill was recently defeated in the Senate.

We will continue to keep our readers informed of state and federal developments in this area as they arise.

Data Breaches: Some Lessons

Some of our readers may have read about recent high profile data breaches, such as the one involving credit card information taken from many Barnes & Noble retail stores. Or they may have heard of the huge class action law suits against Sony which resulted from its handling of a 2011 incident involving hackers into the Sony Playstation network. In that case, the hackers accessed personal information including names, addresses, user names, passwords, and other personal information from about 77 million user accounts. And they may have read about the breach involving TD Bank, in which TD Bank misplaced in March 2012 computer back-up tapes containing personal information for 267,000 customers, but did not inform the affected customers and pertinent state authorities until seven months later, in October. Each of these instances brings to light some apparent misconceptions regarding the handling of data breaches.  

Myth 1: There is no law that requires action in the event of a data breach.

Fact 1: There is no federal law (aside from laws regarding specialized industries such as banking and health care) that requires a response. However, 46 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands require certain actions be taken in the event of a data breach regarding personal information, and each of these laws is different.

Myth 2: My company only needs to comply with the data breach laws of the states in which my company has an office or other physical presence.

Fact 2: A company is subject to the data breach laws of not only the states in which it has a physical presence but also the states in which it has customers.

Myth 3: I need only look at one state’s laws if there has been a data breach.

Fact 3:In the unfortunate event of a data breach, you need to follow the laws of each state where the affected persons reside, and not just the law of the state where their information is maintained or the breach has occurred.

Myth 4: My company can have a uniform response to a data breach.

Fact 4: State laws require notifications to affected consumers and state agencies in the event of a breach. Some also require notifications to credit reporting agencies. The laws are not uniform with regard to what constitutes a data breach, the government agencies to be notified, the credit reporting agencies, if any, that need to be contacted, and the contents of the notice to individuals whose information was compromised.

Myth 5: My company is not required to have a data breach response plan in the event of a data breach.

Fact 5: If the company makes sales to residents of Massachusetts, then the company must have a written plan to disclose how it intends to respond to data breaches. This is part of a so-called WISP, as required by a 2010 Massachusetts law. Moreover, a data breach response plan can provide a critical defense to class action lawsuits claiming that your company failed in its duty to protect customers against harm resulting from data breaches.

Myth 6: My company can play it by ear when there is a data breach, so it is of little value to plan.

Fact 6: A company must and should tailor its response to a data breach to the facts and circumstances of the breach—and so there is a need “to call audibles at the line of scrimmage.” However, data breaches are dynamic events that require immediate, consistent action to: investigate what happened, determine the appropriate responses to stop the security breach, shape the correspondence with individuals whose information is compromised, and decide on notification to the appropriate federal and state authorities. Most of the actions require approval at the highest levels of a business. There needs to be a signal caller for the plays based on a play book developed before the game and the play takes place.

Myth 7: There is no requirement that my company respond quickly to a data breach, and we certainly do not want our actions to take away from our company’s efforts to operate the business.

Fact 7: No state law requires a fixed period of time to respond to a data breach. Many of the laws require prompt responses, however. And every day of delay for serious data breaches increases the potential exposure to real damage done to persons whose information has been compromised. Sony has oftentimes been criticized, and it has been hit with a number of class action law suits, because of the one week delay in notifying appropriate federal and state officials and the users whose information was compromised. A data breach response plan permits companies to continue to operate their businesses at times of a data breach, yet take the necessary action in as short a time possible under the circumstances. Finally, many state laws require notice to consumers before a data breach has been confirmed where there a reasonable likelihood of such a breach. As a result, waiting until a full investigation has been completed can violate applicable laws.

Myth 8: The data breach does not affect credit card numbers. Therefore, there is no required response.

Fact 8: Each of the data breach laws require notification of consumers and state agencies if the information compromised involves personal information, which is generally defined as a combination of a name and a data element, which may be a credit card number, but may also be a social security number, driver’s license number, bank account number. or other state-issued identification number. In addition, data breach notification requirements can be triggered even if the data involved is encrypted, since the laws of some states provide no exceptions for encrypted information.

Myth 9: The information was compromised when possessed by a third party, so my company need not make any notification to our customers.

Fact 9: The state data breach notification laws generally apply to any company that stores or maintains personal information or owns or licenses personal information of an individual. Thus, if a retailer submits personal information to a third party for processing—e.g., to a company to do a merge/purge or to send emails—it has a duty to notify the consumer whose information was compromised. All retailers should make sure that their contracts with outside contractors have suitable provisions addressing the confidentiality of personal information of their customers and employees as well as required notifications to the retailers in the event of a breach.

Myth 10: Data breaches occur only for large companies and my company is too small to be subject to either a data breach or the required response to a data breach.

Fact 10: In a recent survey, PricewaterhouseCoopers found that 70 percent of companies responding to the survey had experienced a data breach in the prior year. Other studies have found that data breaches are episodic and can occur to companies regardless of size. None of the data breach laws maintain a small business exception.

Conclusion

Inappropriate responses to data breaches can expose a company to significant liability and unfavorable publicity. Developing and implementing a sound data breach plan can reduce these adverse consequences and help avoid penalties from government “referees."

RBA CUTS INTEREST RATES: TOWNSVILLE LOCAL PERSPECTIVE

The Reserve Bank of Australia (RBA) has cut the official interest rate by .25 percent to 3.00 percent today bringing welcome news to home buyers and home owners.

The real estate sector, housing industry and property investors alike have anticipated a drop in the cash rate as the economy adjusts to increased prices in products and services impacting the property industry as a whole and moderate growth in revenues.

Townsville’s economy has a broad base of industry and government; defense, mining, engineering and agriculture which has supported modest growth in rental accommodation prices driven by increased holding costs and the injection of the 3^rd army battalion to the City early in 2012. Vacancy rates that were published by Herron Todd White in October 2012 have shown an increase in vacancy rates to over 2 percent.

Rapid Realty’s monitoring of prices and volumes suggests that housing prices have been steady across North Queensland with volatile fluctuations from street to street. Similar or slightly lower transaction volumes have occurred in 2012 compared to 2011.

The combination of higher vacancy rates in the rental market, which may reach 3 percent by 2013, together with very affordable house prices that many commentators are saying is bottoming, means that we may have arrived at the most favourable buying conditions for investors in the current property market cycle.

Positive economic news out of Asia and the recovery of USA housing prices and volumes could stimulate more positive news from global markets, and stem the tide of negativity that has dogged markets in our region since the start of the Global Financial Crisis (GFC).

 

State budget corrections and the emerging "policy cliff in Canberra" where the federal government is seemingly persisting with a budget surplus is further risk to the confidence factor in property markets.

 

North Queensland is not insulated from these macro-economic factors by all means, but the local economy has demonstrated positive resilience in the past.

The RBA decision today to reduce the cash rate is further incentive for buyers and investors to enter or expand their exposure to the property market in North Queensland.

