The Power to Destroy from Telecom Digest

[David Farber <farber () central cis upenn edu>]

From: atfurman () cup portal com
Subject: The Power to Destroy
Date: Sat,  4 Sep 93 01:54:55 PDT




The following was found posted in the Usenet newsgroup comp.org.eff.talk.


Also notice the comment below about how "politicians on both sides of
the aisle" have created the status quo.  (Don't blame me.  I voted
Libertarian.)


                    ===== forwarded from Usenet =====




STATE OF NEW YORK SLAPS 13 PERCENT SALES TAX ON INFORMATION SUPERHIGHWAY


 The following is a complete electronic transcript of a bulletin
issued by the New York State Department of Taxation and Finance and
was received by Friends & Lovers BBS on Saturday, August 28, 1993.


(begin T&F document)


New York State Department of Taxation and Finance          N-93-20
                                                            (8/93)
                        IMPORTANT NOTICE


                Increase in Tax Rate Applicable to
              Entertainment and information Services
            Provided by Means of Telephony or Telegraphy


 Effective September 1, 1993, there will be an additional state sales
tax at the rate of 5% added to the existing 4% state sales tax imposed
on receipts from the services of furnishing or providing an entertainment 
or information service which is furnished, provided or delivered by
means of telephony or telegraphy or telephone or telegraph service of
whatever nature (see section 1105(c)(9) of the Tax Law). The treatment
of these services for sales tax purposes remains identical to the
existing treatment except as to rate.  Thus, the only change is that
the state sales tax rate on such services has been increased from 4%
to 9%. The Municipal Assistance Corporation sales taxes (section 1107
of the Tax Law), the Metropolitan Commuter Transportation District
sales taxes (section 1109 of the Tax Law) and local sales taxes
imposed pursuant to the authority of Article 29 of the Tax Law are to
be added to the aforementioned 9% state sales tax rate.


Example: A person residing in New York State subscribes to an
entertainment service that is provided by telephony. The entertainment
service recipient receives the service on a monthly basis and is
charged for the service directly on the bill for telephone service.
Prior to September 1, 1993, both the telephone service and the
entertainment service were subject to an 8% sales tax (4% state, 4%
local). However, any entertainment service provided after September 1,
1993 will be subject to a 13% sales tax (9% state, 4% local). There is
no change in the rate of tax imposed on the telephone service which
remains at 8%.


The affected services contracted for or paid for prior to September 1,
1993 will be subject to the additional state sales tax if they are
rendered after September 1, 1993.


A new line and reporting code has been added to the sales and use tax
return in order to report the additional state sales tax imposed on
such services.


Entertainment and information services provided or delivered by means
of telephony or telegraphy or telephone or telegraph service include
ALL such services delivered by such means. These services are taxable,
and subject to tax at the higher rate and the applicable local tax
rate, whether provided through 500, 700, 800 or 900 telephone numbers,
as well as those delivered by local exchange, private telephone line,
cable, or channel. It should be kept in mind that the services subject
to tax at the increased rate are distinct from telephone or telegraph
services subject to tax under section 1105(b) of the Tax Law.


Collecting, compiling or analyzing information of any kind and
reporting such information to other persons by means of telephony or
telegraphy or telephone or telegraph service constitutes the rendering
of an information service subject to tax at the increased state tax
rate as well as the applicable local sales tax, unless otherwise
exempt.


Information services that are currently subject to tax when furnished
in written form by printed, mimeographed or multigraphed matter or
duplicating written or printed matter, such as tapes, disc, electronic
readouts or displays, continue to be subject to tax at the 4% state
tax rate and the applicable local tax (see section 1105(c)(1) of the
Tax Law). The higher sales tax rate applies to all charges for the
service by the vendor to the customer which are subject to tax
pursuant to section 1105(c)(9) of the Tax Law.


(A fee for subscribing to a taxable entertainment or information
service (taxable under section 1105(c)(9) of the Tax Law) that is
billed on a monthly, annual or other basis is taxable at the new rate.
Membership or other fees entitling the subscriber to receive by means
of telephony, telegraphy, a certain number of free reports or
services, or reduced charges on reports or services, are also taxable
at the new state tax rate. No tax is due if the vendor makes no charge
for the services.


