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Supreme Court Says States Can Now Collect Sales Tax From All Online Retailers

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WASHINGTON, June 21, 2018 – The United States Supreme Court on Thursday dealt a blow to the online retail industry by overturning a 26-year-old ruling, Quill v. North Dakota, which had prohibited states from forcing mail-order retailers to collect sales tax from customers in states where they lacked a physical presence.

The 5-4 ruling on Thursday, in South Dakota v. Wayfair, means customers of online retailers like Amazon will no longer be able to avoid paying their state’s sales tax, and those retailers – which are now some of the largest in the United States – will no longer enjoy an advantage over their brick-and-mortar competitors.

The case could put an end to years of non-stop growth by online-only retailers like Amazon, which many small business owners claim came at their own expense, costing Americans their jobs as the brick-and-mortar retail industry has contracted in the face of online competition.

The decision could provide a needed boost the state and local governments that have long complained that the inability to collect sales tax from online retailers has caused their sales tax revenue to plummet as consumers have increasingly stayed home for even the most basic shopping needs.

Trump weighs in

President Trump took to his Twitter account late Thursday to applaud the ruling.

“Big Supreme Court win on internet sales tax – about time! Big victory for fairness and for our country. Great victory for consumers and retailers,” he wrote.

Trump, who initially entered the public consciousness as a real estate developer, has often suggested that Amazon — the United States’ largest online retailer  — was gaining an unfair advantage over brick-and-mortar merchants from the rules under which online retailers operated until today.

“Unlike others, [Amazon] pay little or no taxes to state & local governments,” Trump wrote in a March 29 tweet attacking Amazon and The Washington Post, which is owned separately by Amazon founder Jeff Bezos.

During his campaign for the presidency, Trump often suggested that Bezos had purchased the Post in order to influence legislation to prevent Amazon from having to pay sales taxes.

Trump’s assertions regarding Amazon and state sales taxes have no connection to reality, as Amazon has paid sales taxes in states which require it for a number of years.

While the president suggested that the ruling would help small businesses, Steve DelBianco, president and CEO of the free-market advocacy group NetChoice, explained that Thursday’s court ruling would actually hurt the small business of which Trump has styled himself a champion.

“While a fraction of online commerce was free of sales tax before this ruling, the Supreme Court has now created an even greater imbalance by placing far greater burdens on Internet shopping compared to its “offline” counterparts,” said DelBianco, whose group has long opposed allowing states to require online retailers to pay sales tax absent a physical presence in a given state.

DelBianco explained that now that Supreme Court has “legislated from the bench,” small online merchants have their “already razor-thin profit margins” cut even further, while brick-and-mortar remain unaffected.

“When these businesses disappear, consumers will be the biggest losers,” he said.

Former Congressman Chris Cox, the group’s outside counsel and author of the Internet Tax Freedom Act, said the court’s decision will do the most harm to small online retailers and those with a single location, “because they can’t afford the overhead to comply with thousands of different tax rules across the country.”

Cox predicted that many small online retailers would be forced to close their doors or be bought out by online retail giants.

“The last hope for consumers and small online business owners is for Congress to take action.  It should be Congress, not the courts, that sets the rules for interstate sales tax collection,” he added.

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Andrew Feinberg covers the White House, Capitol Hill, and anywhere else news happens for BeltwayBreakfast.com and BroadbandBreakfast.com. He has reported on policy and politics in the nation's capital since 2007, and his writing has appeared in publications like The Hill, Politico, Communications Daily, Silicon Angle, and Washington Business Journal. He has also appeared on both daytime and prime radio and television news programs on NPR, Sirius-XM, CNN, MSNBC, ABC (Australia), Al Jazeera, NBC Digital, Voice of America, TV Rain (Russia) and CBS News. Andrew wishes he could say he lives in Washington, DC with his dog, but unfortunately, he lives in a no-dogs building in suburban Maryland.

Courts

Supreme Court Rebuffs Trump on Census Citizenship Question and Sends Case Back to Lower Court

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WASHINGTON, June 27, 2019 – The Supreme Court on Thursday ruled that Commerce Secretary Wilbur Ross’s reasoning for adding a citizenship question to the 2020 census “seems to have been contrived,” upholding a lower court ruling that had thrown out the citizenship question.

While the court did not find that adding a citizenship question to the census would violate the Administrative Procedures Act, the majority of justices held that the explanation Ross provided was a pretext for an improperly-motivated reason to include the question.

By ordering the case returned to a lower court for further proceedings, Thursday’s ruling makes it unlikely that a citizenship question will appear on the 2020 census questionnaire.