 

Trusting the banks to pass on the full .25 percentage point reduction is an uncertain instrument in the current global financial economy for which the RBA or government policy must acknowledge and treat to assist in the recovery of the property markets in the North Queensland.

For more research or to share your own comments about the RBA decision and property in North Queensland, visit one of our discussion forums at:

www.rapidrealty.com.au

http://townsvillerealestate.blogspot.com.au/

http://www.facebook.com/pages/Rapid-Realty-Townsville/122486097777277

Rapid Realty Townsville

Townsville City Councillors Better off Providing Discounts to First Generation Developers

Townsville City Council would serve their community better and leverage rate payer funds more effectively by redirecting money being offered to a City Cinema Developer (see Townsville Bulletin article below) to small and medium size developers because it is more likely a greater short and long term economic benefit would be achieved for the City.

Local Property Investment Consultant and Real Estate Principal, Aaron McLeod said; "Council need to think seriously about turning on small and medium size investors again to the City".

Many small subdivisions and strata developments that were approved before the new Integrated Planning Act was introduced were established by local North Queensland families. This type of small development is now cost prohibitive to local investors. Council has the opportunity to stimulate this market with some initial relief from ridiculous planning and administration costs, Mr McLeod said.

Instead of bowing to large developer’s appealing for reduced planning costs in the City centre where an incentives program already applies of up to 50% on infrastructure charges, the Planning and Development Committee members should seriously question if they are really serving the community interests.

Small to medium size investors have by and large turned off Townsville because of the exorbitant planning costs imposed by State Government and Council red tap to complete suburban subdivisions and community-hub facilities such as local medical practices, corner stores, butchers, bakers and restaurants.

Even the privacy protection legislation is making it more difficult for small investors and developers to simply research investment opportunities in the City, causing many to throw their hands in the air and give up or redirect their attention interstate or overseas.

Just as one example, a local investor and medical practitioner wanted to set up a small psychology practice from an existing residential dwelling, which is located next door to a hotel and across a main road from an existing set of shops neighbouring industrial sheds in a well-established community, and Council planning provided absolutely no encouragement. Not only the investor but the prospective Seller of the residential dwelling is bewildered and frustrated with the system.

These small developments provide direct economic stimulus with construction and operational jobs, but most importantly, it stimulates broader investor confidence and therefore more investor demand for property in the City.

It seems our esteemed Councillors are happy to network and lobby with large corporations in the CBD to facilitate favourable financial outcomes for big business, but they are ignorant to the frustrations and call for help from the network of small to medium size investors local to North Queensland, and the prospective sellers that increasingly under enormous pressure from their banks to sell their properties, simply wanting urgent respite from the intolerable planning and administration fees and charges.

References:

Townsville Bulletin - http://www.townsvillebulletin.com.au/article/2012/11/28/371020_news.html
Rapid Realty Townsville - www.rapidrealty.com.au
MCINC Investments and Consultancy

One More Post on Real Estate and Violent Death

A response to my two previous posts on real estate and violent deaths from thoughtful reader Kristian Gravenor:

Nice post, good topic, but I think you're greatly overestimating the issue.

People die in every pre-owned house in a lot of ways. It has no bearing on what happens when you live there.

In the USA there's a hodgepodge of laws from state to state concerning disclosure but I've never found a case in the jugements.qc.ca files of a lawsuit asking for material damages from such a failure to disclose in Kweebeck.

Unless there was a Jim Jones-type body count inside the house I wouldn't be bothered a tiny bit by what happened before.

Yes, but there's a difference between people dying in houses and people dying violently in houses. I learned this lesson first hand a few years ago when I was given the responsibility of selling a home in which the owner had just taken his own life. In this case, the death was not violent, as these things go, but it was an unnatural death. The police and an ambulance were involved. All the neighbors knew what had happened.That raised the potential for neighborhood gossp and conjecture.

It was an interesting experience. The house was fully furnished but quite empty. People had what can only be described as "spidey senses". You could see them trying to put the story of this house together as they walked through. They knew something was a bit off about it.

If I sensed that there was an interest in making an offer, I would sit down and explain the situation. It was amazing the number of times people told me intimate stories of their own experiences with suicide - friends, family members, their struggles with dark thoughts. These are not the kinds of stories you tell complete strangers. Or maybe they are.

The first people who wanted to make an offer on the house were a Vietnamese family, elderly parents, young professional kids. As soon as they heard about the suicide, they said sorry, no thanks. Here's the thing, and it speaks to the point you raise, Kristian. They would not have been bothered by a death in the house. Had an old person died quietly in the house after a long, good life, that would have been auspicious. A violent death was not negotiable.

It took a while, but I sold the house to a family from Iran. The woman with whom I was negotiating had a cousin who took her own life in her early 20s. She had thought long and hard about what makes people kill themselves. Her only question before buying the house was whether kids in the local school yard were going to pick on her son or refuse to play at their house because of that event. I told her I didn't think they would. She bought a good house in a good neighborhood at a good price.

As for whether people go to court over the failure to disclose, you may be right, though I wonder how you would even check such a thing. The other option is that the parties settle out of court most times because if there's been a violent death and the broker hasn't disclosed, the buyer would win, hands down.

So there, you go, Kristian. Thanks for writing. You keep me on my toes.

A Few More Thoughts on On Dream Home as the Scene of a Crime

Yesterday, by pure accident, I stumbled upon an MLS property where the listing broker noted discreetly that the home had been the scene of a suicide. It was mentioned in a note to other agents, not visible to the general public.

I investigated a little further. Yup, the vendor noted the suicide in the vendor's declaration. Here's the interesting part. The suicide occurred before she bought the property. Date and details unknown.  That sent me scampering back through the previous MLS listings for this particular property (What can I say? It was a slow day and I didn't feel like vacuuming. Or folding laundry. Or raking leaves.)
None of the three previous listings mentioned the suicide, either in a note to other agents, or in the vendor's declaration.

It could be the the previous vendor verbally disclosed the suicide to the buyer. It is also possible that the info was written in the declaration but that the declaration was not posted to the MLS site.

I found it curious that the current seller has left an online signpost about the violent death, one that won't be easily erased. From now on, the house's sad history will be there for brokers to see. She gets points for honesty, though I suspect that honesty might make it harder to sell her house.

When Your Dream Home Was the Scene of a Nightmare

Yahoo News picked up a Toronto Star story today about a Bowmanville, Ont. couple who bought what they thought was their dream home, only to discover that the property was the scene of a double murder 15 years earlier.

The owners are now suing their real estate agent, claiming she should have disclosed the house's sordid past to them. They are also suing the former owners, who purchased the property after the crime.

According to the Toronto Star story (link here until it goes dead): 

"The Real Estate Council of Ontario, which regulates the industry, issued a warning to (agent Mary) Roy last month on the grounds that she “deliberately withheld a material fact known to her” regarding the murders from the buyers, contrary to the Real Estate and Business Brokers Act. The decision followed a complaint by the (buyers) earlier this year.
The council cited several provisions in the act’s code of conduct, including not engaging “in any act or omission that, having regard to all the circumstances, would reasonably be regarded as disgraceful, dishonorable, unprofessional or unbecoming a registrant.”