Tax is to be separately stated on the recipient's telephone bill,
credit card charge receipt or any other bill issued for such services.


The increased state tax rate does not apply to any receipts from the
sale of information services that are not subject to tax under section
1105(c)(1) of the Tax Law. These include an information service which
is personal or individual in nature and is not or may not be
substantially incorporated into reports furnished to other persons by
the person who collected, compiled or analyzed the information.
Examples of such services include a personalized management report
delivered orally over the telephone, or an insurance damage appraisal
conveyed over the telephone. Also, purchases of information services
by newspapers or radio and television broadcasters that are used in
the collection and dissemination of news are exempt from sales tax.


In addition, the increased state sales tax rate does not apply to
charges made to organizations and entities (such as government
agencies, exempt organizations, etc.) that are exempt from the general
sales and use tax in accordance with section 1116(a) of the Tax Law.
Documentation which substantiates exemption from the state and local
sales tax for such organizations will likewise serve to exempt such
organizations from the additional 5% state sales tax.


When exempt entertainment services or exempt information services are
being billed by a person other than the actual exempt provider of the
services, the actual provider must give an exempt certification
document, form ST-930, Certification of Nontaxable Services Provided
Via Telephony or Telegraphy or Telephone or Telegraph Services, to the
person who will be doing the billing in order that sales tax
(including the increased state sales tax) will not be charged on the
exempt services.


This sales tax exempt certification document may not be issued unless
the person issuing the document is registered to collect sales tax or
is specifically exempt under section 1116(a) of the New York State Tax
Law (and, if required issued a Form ST-119, Exempt Organization
Certificate).


When any person, affiliate or agent other than the actual provider of
entertainment or information services bills the recipient of the
services on behalf of the provider, that person will be deemed a
vendor of the service for sales tax purposes and will be liable for
all the obligations of a vendor. Such obligations include collecting,
reporting, and remitting the sales tax (including the additional 5%
state tax) due on entertainment and information services which are
furnished, provided or delivered by means of telephony or telegraphy
or telephone or telegraph services.


A person deemed a vendor of these services is entitled to and possesses 
all the rights afforded a vendor, including the right to an exclusion
or a credit or refund of tax as provided in section 1132(c) of the New
York State Tax Law with respect to such services.


The person providing the billing service, whetyher doing the actual
billing or or having the billing done by an affiliate or agent, will
be deemed to be a vendor of entertainment or information services when
the charges for the services are wither listed as part of, or as a
schedule to the statement of such person to its customers, or are
billed separately.


The term affiliate means an entity which:


 - directly, indirectly or constructively controls a person deemed a vendor 
   of entertainment or information services;


 - is controlled by a person deemed a vendor of entertainment or information
   services;


 - is controlled by a common parent who also controls a person deemed a 
   vendor of entertainment or information services.


The designation of a person as a vendor, by virtue of such person
performing the billing of charges on behalf of the actual provider of
entertainment or information services, in no way limits the obligations 
or removes the liabilities of the actual provider of such services or
any other person with respect to the sales tax imposed on these
services.


               (end of T&F bulletin N-93-20 [8/93])
            
                          -----------------




  Date: 31 Aug 93 06:01:03 EDT
  From: Marty Winter <76407.3521 () compuserve com>
  Subject: Sales tax on information services to increase


OK, so what does all this gobbledegook mean? It means simply that New
York State has decided to trash the information superhighway that has
been touted as the solution to unemployment and the means by which New
York could have rebuilt itself. New York, former home of leading edge
high-technology is working overtime to relegate its citizenry to the
welfare rolls.


It means that BBS's which are already liable for collection of sales
tax must now go back and collect an additional 5% for a total of 13%.
This tax is RETROACTIVE ... any BBS which has already collected a
membership fee or other charges up front for a year of service must go
back and collect more money from their subscribers unless their fiscal
year begins on September 1.


