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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 anything else you can think of for BeltwayBreakfast.com and BroadbandBreakfast.com. Andrew 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.

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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Courts

‘This Is All Bogus, And It’s To Take Control Over The Judiciary’ — A Veteran Administrative Law Judge Slams Trump’s Order Making ALJs Political Appointees

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WASHINGTON, July 11, 2018 — A veteran Administrative Law Judge says President Trump’s new executive order governing the hiring of ALJs could mean the end for many Americans’ right to have disputes against the government heard by a neutral arbiter.

The July 10 order, entitled “Excepting Administrative Law Judges From The Competitive Service,” puts an end to the system of selecting ALJs by their performance on a competitive examination and exempts them from the civil service protections to which they’ve long been entitled.

The White House says the order is necessary because of a Supreme Court ruling, Lucia v. Securities and Exchange Commission, which rejected a challenge to an Administrative Law Judge’s decision by finding them to be “inferior officers” under the Appointments Clause of the constitution.

White House says the order is necessary but a longtime Administrative Law Judge says there was no reason for it

A White House official told BeltwayBreakfast that any new judges hired under the new order would have statutory protections under the Administrative Procedure Act, the order specifically exempts them from civil service regulations.

But in an interview with BeltwayBreakfast, the veteran Administrative Law Judge, who hears cases at the Social Security Administration and has been active in the Association of Administrative Law Judges — the federal ALJ union — for many years, called the order a completely unnecessary assault on Americans’ right to due process.

BeltwayBreakfast is not naming the judge at his or her request because he or she was not speaking on behalf of the ALJ union and because he or she fears the Trump administration would retaliate against him or her for speaking to the press.

“[Trump] didn’t have to do any of this. This is all bogus, and it’s to take control over the judiciary,” said the judge. “This is a total assault on due process for the American people.”

The Lucia decision did not require any change in the way Administrative Law Judges are hired, the judge said, because it affirmed the source of current judges’ authority under the constitution.

In that case, the court ruled 7-2 against the petitioner, Raymond Lucia, who’d argued that the Securities and Exchange Commission judge who’d found him to have violated the law was not an “Officer of the United States.”

Ending competitive selection means a return to the spoils system

The judge told BeltwayBreakfast that nothing in that decision requires an end to the competitive selection process that has been used for many, many years, but suggested the White House is ending it anyway in order to reward their friends and rig the system.

“What it really means…is that the administration can hire 1000 attorneys with no experience, make them judges, and take over the process,” the judge said. “If you eliminate merit-selected judges it becomes a patronage game.”

The judge explained that if you can appoint a person under the Appointment Clause the person who is appointed can be removed just as easily.

“This is really about removal,” the judge said. “The new ones who are being appointed as ‘excepted ALJs’ have no protections whatsoever. I’m sure they’ll be hired as managers, which means they can’t unionize. I’m sure they’ll be employees-at-will, and if they don’t what the appointer tells them to do, they’ll be fired.”

While the White House has pointed to the current force of merit-selected judges — who cannot be fired without cause — as a reason that Americans should not be concerned, the longtime ALJ union official said the Trump administration doesn’t need to fire them to rig the process.

The Trump administration’s ‘endgame’ could be court packing to crowd out existing judges

“Here’s what I posit: They’ll hire 1,000 new judges, all managers, given a quota and told what to do. They’ll be given all the cases, as many as they can to reduce the backlog of 1 million cases. And they’ll RIF [Reduction In Force] us. They lay us off. They’re not firing us, they’re not removing us, but they’re saying ‘we don’t have any work for you,” said the judge. “I don’t want to put ideas into anybody’s head, but guess what? That’s the endgame.”

What’s more, the veteran judge suggested that it’s no coincidence that this new order was signed one day after a May executive order, which severely limits federal employee unions’ ability to represent their members during working hours or with government resources, went into effect.

“Don’t you think it’s interesting that on Monday, we were officially muzzled, and on Tuesday they drop this executive order knowing we can’t fight it?” the judge asked.

The longtime ALJ explained that Americans should be frightened at the prospect of not being able to have disputes heard by independent arbiters. Even people who aren’t pro-union “need to start waking up,” the judge said, calling the order “a frightening, frightening development.”

‘Give grandma her day in court’

Even Republicans in Congress have to understand, this is really dangerous, dangerous stuff,” the judge said, noting that Securities and Exchange Commission judges who rule against Wall Street could be removed, as well as Social Security Administration judges who rule in favor of too many Americans.

Deep red state Republican-leaning constituencies could also lose out with the loss of independent Administrative Law Judges, the judge explained, noting that Department of Labor has an ALJ staff to hear “black lung cases,” and they could lose their jobs under the new rules if they rule against coal companies.

“Does [civil service protection] benefit us as federal employees? Yes it does. But the real issue is due process for the American people. It’s not about us and your hatred of federal employees,” the judge said.

“There are people behind these jobs that help you, the American public. I’m here to protect your due process, I’m here to give your grandmother’s disability case a fair shake — give grandma her day in court.”

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