The Star story goes on to say that the case raises questions about what a real estate agent is obliged to disclose.

"Lawyers say the case involves a grey area in common law on the issue of “duty to disclose” — and how to assess what information that entails.
If the claim proceeds to trial, it could become a test case for the doctrine of “caveat emptor,” or buyer beware, and whether the couple’s situation is an exception to that general rule."

You will be glad to know that in Quebec there is no such ambiguity about what an agent is obliged to disclose to a potential buyer. The Real Estate Brokerage Act (REBA) says:

 A broker or agency executive officer must inform the party represented
and all other parties to a transaction of any known factor that may adversely
affect the parties or the object of the transaction.

In plain English, if I know something about a house,I must disclose it, whether the buyer asks or not.
The law goes further. Each time a client and I sign a brokerage contract before listing a property for sale, we also complete a Vendor's Declaration. This six-page checklist is where sellers declare everything they know about their house, from the age of the roof to - oh yeah, by the way -  someone was killed here.

"To your knowledge, has there ever been a suicide or violent death in the immovable?"

In case that is too narrow a question, the declaration also inquires:

"To your knowledge, are there any other factors relating to the immovable not mentioned in these declaration that are liable to significantly reduce the value or restrict the use thereof, reduce the income generated thereby or increase the expenses relating thereto (e.g. development or construction project, environmental problems (e.g. radon, abnormally high noise level, unpleasant odor, etc.)"

The latter question covers pretty much any other eventuality, whether the house was used as a brothel, a marijuana grow-op or a slaughterhouse for chickens. (Where did THAT come from?)

The vendor's declaration is attached to the listing so that other agents can see it. Buyers are given a copy before they make their offer and must sign and date the declaration as proof that they are aware of all a house's quirks and defects.

There's no gray area in Quebec law about whether or not you must disclose. When in doubt, disclose.

Free the Blackstrap BBQ Sign!!

Blackstrap BBQ sign, stolen shamelessly from their Twitter page @bbqblackstrap

There's a bit of a brouhaha in the Twitterverse involving Verdun's buzziest new restaurant Blackstrap BBQ.

The Wellington St. eatery is getting rave reviews for its authentic Memphis style ribs, brisket, pulled pork and such. Everything is smoked daily on the premises. As we say here in Quebec "Omnomnomnom."

It's great to see energetic young entrepreneurs making a go of it on our main drag, Wellington St. Given the number of slice pizza joints and 99-cent hot dog emporia, Blackstrap represents a quantum step up in quality. Just what a gentrifying neighborhood needs.

To make a long story short, controversy has erupted over Blackstrap's distinctive new sign. Apparently it falls outside the borough's regulations for signage. Language, you ask? No. Plywood. Verdun doesn't permit plywood signage. Too "ghetto", in the words of Blackstrap co-owner Clara Barron.

Word spread through the social media world, with the good folks over at the Decouvrir/Discover Verdun Facebook page (an invaluable resource for people interested in local doings) voicing outrage over the borough's small-mindedness. 

As several posters pointed out, this kind of nitpicking is no way to encourage small business. Photos of ugly storefronts were posted on the FB page, none of which appear to offend the delicate sensibilities of Verdun's signage tastemakers.

A few minutes ago, Blackstrap's Barron posted a Twitter update, saying that the SDC Wellington (Société de développement commercial) will go to bat for Blackstrap and try to persuade the borough council to approve the sign.

A happy ending? Not quite yet, but maybe. Now go get some brisket.

Just Listed! Point St. Charles 4-Bedroom Cottage

Just listed in Point St. Charles, a lovely four-bedroom Victorian. 582 Bourgeoys St., a bit south of Wellington, was built in 1885 and has been lovingly cared for by an attentive owner. It's big enough for a growing family though the easy flow of the main floor would make it a wonderful home for that sociable couple who like to entertain. The asking price is $524,000.

The floors, door and window trim, as well as a grand staircase that wends to the second storey, are all stripped original pine. The hot water radiators (super comfortable heat)  are hidden beneath ornate 19th-century brass and marble mantles. The ceilings are high, the windows and doorways are large. In short, like broad-at-the-beam Queen Victoria herself, this house was built for comfort.

The main floor features a spacious living room that easily accommodates a huge sectional sofa, ideal of family movie nights or gatherings of friends.

The dining room, with a view onto the back garden, can easily seat 12, without crowding.
The kitchen retains its original tall wooden cabinets. There's room for a breakfast table and a nook for a desk, computer station or spot where the kids can do homework while a grown up gets started on dinner.

The main floor also has a powder room. A door at the back of the kitchen communicates with the main floor laundry and to a large treated wood deck and flagstone patio in the sunny, fenced back yard. There's a lane behind the house and the flagstone patio can double as parking in a pinch. Street parking is easy.

 Upstairs, you'll find four real bedrooms, including a massive master bedroom that measures nearly 13 feet by 13 feet. The second and third bedrooms are equally spacious.The smallest room is irregular in shape. It would make a perfect baby's room or den/office. All of the rooms have high ceilings and large windows. This is a quiet residential street with two and three-storey buildings. The light pours in all day long.

The main bathroom is divided into two rooms, a bath with shower in one room with a skylight and the WC in another little room of its own. The fixtures have been updated.

Point St. Charles has become one of the most sought-after neighborhoods in central Montreal in the last 20 years, in part because it is an easy 10 minute drive, 20 minute bike ride or 20 minute bus trip to the corner of Peel and Ste. Catherine. The housing stock is older, with lots of Victorian charm and more modest homes that have been gussied up with sleek contemporary style.

582 Bourgeoys (the anglo old-timers pronounce it Burgess)  offers the luxury of space, a rare fenced AND sunny garden, carefully preserved cachet and four real bedrooms.

The basement is unfinished, but is easily 7 feet high, with interesting potential, if the square footage above ground isn't enough room for you.

As with all houses, it has a few quirks. There's a new chimney liner but the brick chimney itself will need attention in the next few years. The windows are older and still work fine, but aren't as energy efficient as newer models. We all have our little imperfections, don't we?

Check out the complete listing at marylamey.com. Give me a call if you'd like to schedule a visit.

Tennessee Ruling Provides Another Wrinkle for Cloud Computing Services

A recent ruling by the Tennessee Department of Revenue (Ruling #12-11) illustrates some of the anomalies and pitfalls in properly taxing cloud computing services. The request for ruling concerned a service that provided Tennessee users access to software maintained on remote servers located outside of Tennessee. This is otherwise known as an SaaS service. In addition, the charge for the service permitted users access to certain databases, including certain reference materials such as dictionaries and encyclopedias. It would appear that the users did not download the references to their computers.