It means that a connection to the Internet, a subscription to GEnie,
Prodigy, or CompuServe just got A LOT more expensive. It means that
directory assistance calls to look up a phone number will cost more.
Calls for technical support or 800 or 900 services just got a lot more
expensive.  Relatives of mine who are still employed by IBM downstate
got told by their superiors that as a potential result of this change
IBM and numerous other information service providers have decided or
will decide to leave New York as quickly as possible.


Newspapers and other entities that would have poured millions of
dollars into New York's economy have found the cost to potential users
and subscribers of new information services has now moved beyond
practicality.  The bottom line is that New York has literally killed
its own future. New York's politicians from the Governor to the
majority in both aisles of the legislature have shown a degree of
stupidity unparalleled since Nero was emperor in Rome in killing the
golden goose that could have made New York a mecca for high tech
communications. Modern communications in New York by political fiat
will have to consist of semaphor flags and smoke signals while the
remainder of the world outside our third-world state go digital.


This particular episode proves that New York's political system is so
corrupt and so incredibly inept that citizens of New York really have
to give serious consideration to drastic measures against our state
government including voting out every single politician in statewide
office. I am particularly dismayed that this tax law was kept SO
secret while being nursed through the legislative process that no one
knew about it at all, including the Senate. Not a single one of my
contacts was able to find out about any of this in advance. Even the
notification from Tax and Finance a mere three days before its
enactment was incredible and unprecedented.


This latest folly will have no effect on free bulletin boards such as
Friends & Lovers, but it will be murder on those services run by those
who thought New York might have permitted them to eek out a living
with a computer and a modem. Thirteen percent sales tax? Think about
that number a little bit. The morons we elected have gone and done it.
Do we really think they're done yet? Are you REALLY going to vote for
the same guy again in the Assembly, the Senate, or the State house? Or
are you going to make use of your digital communications while there
is still a dialtone? Is Bill Clinton watching New York's government
and is Bill Clinton REALLY going to sit idly by and let our bozos in
Albany get away with it?


Information superhighway ... ptooey!


[...] The biggest threats to the use of cyberspace are NOT going to
come out those committees and state organizations that deal directly
with coputes, the Internet or other on-line services, but from places
like the Finance committeess, etc, who see the use of the Internet and
other services as a way of helping to fill the state's coffers. If we
are going to educate anybody within the government, it MUST be those
who seem to have the least sake in cyberspace. As Kevin so rightely
pointed out, the boays in Finance and over at T&F have effectively put
the Internet, CompuServe, GEnie and other commercial on-line services
out of the reach of those who might benefit MOST from the use of such
services. In some areas of the state the extra 5% that they just
tacked onto the bill could bring the total coast closer to 20% rather
than the 13% it does in ALbany. Worst part is, that the legislation
that authorizes such things is often buried in the middle of bills
that take weeks to read owing to their sheer size. Our information
highway is going to become a dead end dirt road if things like this
continue in NY.




Originally posted in comp.eff.org.talk by Lance Detweiler
(ld231782 () longs LANCE ColoState EDU).  Forwarded to the Internet
TELECOM Digest by Alan T. Furman (atfurman () cup portal com).




[Moderator's Note: You'll see more and more of this in other areas of
the country before long. Even the feds will get in on it. Not the old
'modem tax' bugaboo -- we've been that round before -- but a tax on
'information and entertainment supplied via the telephone'.  But please
note newspapers as described above are exempt. Maybe operators of BBSs
need to get away from the concept of entertainment and arrange to legally
define themselves as publishers of electronic journals.  The reason NY
is starting this tax is the same reason IL will be starting it soon I
suspect. Both states have major urban wastelands which are terrible
drains on their respective state treasuries (New York and Chicago).
Generally when municipal and state governments get in the dire straits
both New York (NY) and Chicago (IL) are in, the response of government
is to become even more repressive tax-wise. For example, our tax base
here has eroded terribly, as the productive, revenue producing people
flee the jurisdiction holding onto their underwear or whatever they
were able to salvage. Not to be dissuaded, the government simply takes
the fewer people/businesses still left and clamps down even harder on
them. So I suggest being a not-for-profit electronic publisher might
be the way to go. They're still relatively free to do their thing.  PAT]


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