If so, that would deal a significant blow to the Trump administration’s efforts to add a question that most experts predicted would depress response rates in minority communities.

The case pitted New York state and a number of heavily-Democratic cities and states against the Commerce Department, which argued that the question added at the request of the Justice Department in order gather data to help it better enforce the Voting Rights Act.

The Trump administration had hoped that the court would overturn a district court judge’s finding that the Commerce Department had acted in an “arbitrary and capricious” manner when deciding whether to add the question, but all nine justices were able to agree that the district judge had applied the law properly.

The case was unusual in that extremely damaging evidence of malfeasance by Ross emerged after the case had been argued by the Supreme Court in late April. Last month after the progressive advocacy group Common Cause obtained a cache of documents from the daughter of a deceased GOP redistricting expert.

Those documents reveal that the expert, Thomas Hofeller, had corresponded with Commerce Department officials and other top Republicans about how the GOP could gain an advantage from the addition of a citizenship question to the census.

Because that material not in the record before the Supreme Court, the court effectively took notice of extra-judicial evidence by sending the case back to the lower court.

After reviewing the process by which Ross had enlisted the Justice Department to request the addition of a citizenship question to the upcoming census, Roberts explains that the evidence in the record does not support the reasons Ross gave to explain his decision.

“Altogether, the evidence tells a story that does not match the explanation the Secretary gave for his decision. In the Secretary’s telling, Commerce was simply acting on a routine data request from another agency. Yet the materials before us indicate that Commerce went to great lengths to elicit the request from DOJ (or any other willing agency),” Roberts wrote for the five-member majority.

“[U]nlike a typical case in which an agency may have both stated and unstated reasons for a decision, here the VRA enforcement rationale—the sole stated reason—seems to have been contrived.”

That statement came from the fifth and final part of the opinion, a portion authored by Chief Justice John Roberts and joined by the four justices on the traditional “liberal” wing of the court: Ruth Bader Ginsburg, Steven Breyer, Sonia Sotomayor, and Elena Kagen.

There were multiple other portions of the ruling that were joined by the other more conservative justices. Many of those conservative justices insisted it was improper under the APA delve into the mental motivations of an administrative official – Secretary Ross – in reaching his decision.

But the five-member majority disagreed: “The reasoned explanation requirement of administrative law, after all, is meant to ensure that agencies offer genuine justifications for important decisions, reasons that can be scrutinized by courts and the interested public. Accepting contrived reasons would defeat the purpose of the enterprise. If judicial review is to be more than an empty ritual, it must demand something better than the explanation offered for the action taken in this case.”

For this reason, the majority “share the District Court’s conviction that the decision to reinstate a citizenship question cannot be adequately explained in terms of DOJ’s request for improved citizenship data to better enforce the VRA.”

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Check Your Privilege

As Dems Probe Whether Census Is Being Rigged Against Minorities, Trump Claims Executive Privilege Over Commerce Department Docs

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House Oversight Committee Chairman Elijah Cummings, D-Md., wields the gavel during a 2019 hearing

WASHINGTON, June 12, 2019 — President Trump will invoke executive privilege to keep the House Oversight Committee from viewing documents that could shed light on whether Commerce Secretary Wilbur Ross’ decision to include a citizenship question in the 2020 census was motivated by racial or political animus, a Commerce Department official said Wednesday.

In a letter to House Oversight Chairman Elijah Cummings, Commerce Department Legislative Affairs Director Charles Kolo Rathburn said Cummings’ decision to go ahead with a vote to hold Ross in contempt forced Trump’s hand.

“It is disappointing that you have rejected the Department of Commerce’s request to delay the vote of the Committee on Oversight and Reform on a contempt finding against the Secretary this morning. By doing so, you have abandoned the accommodation process with respect to the Committee’s January 8, 2019 request for documents and information and April 2, 2019 subpoena for documents concerning the Secretary’s decision to reinstate a citizenship question on the 2020 Census,” said Rathburn, a political appointee who is performing the duties of the Assistant Secretary [of Commerce] for Legislative Affairs because President Trump has not nominated anyone to fill the Senate-confirmed position.”

“Accordingly, I hereby advise you that the President has asserted executive privilege over the specific subset of the documents identified by the Committee in its June 3, 2019 letter — documents that are clearly protected from disclosure by the deliberative process, attorney-client communications, or attorney work product components of executive privilege.”

Additionally, Rathburn said Trump will use the privilege to withhold all documents the committee had subpoenaed on April 2 as part of its investigation into whether the his administration’s plan to add a citizenship question to the 2020 census was an attempt to reduce the counted population of Democratic-leaning minority groups.