One of the anomalies in the ruling is that the Department stated that the SaaS portion of the service was not taxable, but access to the databases was taxable because the Department deemed the access to include the right to license and use digital books. As of January 1, 2009, the right to license and use digital books is taxable pursuant to an amendment to the Tennessee sales and use tax statute adopting the Streamlined Sales and Use Tax Agreement (“SSUTA”).

The Department’s basis for this distinction in taxability appears to be that access to software is not taxable because “title, possession, and control” of the software always resides outside of Tennessee. On the other hand, the taxability of digital books is predicated on the following underscored clause from Tenn. Code Ann § 67-6-233(a), which provides for the taxation of digital books when there has been the “retail sale, lease, licensing, or use of specified digital products transferred to or accessed by subscribers or consumers in this state.” (emphasis added). Section 67-6-231(a), providing for the taxation of software, includes only “software transferred by tangible storage media or delivered electronically,” but does not include access to the software. The difference between the two statutory provisions is subtle. On the one hand, digital books are taxable if the consumer in Tennessee has “access” to the books, without being required to download them. On the other hand, computer software is not taxable, even if the consumer has access to the software, so long as the consumer does not download the software to his or her computer in Tennessee.

Another anomaly pointed out in the ruling is the distinction between information services and digital books. The Department conceded in its ruling that data processing and information services are not taxable in Tennessee, and defined such nontaxable services as allowing “data to be generated, acquired, stored, processed or retrieved or delivered by electronic transmission.” Because the service at issue in the ruling included access not only to information maintained in a database by the service provider, but also access to reference materials such as a dictionary or encyclopedia, the non-taxable information service was transformed into access to digital books.

Finally, the “pitfall” is, as the Department ruled, because the charge was for the combined service of access to the software as well as access to the databases and the digital books, the entire transaction was taxable. This was the case even though the transaction fit within the definition of a “bundled” transaction (i.e., the sale of two or more services for one price), and some of the services were not taxable.  The ruling is in line with the old New York “cheeseboard” rule* and the proverbial expression that “one rotten apple spoils the bunch.” The lesson for a cloud service provider is that it should itemize charges for separate services; otherwise it stands the risk of taxation of the entire transaction. This is so, even in the SSUTA states, which only provide for “unbundling” services (i.e., permitting the showing of the portion of a bundled transaction that is not taxable) where the services consist of a bundled transaction of “telecommunications services, ancillary services, Internet access services, or audio or video programming services.” Most cloud computer service providers do not provide such components as part of their service offerings and so itemizing the services they actually provide is a constructive way to limit the tax hit.

* Under 20 NYCRR § 527.1(b), “Taxable and exempt items sold as a single unit. When tangible personal property, composed of taxable and exempt items is sold as a single unit, the tax shall be collected on the total price.  Example: A vendor sells a package containing assorted cheeses, a cheese board and a knife for $15. He is required to collect tax on $15.”

One Month Left to File under Maine’s Use Tax Compliance Program

At the root of debate about whether Internet retailers and other direct marketers should be required to collect state sales and use taxes is the well worn complaint by state revenue departments that consumers (the folks who actually owe the tax under nearly every state’s laws) just do not self-report and pay use tax if left to their own devices. Consequently, the states’ argument goes, states should be entitled to shift the burdens of tax collection onto remote sellers (no matter how onerous), rather than requiring the state to pursue measures to promote reporting, or to boost collection. There are ways, however, for a state to educate consumers about their obligations to pay the use tax.

For example, now through November 30, taxpayers who have unreported use tax liability due to the State of Maine may remit tax under the 2012 Maine Use Tax Compliance Program. The Program, enacted by the State’s Legislature last spring, seeks to “encourage payment of previously unreported use tax and to improve compliance with the State’s use tax laws.”

The Program covers periods from January 1, 2006 through December 31, 2011. Taxpayers must report all taxable purchases for which tax has not been remitted for the entire six year period. But, taxpayers only must remit tax for the three years with the greatest amount of unreported tax due. No tax is due for the three years with the lowest amount of tax reported and all interest and penalties are waived for the entire six year period. Taxpayers who timely file returns under the Program are “absolved from further liability for unreported and unassessed use tax incurred prior to January 1, 2012, and [are] also absolved from liability for criminal prosecution and civil penalties related to those taxes for those years.”

For those individual taxpayers who lack records to support detailed reporting for the past six years, Maine Revenue Services allows filers to estimate their use tax obligations, if no single purchase in a given year exceeded $1,000. Businesses must report their actual purchases for the past six years. The estimate for individuals is based on Maine adjusted gross income and is calculated using a table provided by the State. For instance, an individual filer with $50,000 of Maine Adjusted Gross Income in 2007 is assumed to have made $1,000 of taxable purchases in that year. Obviously, for someone who makes few purchases subject to the use tax, the estimate may be on the high side.

Furthermore, taxpayers who choose to itemize should be careful in reviewing their purchases to make sure they do not over report their use tax liability. For example, out-of-state purchases sent to out-of-state recipients (a Christmas gift bought on Amazon.com and mailed directly to someone outside of Maine) and purchases from out-of-state vendors who charged Maine sales tax would not be subject to the Maine use tax and should not be reported on the form. Taxpayers should also note that if they have no unreported use tax liability, they need not file any returns or make payment under the program.

Because the reporting form only appears to permit individual filing, married taxpayers who file jointly and taxpayers whose filing status changed during the six year lookback period should consult with Maine Revenue Services or their personal tax advisors for guidance on filling out the form. Also, while the form is due November 30, taxpayers may enter into a payment plan with Maine Revenue Services to make payment, plus interest, by May 31, 2013.

Finally, while this can be a great opportunity for taxpayers to wipe the slate clean, it is a narrow one. Taxpayers who owe taxes other than the use tax might consider a broader voluntary disclosure agreement instead. Our readers would do well to contact their tax advisors and carefully weigh their options before jumping into any amnesty program, especially as many, including this one, require taxpayers to waive any right to seek a refund for monies paid under the program.

Lance Armstrong and Fitness for a Particular Purpose

Each year the authors of the Moot Problem for ICAM cook up perplexing problems On of my favorites this year is the claim by a buyer that goods were not fit for a particular purpose because they were produced by a firm associated with the use of child labor. Thus, the could not be sold for a profit.  As far as we know, no children laid a hand on these particular shirts but buyers are up in arms nonetheless. Of course, there are many reasons an item may not be profitably sold that have little to do with a promise by the seller. So one has to look further than that and think about why they did not sell.

In some sense, does the fitness for a particular purpose warranty even apply to the signalling one does by wearing the item or the sense that one has done the "right thing." You might think about the Lance Armstrong situation. All those Livestrong shirts are the same as they were when you bought them. But, when you bought them you may have wanted to advertise your admiration for Lance. Or you were just happier with them because you like Lance. Are they now unfit for a particular purpose?

Of course, a little quirk is that they were perfectly fit when no one knew of the misdeeds.  Are then unfit now simply because of new information?

Reg. CC in Legal Limbo?

