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Computer Underground Digest--Tue, Sept 25, 1991 (Vol #3.34)
Moderators: Jim Thomas and Gordon Meyer (TK0JUT2@NIU.BITNET)
CONTENTS, #3.34 ( September 25, 1991)
File 1--Moderators' Corner
File 2--WANTED: TARGETS OF OPERATION SUN DEVIL
File 3--BBS Services Fight NY "Download" Tax (Newsbytes Reprint)
File 4--New York Tax Law and Commentary by Tony Mack
File 5--Confusion Reigns on NY Download" Tax (Newsbytes Reprint)
File 6--Confusion unfolds on NY "Download" Tax (Newsbytes Reprint)
File 7--Clarification of NY BBS Law
File 8--Summary of Significance of NY "BBS Download Tax" (reprint)
Issues of CuD can be found in the Usenet alt.society.cu-digest news
group, on CompuServe in DL0 and DL4 of the IBMBBS SIG, DL1 of LAWSIG,
and DL0 and DL12 of TELECOM, on Genie, on the PC-EXEC BBS at (414)
789-4210, and by anonymous ftp from ftp.cs.widener.edu (147.31.254.20),
chsun1.spc.uchicago.edu, and dagon.acc.stolaf.edu. To use the U. of
Chicago email server, send mail with the subject "help" (without the
quotes) to archive-server@chsun1.spc.uchicago.edu.
COMPUTER UNDERGROUND DIGEST is an open forum dedicated to sharing
information among computerists and to the presentation and debate of
diverse views. CuD material may be reprinted as long as the source
is cited. Some authors do copyright their material, and they should
be contacted for reprint permission. It is assumed that non-personal
mail to the moderators may be reprinted unless otherwise specified.
Readers are encouraged to submit reasoned articles relating to the
Computer Underground. Articles are preferred to short responses.
Please avoid quoting previous posts unless absolutely necessary.
DISCLAIMER: The views represented herein do not necessarily represent
the views of the moderators. Digest contributors assume all
responsibility for ensuring that articles submitted do not
violate copyright protections.
----------------------------------------------------------------------
Date: 25 Sep 91 11:21:19 CDT
From: Moderators <tk0jut2@mvs.cso.niu.edu>
Subject: File 1--Moderators' Corner
New York State recently passed a law that would seem to impose a
"download" tax on BBS sysops. Following a spate of initial fear about
the implications of such a tax and the impact it would have on
hobbyist BBSs, a series of articles and commentary clarified the law's
intent and some of its language. Although it appears that it is
premature to see it as a threat to the BBS world, the law's murky
language seems to require clarification, lest it eventually be invoked
"because it's there." We have pulled together a series of comments
that we gathered or were sent that address various issues and include
those that were most helpful below. NEWSBYTES, as usual, was on top of
the story from the beginning, and we recommend it as the most valuable
source general netnews around.
Also, be sure to check out the next file, which is a request from
CPSR for information on victims of Operation Sun Devil.
------------------------------
Date: Tue, 24 Sep 1991 13:37:21 EDT
From: Craig Neidorf <cneidorf@ITP.ACLU.ORG>
Subject: File 2--WANTED: TARGETS OF OPERATION SUN DEVIL
Contact: Craig Neidorf and David Sobel
(Computer Professionals for Social Responsibility)
Computer Professionals for Social Responsibility (CPSR) is pursuing a
lawsuit against the Secret Service seeking the release of information
concerning Operation Sun Devil. In recently filed court papers, the
agency claims that the information cannot be disclosed because, among
other reasons, disclosure would violate the privacy of those
individuals who are the targets of the investigation. This argument
can be overcome if CPSR obtains signed releases from those
individuals. CPSR is requesting the cooperation of anyone who was the
subject of a Sun Devil raid on or about May 7, 1990. We are prepared
to enter into an attorney-client relationship with individuals
responding to this request, so that confidentiality will be assured.
Please respond ASAP to:
David Sobel
CPSR Legal Counsel
(202) 544-9240
dsobel@washofc.cpsr.org
------------------------------
Date: Mon, 9 Sep 91 17:54:53 PDT
From: jmcmullen@well.sf.ca.us
Subject: File 3--BBS Services Fight NY "Download" Tax (Newsbytes Reprint)
BBS SERVICES FIGHT NEW YORK STATE "DOWNLOAD" TAX 09/09/91
ALBANY, NEW YORK, U.S.A., 1991 AUG 09 (NB) -- New York State Bulletin
Board System Operators (sysops) have banded together to attempt to
roll back legislation that imposes a requirement on sysops to collect
New York State Sales Tax on software downloaded by users of their
systems.