The decennial census, a requirement laid out in Article I, Section II of the Constitution, is required in order to determine how many seats in the House of Representatives — and electoral votes — will be allocated to each state.

Because the Constitution requires the census to count “the whole number of persons in each state,” most experts say a question on citizenship — a subject which the census has not asked about in more than half a century — is unnecessary.

While the Commerce Department says adding the question is necessary — even without performing the statistical testing required by law — to better enforce the Voting Rights Act, experts also say adding such a question would result in fewer responses from Latino households in which some members are undocumented.

After a number of states sued the Trump administration in hopes of blocking Ross from adding a question that could potentially cause them to lose representation in Congress, a district court judge found the Commerce Department to have violated the Administrative Procedure Act by acting in an “arbitrary and capricious” manner when deciding whether to add the question.

The judge’s detailed finding of fact did not address whether the Trump administration’s decision to add the question was motivated by a desire to hurt Democrats or dilute minority representation, and the administration’s appeal is currently before the Supreme Court.

But the case was upended last month after the progressive advocacy group Common Cause obtained a cache of documents from the daughter of a deceased GOP redistricting expert.

Those documents reveal that the expert, Thomas Hofeller, had corresponded with Commerce Department officials and other top Republicans about how the GOP could gain an advantage from the addition of a citizenship question to the census.

As a result, members of Cummings’ committee are hoping to look into whether Ross or other administration officials committed perjury when testifying before Congress or as part of the lawsuit over the citizenship question.

While the President customarily has broad latitude when claiming executive privilege — meant to protect presidential communications so as to give the chief executive the benefit of candid advice — courts have placed some restrictions on its uses.

In 1974, a unanimous Supreme Court held in United States v. Nixon that a president could not use a claim of executive privilege to defy a judicial subpoena.

But one executive privilege expert — University of Virginia law professor Saikrishna Prakash — cautioned that the Nixon ruling does not apply to a Congressional subpoena.

“[The] Nixon [case]…was…an actual prosecution as opposed to Congress being involved, and the court…set aside the question of whether [executive] privilege ought to apply or how it would apply to Congress,” said Prakash, a Senior Fellow at UVA’s Miller Center.

“The [Supreme] Court has never said how the executive privilege applies to Congress if it does apply to Congress, but the lower courts seem to think that it does.”

Prakash predicted that the Trump administration’s invocation of executive privilege will be “the first step in a complicated dance” which will most likely end with some sort of negotiated settlement between the administration and Congress.

But if the White House asks the judicial branch to declare that the President can use executive privilege to block Congressional investigations, Prakash said it’s possible that a court would find that Congress’ interest in determining whether members of the executive branch broke the law to be sufficient enough to pierce the veil the administration hopes to draw around its actions.

“One could always say, ‘we’re worried about the possible, uh, possible, uh, uh, possible crimes by executive branch officials and therefore we need this information.’ If that’s enough to overcome the privilege, you might understand that as saying that, in effect, there is no privilege vis-a-vis Congress.”

“That might very well be the right answer, but it’s not an answer that the courts have given us yet,” he said, adding that House Democrats will most likely use such an argument if they try to enforce their subpoena in court.

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Big Tech

With Google and Facebook Under Fire, Section 230 is at a Tipping Point as More Push for Changes

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Former FCC Chairman Reed Hundt speaks at The Capitol Forum on June 7, 2019 (Drew Clark / Breakfast Media)

WASHINGTON, June 12, 2019 – New critics of Section 230 of the Telecommunications Act seem to emerge every day on both the political right and the left.

The law states that “no provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”

These 26 words are widely credited with creating the free-wheeling internet of today. It did this by shielding internet social media “publishers” – otherwise known as internet “platforms” – from liability for the content created by their users.

On Tuesday, conservative firebrand Rep. Matt Gaetz, R-Fla., became the latest on the right to fire at Section 230. At a hearing on Google and Facebook’s impact on journalism, Gaetz floated the possibility of removing or altering the Section 230 protections upon which the technology industry has come to rely.

He also imputed a kind of “fairness” or neutrality standard to which internet platforms must purportedly subscribe if they wish to retain the benefits from liability provided by Section 230.

From the left, Reed Hundt criticizes Section 230 protections as ‘naïve’

But it isn’t just conservatives gunning for Section 230: So are progressives, including Reed Hundt, the author of a recent book critical of what he calls Barack Obama’s “neoliberal” handling of the great recession.

Speaking about his book “A Crisis Wasted: Barack Obama’s Defining Decisions” at a Friday forum hosted by The Capitol Forum, Hundt concurred with some – on the left and on the right – who want to break up Facebook.