Mark Twain once said, “Be careful when reading health books, you may die of a misprint.” While the risk of death does not seem likely from a commercial law book, lawyers, professors, and students should be wary of the things they read.  A recent change to Regulation CC’s treatment regarding Next-day Availability of Funds as part of the Dodd-Frank Act should have the legal community taking a closer look at their codebooks.

The Expedited Funds Availability Act of 1987 (EFAA), implemented by the Federal Reserve's Regulation CC, sets standards for banks making funds deposited into accounts available for withdrawal, including availability specific schedules.   Section 1086 of the Dodd-Frank Act amends the EFAA (requiring a conforming amendment to Reg. CC) to require depository institutions to make the first $200 of funds deposited by certain checks into an account available for withdrawal on the business day after the banking day that a deposit is received.   See, Regulation CC 229.10(c)(1)(vi) (formerly $100); FDIC version of Reg. CC.

All moves along as expected thus far.  In accordance with amendments, the U.S. Department of the Treasury sent out a bulletin to the Chief Executive Officers and Compliance Officers of all National Banks outlining the major changes. Officiously, the Department of the Treasury stated “National banks should make the appropriate changes to their practices, policies, and disclosures as necessary to comply with the statute by July 21, 2011, even if the changes to Regulation CC have not been adopted by that date.” While it appears that today banks are on notice regarding the Dodd-Frank change to the availability rules, the updated $200 rule remains absent from the Federal Reserve and FDIC current versions of Regulation CC published online.

The potential for confusion does not end there. Some of the latest editions of commercial law textbooks such as 2012 Fifth Edition of Lopucki, Warren, Keating and Mann’s Commercial Transaction: A System Approach have misprints in regard to the rule as well (retaining the $100 rule without comment). Even codebooks that reflect the $200 dollar rule before the regulators have officially put it into regulation are inconsistent. William Warren and Steve Walt’s Commercial Law: Selected Statutes for 2012-13 under section 229.10(c)(1)(vii) reflects the $200 rule with a footnote attribution to Dodd-Frank, but under the printed version of section 229.12(d) retains the reference to the former $100 available under section 229.10(c)(1)(vii).

With the Federal Reserve and FDIC not reflecting the $200 change to section 229.10(c)(1)(vii), as well as conforming amendments in other parts of Reg. CC, it is not surprising that the statutory codebooks and textbooks have had difficulty in conveying the amended rule.  In the meantime, don't believe everything you read.

- JSM and Ramon Alvarez (J.D. 2014) 

The Cost of Default: Bow Wow

Snoop Dog may have his namesake in favor of Snoop Lion, but Bow Wow offers Uniform Commercial Code entertainment for those with a canine preference.  Apparently, a lender had to repossess Bow Wow's Lamborghini.  The original loan was in the amount of $300,165, with about $157,571 owing on the loan at the time of repossession.  The bank managed to sell the car for $161,000, but had $25,000 in costs associated with the repossession and resale of the car.  The bank sued the rapper for a deficiency of $21,371. See, Bank to Bow Wow.

 

UCC Article 9 directs the secured party to apply the proceeds from a disposition of collateral to the expenses of retaking, holding and preparing the collateral for disposition and then toward the obligation secured by the loan.  9-615.  The debtor is liable for any deficiency after application of the proceeds.  So, Bow Wow does in fact appear to owe the Bank the additional chow.  One of my students found this case.  Apparently, like me, he enjoys a little bit of Article 9 in action.

 

- JSM

Does Article 2 Inform CISG Damages?

When it comes to teaching remedies, it is easy to collapse doctrines onto one another that appear consistent in underlying theory.  When it comes to the CISG (Convention on the International Sale of Goods) this conflation would be erroneous.  A large number of American courts have held that where Article 2 and the CISG are similar in theory or language, that resort to Article 2 cases and provisions is an appropriate method for interpreting the CISG.  This approach, though, would not be consistent with the Article 7 of the CISG's mandate theat “[i]n the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade."  The unifority would not seem to be enhanced by American courts referring to Article 2, even though they are more familiar with its provisions.  Quite simply, there is no expectation that courts of other countries would defer to Article 2 in any manner. 

Rather, the better reasoned approach should be to consider interpretive sources that evidence this international perspective, which might be used individually or collectively toward deducing the meaning behind various CISG provisions. For instance, courts could accept that a specific source of general principles of contracts routinely informs CISG cases worldwide, such as those of the Unidriot Principles of International Contracts.  Alternatively, the CISG Advisory Council Opinions could fulfill a stronger informative role regarding interpretation of provisions in the manner like the comments to the UCC do such that courts and commercial parties would regularly follow its interpretations in practice.  Yet another alternative available in the fulfillment of the CISG’s mandate is consultation with decisions rendered by tribunals applying the CISG where such are available.  Where such decisions are unavailable, insufficient, incomplete or unhelpful, though, UCC Article 2 might form part of the evidence of applicable private international law, as well as usages, customs and practices, but would not itself be the primary legal authority. The writings of scholars collecting opinions, examining theory and practice and providing careful analysis would also surely constitute sources expected for consultation in these cases just as in domestic ones.

This is not meant to state that Article 2 would never be part of the consideration of interpretation in CISG cases, but only that courts have overstated its usefullness.  There is only a limited role for Article 2 in such cases where it forms part of a larger indication of international perspective or a portion of an applicable usage.  This would be true even where the language in the CISG seems to track that of Article 2 or be otherwise similar in theory.  An example of this would be CISG Article 74’s general directive regarding remedies provides that: "Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach. Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract."   While American courts have ample experience with remedy considerations involing loss profits and foreseeabilty (Hadley v. Baxendale), it would be in error to solely rely on our perspective for these doctrines that are entrenched in our own legal history and perspective.  The better view is that our perspective simply is part of a larger understanding of these doctrines where it is consistent with the international perspective.

If the CISG is to have any force as a body, we cannot consider it merely an extension of Article 2.  For more on this, see: Does Article 2 Inform CISG Damages?

- JSM

Why would you ever assign a book that costs students money if it is available for free? (Again)

Over the summer, I posted about the high cost of law school textbooks for students (Why Would You Assign).  My current book for Contracts was being updated and the new edition would cost my students $180+. With the cost of law school somewhere near $150,000 (See For Law Schools, a Price to Play the A.B.A.'s Way, New York Times) I find it difficult to add to that cost any more than necessary. That means, choosing free books for students where they are available. CALI's ELangdell program does just this by paying professors who write textbooks a stipend and then giving the books to students in Word, Mobi, PDF and Epub formats for free. So, why is the message not getting through.

I receive the messages posted to the Contracts list-serve daily and this topic came up again. Professor Jeff Harrison (U Florida) initiated a lively discussion with the following post: 

Is the market for casebooks working? I like the George/Korobkin casebook which was just published. I thought I would use it until I saw the price --$186. I really cannot see asking my 100+ students to pay this. Even if they get $40 for selling their used copies, it's too much given what is otherwise available. Put differently, how is it possible that any contracts casebook would have enough market power to profitably sell at this price? One explanation is similar to that with physicians. The people who demand the books are not the same as those paying for them. So the professor assigns a book and is sheltered from the impact. Related to this is the possibility that professors are too lazy to change books. So, suppose you have been using Farnsworth for 20 years and when a new edition comes out you assign it because you want to minimize preparation time. The economics of casebook publishing puzzles me. First, the breakeven point must be tiny. Second, the pricing seems based on a belief that there is some market power when there should not be.