The legislation, enacted as part of the New York state budget
agreement (Senate bill #6079, Assembly #8491), went into effect on
September 1st and, according to the understanding of an organization
of New York sysops (NYBBS), requires sysops to remit to New York
State sales tax on any software downloaded. It is the understanding
of this group that the tax requirement includes not only commercial
software but also "shareware" and public domain software (in the case
of public domain software, the sysop is required to estimate the
"value" of the software and then remit applicable tax). The tax
remission requirement is said by NYBBS to be in effect for the sysop
whether or not the downloader ever pays for the software.
Tony Mack, a sysop in the Albany area, told Newsbytes that 31 sysops
met on Saturday, September 7th with legislatures attempting to reach
agreement on modifications. Mack said that the legislators,
Assemblyman Paul Tonko (D - 105th Dist) and James Tedisco (R -
107th), told the group that they believed that exemptions could be
made for BBSs that did not accept donations of any type and imposed
no restrictions on downloading such as "upload/download ratios" or
membership requirements.
Mack said that the compromise was unacceptable and pointed to the
fact that many BBS accept donations simply to pay for Usenet charges
and equipment upgrades. Jack Brooks, sysop of New York City's Dorsai
Embassy, agreed with Mack, telling Newsbytes "Dorsai charges users of
our Usenet interface $25 a year. This charge is an attempt to offset
our monthly payments for the Usenet feed and, quite frankly, it
doesn't cover it so we still have to make it up from our own pockets.
This law is absurd and must be repealed.
Brooks said that Dorsai has issued a public statement on the issue
and is asking its users to bring appropriate political action to
repeal the regulation. The statement says, in part, "It is the policy
of The Dorsai Diplomatic Mission to oppose any and all legislation
that would diminish and hamper the goals, continued operation and
successes of the telecommunications community at large. Such an
act is New York State Senate Bill #6078 and Assembly Bill #8491
sections 154, 155, 156, and 157 These statues would destroy the free
exchange of information, ideas and public domain software
guaranteed by the Constitution."
The BBS of the New York Amateur Computer Club (NYACC) also responded
to the regulation with a message from sysop Hank Kee, saying, in
part, "This is an ill advised law that muzzles the free flow of
electronic information. This bill needs to be repealed. If not, I
will forced to inhibit all file transfer activity on this BBS." NYACC
distributes, through its BBS, the PC Blue Library, a multi-hundred
volume library of MS-DOS public domain and shareware software.
Mike Godwin, in-house counsel of the Electronic Frontier Foundation,
told Newsbytes that Kee's notification that file transfer activities
may be terminated is an example of the effect that the tax
requirement will have. Godwin said "I think that this kind of
ill-conceived law is very likely to impose a chilling effect on the
exercise of the rights of BBS users to communicate and share free
software."
Godwin continued "It's as if you had to charge a sales tax whenever a
neighbor brings a cup of sugar to someone's door. We (EFF) strongly
recommend that the officials responsible for both this law and its
interpretation reconsider this action."
Officials at GEnie and CompuServe were unavailable for comment on
how the legislation might impact their services within New York
State.
(Barbara E. McMullen & John F. McMullen//19910909)
------------------------------
Date: Wed, 11 Sep 91 12:21:12 PDT
From: 476.SANDMEN%mysys.comp.pt@uunet.uu.net
Subject: File 4--New York Tax Law and Commentary by Tony Mack
((This has appeared in a number of places, and we thought you might
be interested if you haven't seen it already. Sandmen)).
++++++++++++++++++++++++++++++++++++++++++++++++
Commentary: (from Tony Mack)
As an active member of NYBBS, I have sent to this system, a copy of
the laws which were passed into law, with the GREAT BUDGET DEBATE of
1991, where we became a national disgrace by passing a budget the
latest ever in the history of the nation.
In brief summary, the law which stands, says that a SysOp that allows
the transfer of software from his BBS, is in violation of the NYS Tax
and Finance Law, and is subject to substantial fines, and penalties.
NYS has begun taxing software based on the "value" of the software,
regardless of the authors asking price, on PD or FW software. As a
member of NYBBS, I am adamently opposed to this taxation, as we
(sysops) receive no compensation for our efforts, let alone receive
"registration fees" for PD software downloaded from our BBS's.
This matter was brought to my attention through Martin Winter, NYBBS
President, in Albany NY. I immediately contacted several local
assemblymen, who claimed to not understand what I was talking about.
I explained the theory behind hobby BBS's, and they seem to now see
our point. NYS Tax and Finance, has graciously (!) come up with a
compromise, which to me is completely unacceptable. They say, that if
you accept remuneration for the downloads (via POST per Call Ratios,
Upload/DownLoad Ratios, or donations to the BBS), you will be subject
to taxation.