Hundt, the first chairman of the Federal Communications Commission under President Bill Clinton, said that he was “wrong” not to oppose Section 230 when it was introduced as part of the Communications Decency Act that passed in 1996.

Hundt contrasted the libel standard that governs traditional publishers like The New York Times. The landmark 1964 Supreme Court decision New York Times Co. v. Sullivan held that newspapers needed to have made a false statement with knowledge or reckless disregard of the truth to be guilty of libel.

It is that standard to which The New York Times is held when it decides to publish “user-generated content” like a letter to the editor. By contrast, Facebook takes much less care in its treatment of content posted by users on its site.

As a result, Facebook and other social media networks permit far more violence and hatred on their web sites than a traditional publisher like The Times would ever countenance on its web site.

Hundt said that the laissez-faire approach of the 1990s, including Section 230, was built around the presumption that “people are good.” Of the time, he now says, “we were very naïve.”

Section 230 took an alternative approach to incentivize online decency

Section 230 was drafted as part of the Communications Decency Act included in the Telecommunications Act of 1996. CDA barred “indecent” material online. It was struck down as unconstitutional in 1997 by the Supreme Court in Reno v. ACLU.

But Section 230 has remained the law of the land. And courts have read its provision to be quite broad in exempting technology companies from liability.

The provisions of Section 230 had originally been proposed as an alternative remedy to an outright ban of indecent content. Indeed, it gave an “interactive computer service(s)” protection for “any action voluntarily taken in good faith to restrict access to or availability of material that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected.”

Today, with greater scrutiny on the market power and elements of toxic speech emanating from social media, Section 230 is under much greater fire from political and social leaders. And yet courts keep making it difficult to limit its scope and reach.

Courts can’t help themselves in broadly viewing Section 230, so prosecutors want legislative changes

On Friday, for example, the D.C. Court of Appeals cited Section 230 in holding that Google, Microsoft and Yahoo aren’t liable for hosting content posted by known scammers. A group of locksmiths had sued the platforms, claiming that the platforms were effectively engaging in a racket to incentivize legitimate locksmiths to buy ads in order to drive scammers lower on search results.

And that’s probably why state attorneys general are also not letting up in their criticism of Section 230. Last month, 47 of 50 attorneys general joined a letter of the National Association of Attorneys General supporting legislative changes to the law. They say (PDF) that Section 230 precludes state and local authorities from enforcing laws against “sex trafficking and crimes against children.”

The attorneys general continue:

  • “We sadly note that the abuse on these platforms does not stop at sex trafficking. Stories of online black market opioid sales, ID theft, deep fakes, election meddling, and foreign intrusion are now ubiquitous, and these growing phenomena will undoubtedly serve as the subjects of hearings throughout the 116th Congress. Current precedent interpreting the CDA, however, continues to preclude states and territories from enforcing their criminal laws against companies that, while not actually performing these unlawful activities, provide platforms that make these activities possible. Worse, the extensive safe harbor conferred to these platforms by courts promotes an online environment where these pursuits remain attractive and profitable to all involved, including the platforms that facilitate them.”

The attorneys general also urged Congress to amend Section 230 in 2013 and 2017. Congress took them up on their request, for the first time, when it made a change in 2018 with the passage of the “Stop Enabling Sex Traffickers Act” and “Allow States and Victims to Fight Online Sex Trafficking Act” (known as FOSTA-SESTA). Passed last year, the measure provides that Section 230 immunity does not apply against enforcement of federal or state sex trafficking laws.

Will changes to Section 230 help big social media companies at the expense of competition?

Some populist Republicans are treating Section 230 as if it were an all-purpose punching bag to go after technology companies and internet platforms.

At a May policy forum flaying Facebook, Sen. Josh Hawley, R-Missouri, said that Section 230 is “predicated on [platforms] providing open, fair and free platforms. If they are not going to do that, but insert their own political biases, then they start to look a lot more like a newspaper, or TV station, but don’t qualify for Section 230.”

At the same time, Hawley took a nuanced view about the possible effects that changes to Section 230 might have on startup companies attempting to compete against giants like Facebook and Google. “We need to make sure that [changes to Section 230 are] not a benefit to incumbency.”

Dan Huff, counsel to former House Judiciary Committee Chairman Bob Goodlatte, R-Va., said at the event that Congress should be more bold in exercising power. The House should use the threat of revising Section 230 as a weapon. This could force Google and Facebook to let the public know how their algorithms highlight particular search results or promote certain items within a user’s social news feed.

Congress should say to these companies: “Unless your make public the grounds on which you keep content off your platform,” we are going to eliminate or drastically scale back Section 230 protections, said Huff.

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