Well said.  A number of responses ensued ranging from students will buy the new hardcover book no matter what the cost even if given the choice of something less costly (indicating that this might not be ripe for concern) to arguments in favor of jettisoning the traditional books in favor of other alternatives without delay. To me, this seems to be a question of leadership. As professors, we should care about the cost of legal education. If there is not sufficient incentive to add to the cost of the students (much of which is financed through student loans), we should decline to do so in favor of viable alternatives. There is no good reason that I can see to lead students down the path of higher costs even if they would willingly pay when most of the cost is incurred by the student as debt that will take them years to pay off. Again, can we justify asking law students to pay for something that is not necessary?

- JSM

Applying Economic Loss Doctrine to Article 2 Transactions: A Doctrine at a Loss . . .

I just finished an essay on the economic loss doctrine (available on SSRN at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2160298). I had a chance to talk to one of the law review editors that had been working on the piece and a discussion ensued.  Surely, he understood that the modern application of the judicially-created economic loss doctrine redirects some purchasers of defective goods away from an action in tort for negligence orstrict liability against a product manufacturer. What is less widely understood is how this is actually done in by courts. Moreover, whether courts provide a defensible rationale is yet another problem.

Quite simply, modern application of the economic loss doctrine has proven esoteric at times, as fittingly illustrated by the case of In re Chinese Manufactured Drywall Products Liability Litigation (the “Chinese Drywall Litigation”), 680 F. Supp. 2d 780 (E.D. La. 2010), which involved installation of defective Chinese drywall in certain homes built after Hurricanes Katrina and Rita. In a seeminglystrange argument, the defendants argued that only some of the purchasers of the drywall should be able to make tort claims that arose from the same defective drywall. The odd part about the argument was that it was based on the manner of purchase made, with an attempt to categorize purchasers (an by extension, application of the economic loss doctrine to preclude tort claims) as: 1) those who purchased the Chinese drywall directly from the manufacturer and then installed it in their homes; and (2) those who purchased a home, which had been built (or rebuilt) with Chinese drywall.

While the court did not invest in this type of distinction, the decision surely left open the demarcation between the inner-workings of Article 2 remedies and tort doctrine.  Essentially, how do we define the product purchased by buyers when it might be installed in a larger unit, like a home. My Essay concludes that modern application of the economic loss doctrine serves the desired purpose to preserve the boundary between tort and contract, but surely there must be a less obscure approach that lends greater surety to parties and which does not require judicial intervention in most cases. Evaluating both the product attributes and the gravamen of the claim yields a basic tool that is more principled in application than an approach dependent on only one portion of the analysis, as has been done on an ad hoc basis by some courts. This would seem to involve an examination of the rationale for limiting Article 2 claimants to statutory remedies and being satisfied that, in true bargain cases, this is sufficient. While it appears that the Chinese Drywall court came to an acceptable resolution in the case, the failure of the court to embrace a meaningful methodology continues to leave litigants with less certainty as to the nature of permissible claims.  Closer examination of the deal in fact made by the parties would seem to permit resolution in these types of cases.

- JSM

This Year's Vis Problem: &%#$^* Yet Again

Jim Chen has invited me to post a note from time to time on the International Commercial Arbitration Moot. This is my tenth year of coaching, along with Tom Hurst and now George Dawson, the Florida team  What follows are my initial impressions of this year's problem. Please feel free to disagree, clarify, whatever. I do not regard myself as a CISG scholar and, as you know, the problems are always composed of mind-numbing combinations of dates, amounts, exhibits, statements, and issues.

 Following the normal formula there are procedural issues and substantive ones. This year the procedural issues seem a bit less significant than in the past but no less sticky. One deals with the use of a statement by an unavailable party. Another has to do with the consequences of a possible Article 96 reservation and its application to a modification.

For Vis veterans the principle substantive issue will be familiar. Remember the wine problem  from a few years ago?  The wine may or may not have been  laced with anti freeze or something related to antifreeze. Or maybe antifreeze was only in the trucks transporting the wine. In that case, problems came up when the possibility was publicized and the buyer decided it was not what was promised.

Now we have an ethically minded buyer who purchases polo shirts for resale but discovers they may or may not have been produced with child labor. This leads to a claim that the shirts are unfit and that a fundamental breach has occurred. Like the wine problem from a few years ago, there is actually nothing physically "wrong" with the shirts except that now, with the bad publicity, they cannot be sold as profitably and without  damage to the reputation of the retailer and its parent company.

It's all rather nasty and definitely fun. The problems reveal themselves over the months before the competition.  Each day the students and the teachers seem to find a new twist or theory. It's additive.

(The shirts in the pic are Fred Perry.  As far as I know the are manufactured by non child labor and by vegetarians who recycle.)

2012-2013. ICAM, Vis Problem is up

Get ready for polo shirts!

California Affiliate Nexus Law Goes Into Effect

We have written frequentlyabout the California affiliate nexus statute, AB 155, which was adopted in June 2011, but was temporarily repealed in September 2011, pending Congressional action on a bill rejecting the Quill physical presence test. Since Congress has not enacted such a law, AB155 is set to go into effect tomorrow.

The California Board of Equalization (“BOE”) undertook a lengthy rulemaking process over the past year to flesh out the requirements of the law. Much of this effort is reflected in the BOE’s newly amended version of California Regulation 1684. Here are some of the key points:

• The law provides that an affiliate relationship will create nexus only if the payment to the affiliate is based upon a completed sale of tangible personal property; i.e., a commission-based arrangement. Thus, pay-per-click payment arrangements with affiliates do not create nexus. 
• The statute, and Regulation 1684 which interprets the statute, provides that if the arrangement with the affiliate is for the purchase of advertisements to be delivered on the Internet, the retailer will not be deemed to have nexus if the affiliate does not directly or indirectly solicit customers in California through the use of flyers, newsletters, telephone calls, email, blogs, social networking sites, or other means of direct or indirect solicitation specifically targeted at potential customers in California. Thus, if a retailer places content on the website of a California affiliate that provides information regarding the retailer’s products and the affiliate links to the retailer’s website, so long as the affiliate does not make any solicitations on behalf of the retailer that specifically target CA residents, the retailer should not have nexus under the California statute. 
• Regulation 1684 provides for a safe harbor if (1) the agreement between the retailer and affiliate provides for a prohibition of California solicitation activities on behalf of the retailer, such as distributing flyers or coupons or sending emails; (2) the retailer obtains certificates annually from the California-based affiliates that it has not engaged in any such prohibited solicited activities; and (3) the retailer accepts such certificates in good faith. 