To further implicate the situation, We have been informed by NYTel,
that upon receipt of a Tax Certificate, we will then be considered a
BUSINESS in this state, and they MAY institute Commercial rate
structures for Hobby BBS's. This situation has got to be curbed prior
to it getting completely out of hand.
Therefore, I appeal to all of you, Write your local Assemblymen,
Senators, that have seats in Albany.... Tell them that you are
totally disgusted with the wording of this bill, and their
"Compromise", and you wish a COMPLETE Exemption for (at the minimum,
) HOBBY BBS's.... That may accept donations, and have certain ratio's
in place.
I thank you for your time, and I especially thank you for your
cooperation in this matter. Special thanks to your SYSOP for allowing
me to post these items that require IMMEDIATE ATTENTION!
Anthony Mack
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Senate #6079 Assembly #8491
For the purpose of this transposition, $ will indicate
SECTION NUMBER, as referred to in the original
documentation.
$154. Paragraphs 5 and 6 of subdivision (B) of section 1101
of the tax law, as added by chapter 93 of the laws of 1965,
are amended to read as follows:
(5) Sale, selling or purchase. Any transfer of title or
posession or both, exchange or barter, rental lease or
license to use, or consume (including, with respect to
computer software, merely the right to reproduce),
conditional or otherwise, in any manner or by any means
whatsoever for a consideration, or any agreement therefor,
including the rendering of any service, taxable under this
article, for consideration or any agreement therefor.
(6) Tangible personal property. Corporeal personal property
of any nature. However, except for purposes of the tax
imposed by subdivision (b) of section eleven hundred fice,
such term shall not include gas, electricity, refrigeration,
and steam. Such term shall also include prewritten computer
software, software, whether sold as part of a package, as a
separate component, or otherwise, and regardless of the
medium by means of which such software is conveyed to a
purchaser.
$155 Subdivison (b) of section 1101 of the tax law is amended
by adding a new paragraph (14 to read as follows.
(14) Prewritten computer software. Computer software
(including prewritten upgrades thereof) which is not software
designed and developed by the author or other creator to the
specifications of a specific purchaser. The combining of two
or more pre-written computer software programs or prewritten
portions thereof does not cause the combination to be other
than prewritten computer software. Prewritten software also
includes software designed and developed by the author or
other creator to the specifications of a specific purchaser
when it is sold to a person other than such purchaser. Where
a person modifies or enhances computer software of which such
person is not the author or creator, such person shall be
deemed to be the author or creator only of such persons
modifications or enhancements. Prewritten software or a
prewritten portion thereof that is modified or enhanced to
any degree, where such modification or enhancement is
designed and developed to the specifications of a specific
purchaser, remains pre-written software; provided, however,
that where there is a reasonable, seperately stated charge or
an invoice or other statement of the price given to the
purchaser for such modification or enhancement, such
modification or enhancement shall not constitute prewritten
computer software.
$156 Subdivision (a) of section 1115 of the tax law is
amended by adding a new paragraph (28) to read as follows:
(28) Computer software designed and developed by the author
or creator to the specifications of a specific purchaser
which is transferred directly or indirectly to a corporation
which is a member of an affiliated group of corporations
within the meaning of subparagraph six of this paragraph (b)
of subdivision seventeen of section two hundred eight of this
chapter except for clauses (ii) and (iii) of such
subparagraph that includes such purchaser or to a partnership
in which such purchaser, or to a partnership in which such
purchaser and other members of such affiliated group have at
least a fifty percent capital or profits interest (but only
if the transfer s not in pursuance of a plan having as its
principal purpose the acoidance or evasion of tax under this
article), but in no case including computer software which is
prewritten, as defined in paragraph six of subdivision (b) of
section eleven hundred one of this article and available to
be sold to customers in the ordinary course of the sellers
business.
$157. Section 1115 of the tax law is amended by adding a new
subdivision (o) to read as follows:
(o) Services otherwise taxable under subdivision (c) of
section eleven hundred five or under section eleven hundred
ten shall be exempt from tax under this article where
performed on computer software of any nature;provided,
however, that where such services are provided to a customer
in conjunction with the sale of tangible personal property
any charge for such services with the sale of tangible
personal property any charge for such services shall be
exempt only when such charge is reasonable and separately
stated on an invoice or other statement of the price, given
to the purchaser.
These are exact translations of the original laws that were
passed during the Great Budget debate of 1991, as adopted by
all legislators, assemblymen, senators, and our infamous
Governor, Mario Coumo.
