April 25, 2008

Jeff Perlman, Executive Vice President – Government Affairs
Clark Rector Jr., Senior Vice President – State Government Affairs
Robert Kohlmeyer, Manager – Government Affairs

FCC Holds Net Neutrality Hearing

The Federal Communications Commission held a public hearing on network neutrality practices at Stanford University, hearing testimony from Internet entrepreneurs, legal scholars and other experts. Despite calls for further government involvement, FCC Chairman Kevin Martin said that his agency already has the regulatory oversight it needs to enforce existing policy rules. Commissioner Deborah Taylor Tate said that she was encouraged by changes made by Internet service providers to better ensure neutral download speeds, saying that the marketplace is “responding to appropriate oversight mechanisms.” Consumer rights representatives disagreed, saying that there was not a level playing field and the FCC should do more to preserve network neutrality. Following the FCC hearing in California, the Senate Commerce Committee held a hearing where Martin warned that at least one Internet service provider was slowing download speeds for purposes other than easing network congestion but reiterated his belief that the FCC can preserve Internet network neutrality without additional regulation.
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Florida Tax Amendment Put on November Ballot

A proposed Florida state amendment that would allow the legislature to decide whether to repeal sales tax exemptions for business services was approved by the state’s Taxation and Budget Reform Commission. The plan, which will be put before voters on the November ballot, would eliminate the main local property tax for public schools and require the legislature to find ways to offset the $9.6 billion in revenue via several options. The legislature could raise the sales tax by one percent, cut spending or repeal existing sales tax exemptions, including advertising. The commission approved the tax-swap amendment by a vote of 18–7. State Sen. Mike Haridopolos, R-Melbourne, has been a vocal opponent of the proposal and held a special meeting of his Finance and Tax Committee last week to hear concerns from schools and businesses, including the AAF Fourth District. If voters approve the amendment, current sales tax exemptions important to advertising could be repealed as early as 2011. The AAF will continue to work to oppose the amendment, because any tax on advertising would immediately harm the industry, raise overall tax costs and cause economic damage.
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New York Approves Internet Sales Tax

New York Gov. David Patterson has enacted a new sales tax on purchases from out-of-state Internet retailers, including Amazon.com and eBay. The tax applies to sellers who have any affiliation with New York retailers, even if the company does not have any operations or employees in the state. Instead, the new law requires any site with at least one New York-based “agent,” such as a reseller or auction listing seller, to collect sales tax. The new tax is scheduled to go into effect on June 1 but will likely be challenged in court. In 1992, the U.S. Supreme Court ruled that out-of-state retailers did not have to collect sales tax unless they had a brick-and-mortar presence in a state.
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EU Panel Makes Internet Data Retention Recommendations

An advisory group of the European Union has recommended that Internet service providers delete all user information after six months. The panel, organized in December under the EU’s Article 29 Working Party, specifically targets advertising-supported search engines, saying that both businesses and governments could exploit the data history. The recommendations suggest that Web site operators should inform users about data practices, make data that is no longer useful anonymous and store search queries separately from a user’s IP address and other identifiable information. The Article 29 Working Party currently regulates consumer data protection on a case-by-case basis within the European Union. The advisory panel was formed soon after the Federal Trade Commission proposed its behavioral advertising guidelines.
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