Unfortunately, many of these important details were omitted from recent correspondence sent by the BOE to retailers, which included a form of nexus questionnaire. The BOE stated that a retailer is engaged in business in California and thus required to collect the California sales and use tax if it has a relationship with an affiliate operating in California that refers potential customers to the retailer. However, nowhere in the materials sent out by the BOE is there any mention of the exceptions to the finding of nexus discussed above.

Before making the decision either to discontinue affiliates or to collect California sales and use tax, ecommerce sellers should review the nature of their affiliate relationships to determine whether those relationships, as currently structured or as revised in the future, will create nexus in California under the actual provisions of the law. Moreover, a prudent e-tailer should not respond to the BOE questionnaire unless and until it has carefully reviewed its activities with competent professionals.

Borders’ Gift Card Holders Not Permitted Recovery in Bankruptcy

We’ve written about gift cards in this space in the past, and have covered escheat issues related to gift cards, as well. But, in a different wrinkle, last month, the Bankruptcy Court for the Southern District of New York addressed the impact of bankruptcy law on companies’ requirements to honor gift cards.

By way of background, in February 2011, Borders filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. In general, retailers are not obligated to honor gift cards in bankruptcy, despite any state requirements that gift cards be honored for a certain period of time. Instead, gift card holders are generally treated like all other creditors and are required to timely file proofs of claim prior to a bar date set by the court in order to receive the value (or a portion of the value) of the gift cards. Note though, that in California, at least, retailers in bankruptcy may be required to honor gift cards.

But, via a motion filed with the Bankruptcy Court, Borders indicated that it planned to honor gift cards issued prior to the petition date. That is, customers could continue to use Borders gift cards in Borders stores and on its website. Later, following the September 2011 liquidation of Borders’ retail stores and the end of its e-commerce operations, Borders no longer honored its gift cards since it no longer had any retail channels through which it could do so. In January 2012, after confirmation of the bankruptcy plan, several holders of gift cards who had not yet redeemed the cards filed a motion seeking to allow late proofs of claim so that they could recoup the value of their unused gift cards. They argued that because of data systems Borders had in place, Borders should have been required to provide each gift card holder actual, individual notice of the bar date to file claims, rather than the general notice provided via publication in the New York Times. Since they did not receive adequate notice, they argued, their failure to file proofs of claim was due to excusable neglect and late claims should have been permitted.

Last month, the Court denied the motion, saying that the holders were not known creditors entitled to individual notice, simply because of the very nature of gift cards. As the Court wrote, “even if the Debtors were able to identify the purchasers of the Gift Cards, they would have no way of tracing the ultimate recipients...” Since the gift card holders were not known creditors, the constructive notice they received via the notice published in the New York Times was adequate.

Moreover, there was no excusable neglect that would allow for late filed claims. First, the Court wrote that allowing the late claims “would have a disastrous effect on...the final distribution of the Plan” and would prejudice other debtors. In June 2011, there were 17.7 million outstanding gift cards with unredeemed balances totaling $210.5 million. By the time the Court issued its order, there was only $90 million remaining to pay various creditors who timely filed proofs of claim totaling over $800 million. The Court wrote that because of the amount of the gift card related claims, if such claims were allowed, they would “drastically change the estimated recovery” for creditors and “warrant a modification of the Plan and re-solicitation of votes” for the Plan. But modification could not be permitted for several reasons including that distributions had already begun. Second, the Court also noted that the gift card holders offered “no valid reason for their extended delay in filing proofs of claim” eight months after the bar date had passed.

In the end, the gift card holders were left holding nothing but souvenirs of Borders’ better times. And our readers would do well to draw two lessons from the Borders experience: first, there are a variety of important and often complex legal requirements concerning gift cards to which issuers must be attentive; and second, bankruptcy proceedings involve a host of different rules and procedures which can add complexity to already specialized areas of the law.

Rapid Realty Townsville Praised by Vendors and Landlords

Rapid Realty Townsville Team, August 2012

Townsville based and nationally trademarked real estate agency, Rapid Realty Pty Ltd is receiving increasing acknowledgement from Landlords and Vendors for "prompt and cheerful" service.

The locally established agency since 2007 is exceeding expectations in their sales and property management business.

Unlike the USA and New York based Rapid Realty, Rapid Realty Townsville is Australian owned and managed by its Australian founder.

"Receiving praise from our valued clients is invaluable and testament to the level of satisfaction being experienced in our sales and property management business"; Aaron McLeod, Rapid Realty Founder and Principal Director said.

"We have been working hard for five years nurturing our clients and their properties and developing our technology, processes and people to continually improve our services. We pride ourselves on delivering 'real service, rapid results' and, to receive praise for what we love doing is a humble experience.” Mr McLeod said.

A Rapid Realty Landlord from Cairns said; "Rapid Realty has managed two of the properties in our portfolio for several years now. The thing that differentiates Aaron and his staff is that they really do deliver. They do what they say they will do, and they do it promptly and cheerfully. They are by far the best agents we have dealt with. They spend the time on your property, including when the going gets tough. They communicate well and give us a sense that they are a genuine 'partner' in our wealth creation endeavours. What more could investors want. Thanks Aaron."

Another Rapid Realty Vendor from the Sunshine Coast said; “We were a little unsure if this was the correct way to go as there were other agents very willing to sell the property also. However, you asked for the opportunity to sell Mum’s property for two months to see how it went and even after explaining to us that December– January would be fairly quiet trading you affected the sale promptly. Aaron at all times you were courteous and polite and were very helpful to our Mum during the time that it took to complete the transaction. We wish you all the best with Rapid Realty and would have no hesitation in recommending you and your business to anyone in the future”.

Rapid Realty Townsville was foundered by Aaron McLeod in December 2007 in Townsville, North Queensland. On the 7^th December 2012, Rapid Realty will celebrate their 5^th Birthday at their Boundary Street office.

 

Source: www.rapidrealty.com.au

Government Sponsored Development "The Village" Attracting Robust Investor Interest



"The Village" Development Stage 1 - Idalia Townsville

Rapid Realty Townsville is receiving an increasing number of enquiries from local, state and interstate investors wanting local expert direction, price comparisons and property management quotes on house and land packages in the new "The Village - Where the river meets city living" development.

Rapid Realty Townsville Principal and National Director, Aaron McLeod said; "Investors are seeking reliable, independent and trustworthy information from a local real estate expert as they sum up the ROI opportunities.

 

"The Village" development adjacent to Ross River at Idalia is a new Government Sponsored Urban Land Development Authority (ULDA) initiative only 1 kilometre from Rapid Realty Townsville's office.

 

For more information, appraisals and property management quotes, go to www.rapidrealty.com.au

Retailers Beware of the new New Jersey Gift Card Law

In the wake of the 2011 decision of the Third Circuit Court of Appeals in New Jersey Retail Merchants Association v. Sidamon-Eristoff, 669 F.3d 374 (3rd Cir. 2012),  condemning a large portion of the New Jersey statute adopted in 2010 regarding gift cards, gift certificates, and other stored value cards, the New Jersey legislature amended the statute.  S.B. (1928), Laws 2012, effective June 29, 2012.  The statute removes some of the more objectionable provisions of the old law regarding stored value cards, which are defined broadly to include gift certificates, gift cards, and any other record (tangible or electronic) that reflects a promise, for money, by the issuer or seller that the owner of the record may obtain merchandise, services, and/or cash in the amount of the face value of the record.  The statute, however, does add some strict prohibitions regarding stored value cards, and gift cards and certificates in particular.  These prohibitions are such that a retailer that issues gift cards could be exposed to significant penalties unless it makes sure its practices conform to the requirements of this statute.  At the same time, the law reduces the potential escheat of unredeemed gift cards. It also protects small issuers of stored value cards.  A company that issues stored value cards of less than $250,000 per year is not subject to the escheat and consumer protection provisions of the New Jersey statute.  Now for the details:

The features of the new law that are beneficial to retailers are that:  (1) it repeals the provision of the old law that if the issuer does not maintain the address of the owner or purchaser of the stored value card, the value of the card must be escheated to New Jersey if the card was issued there; (2) it eliminates the requirement of the old law that the issuer obtain information about the gift card purchaser or owner, but instead requires that by July 1, 2016, the issuer maintain a record of the zip code of the owner or purchaser; (3) it extends the period of abandonment (i.e. an unredeemed gift card not claimed) from two years after issuance to five years; and (4) it requires escheat of only 60% (as opposed to 100%) of the proceeds of all stored value cards other than general purpose reloadable cards, which are cards issued by a bank or other financial institution.

Retailers are faced with three new provisions in the nature of “gotcha” clauses.  The first requires that, for a valid expiration period or dormancy fee for a gift certificate or gift card, the issuer must disclose in 10 point font on the gift certificate or gift card, or the sales receipt or package for the certificate or card:  (1) the expiration period or dormancy fee; and (2) a telephone number that the consumer may call for information regarding the expiration date or dormancy fee.   

The second new feature is even more onerous.  The issuer is required, for any stored value card that has a remaining balance of less than $5, to refund in cash the balance due upon request of the owner.  Although there is no requirement for the retailer to advertise the consumer’s right to refund, or to disclose the same on the gift card, if the issuer fails to honor a gift card owner’s request to redeem, the penalties are severe.  For each such instance, the retailer is liable for a penalty of $500 plus the remaining value on the certificate or card.  If there are 100 or more violations during any 12-month period, the penalty is trebled to $1,500 per violation.   The statute provides that the sole enforcement means for a violation of this section is a hearing before the Director of the Division of Consumer Affairs.

Finally, the new law prohibits the imposition of a fee in connection with stored value cards, except (1) activation or issuance fees of a card; (2) a replacement card fee with respect to lost or stolen cards; or (3) a dormancy fee of not more than $2.00 per month, but only for gift certificates or gift cards and only if the disclosure conditions described previously are satisfied.

In short, while the statute deletes some problematic features of the prior law and limits the escheat to 60% of the face value of the gift cards, it adds to the burden on direct marketers who issue gift cards, except for the small issuers of gift cards.  The potential penalties for the unwary direct marketer are significant, so a gift card program should include protocol to make sure that the company satisfies this new law.

Rapid Realty Townsville Welcomes Locally Born Business Development Manager

 

Rapid Realty Townsville welcomes the appointment of  Tracey Walsh as Business Development Manager - Rentals.

Tracey is a career Property Manager with several years experience in the rental market. She has recently joined Rapid Realty as a Business Development Manager.

Her personal goal is to be a part of a team who are known as Townsville’s most professional, reliable and leading Real Estate Agency. She prides herself on her ability to provide comprehensive, reliable and outstanding service.

Tracey is a born and bred Townsville local and knows the city and surrounding areas like the back of her hand. Her success in real estate has been built from hard work, understanding clients’ requirements and a great local knowledge.

Tracey has a large network of clients gained through her vast knowledge of the property market and ensures all new and existing clients receive up to date information about the current real estate market.

Tracey brings with her an impeccable sense of service excellence and communication skills gained from her previous experience in the real estate industry and management positions.
www.rapidrealty.com.au

Committee Hearings Held on Remote Collection Bills; Coalition Forms to Demand True Simplification Of State Sales Tax Systems, Defend Quill

We have written previously about attempts by Congress to overturn the physical presence nexus standard of Quill Corp. v. North Dakota via the Main Street Fairness Act, the Marketplace Fairness Act, and the Marketplace Equity Act. The bills vary in their specifics as we discuss here and here, but most simply put, all three bills would permit states to require remote sellers to collect and remit sales and use tax despite such sellers having no physical presence in the state. While it is difficult to predict what Congress may do in an election year, it appears that so far, the Main Street Fairness Act has not made much progress through Congress since being introduced. The other two bills have seen some committee action lately, however, as discussed below.

Meanwhile, a coalition has formed to help protect remote sellers’ interests. The TrueSimplification of Taxation (“TruST”) Coalition was formed jointly by the Direct Marketing Association, the American Catalog Mailers Association, the Electronic Retailing Association, and NetChoice to represent “American businesses in the fight to keep interstate commerce and competition free from unfair tax burdens imposed by states where our businesses have no operations or representation.” Brann & Isaacson partners George Isaacsonand Martin Eisenstein assisted in forming the coalition and provide ongoing advice regarding the sales and use tax collection implications to remote sellers.

On July 24, 2012, the House Committee on the Judiciary held a hearing on The Marketplace Equity Act. At the hearing, the bill’s sponsors, and three others (the governor of Tennessee, a representative of the Streamlined Sales Tax Governing Board, and a visiting fellow at the Hudson Institute, a public policy think tank) all spoke in favor of the bill. On the other side, a representative from the Tax Foundation and Steve DelBianco, the executive director of NetChoice, one of the TruST Coalition members, defended the Quill standard as vital to the protection of online sellers – and in particular small Internet retailers -- in the absence of true simplification of state sales and use tax systems.

On Wednesday, August 1, 2012, at a hearing before the Senate’s Committee on Commerce, Science, & Transportation regarding the Marketplace Fairness Act, the committee heard a group of proponents testify, and Mr. DelBianco spoke on behalf of remote sellers and against the bill. However, one of the witnesses inadvertently helped make Mr. DelBianco’s case: the witness, a bookstore owner from Texas who voluntarily collects sales tax on remote sales, was found to be charging tax at the wrong rates on his remote sales, thus demonstrating just how complex remote collection can be. Perhaps through this testimony some Senators will begin to understand the challenges of nationwide use tax collection, but many may require additional education from their constituents who do business online.

Our readers should note, as well, that the July 31 deadline set by the California legislature for adoption of federal legislation overturning Quill has passed. This means that, barring any additional state legislation, California’s affiliate nexus provisions are back in play beginning September 15, 2012. We will continue to monitor each bill’s progress and keep our readers posted of developments in this area.