------------------------------
Date: Fri, 14 Sep 91 19:31: 21 CDT
From: jmcmullen@well.sf.ca.us
Subject: File 5--Confusion Reigns on NY Download" Tax (Newsbytes Reprint)
CONFUSION REIGNS ON NY STATE "DOWNLOAD" TAX 09/12/91
NEW YORK, NEW YORK, U.S.A., 1991 SEPT 12 (NB) -- On the day that
the New York State was to begun to enforce a tax law supposedly
requiring sysops to remit taxes on the downloading of software from
computer bulletin board systems, strong doubt arose that the law was
ever intended to have that result and will ever be so interpreted by
the NYS Dept. of Tax and Finance.
Lance Rose, an attorney with strong interests in BBS communications,
reported that he had contacted Paul Rickard, director of the NYS
Department of Tax and Finance, and received assurances that there was
no intent to require that true hobby boards (those which do not claim
tax deductions due to BBS operation) remit sales tax on software
downloads. The tax change, according to Rose's understanding from
Rickard, was actually aimed at plugging a loophole surrounding those
products built around previously existing software.
Rose also pointed out that BBSs have been subject to sales taxes as
information services for years, under Section 1105(c)(1) of NYS's
tax law although most, if not all, did not actually pay the tax. Rose
suggested that BBS operators attempt to have the law changed to
provide them with the same exemption that newspapers and periodicals
enjoy.
Meanwhile, other interested parties have told Newsbytes that they
have called underlings in the Dept. of Tax and Finance and received
conflicting information. Members of the Albany, NY BBS group, NYBBS,
that originally took notice of this legislation and raised a public
cry over it through calls to the media and postings on CompuServe,
have reported meetings with officials in which they were told that
their understanding of the BBS liability was correct and would be
enforced.
Emmanuel Goldstein, editor and publisher of 2600: The Hacker
Quarterly, in his weekly New York City radio show. "Off The Hook",
exhorted listeners to contact their state legislators and make their
feeling known about such a tax. Goldstein later told Newsbytes that,
while he hoped that Rose's understanding was correct, "We won't
really know until we have a complete copy of the bill available for
all and a public statement from the head of the tax bureau specifying
the interpretation on which the authority will proceed."
Appearing on Goldstein's show, Charles Rawls and Jack Brooks, sysops
of New York City's "Dorsai Diplomatic Mission" said that, in the
event of a worst case interpretation, that they would continue their
operation as is and hope to be a test case. Rawls further said that
any BBS which felt that it should suspend its downloading operation
was welcome to transfer its libraries to Dorsai who would serve the
BBS' users until such time as the BBS was ready to resume normal
operation.
Dave Burstein and Hank Kee, hosts of WBAI's "The Computer Show" also
reported receiving conflicting information and suggested that
concerned parties contact their state representatives and request
information while informing the representative of their opposition to
any form of BBS interference. Kee, sysop of the New York Amateur
Computer Club (NYACC)'s BBS, said that under the definition that he
had received of an exempt "hobby BBS", NYACC was exempt from any
requirements in this matter and, after posting a message identifying
it as a completely not-for-profit system, would continue normal
operation.
Both radio shows received numerous calls concerning this issue with
some callers expressing conspirational theories with such persons or
groups as New York Telephone Company, commercial systems such as
CompuServe and GEnie, anti-BBS government groups and New York
Governor Mario Cuomo emerging as the villain behind a crackdown on
BBSs.
(Barbara E. McMullen & John F. McMullen/Press Contact: Carl Felsen,
New York State Dept. of Taxation, 518-457-4242/19910912)
------------------------------
Date: Thu, 19 Sep 91 11:31:18 PDT
From: jmcmullen@well.sf.ca.us
Subject: File 6--Confusion unfolds on NY "Download" Tax (Newsbytes Reprint)
CONFUSION UNFOLDS ABOUT NYS "BBS TAX" 09/17/91 ALBANY, NEW YORK,
U.S.A., 1991 SEP 17 (NB) -- Some of the conflicting stories
concerning the recently implemented New York Tax modifications were
"put to bed" as a result of conversations between Newsbytes and
sysops Marty Winter and Tony Mack.
Mack, originally quoted by Newsbytes and other publications,
concerning a supposed Saturday, Sept. 7th meeting between 31 Albany
area sysops and two legislators, Assemblyman Paul Tonko (D - 105th
Dist) and James Tedisco (R - 107th), said that there must have been
some miscommunication as he actually had not attended the meeting. He
did say, however, that he had been told that Tedisco and Tonko had
been part of the meeting and had proposed a compromise concerning the
way the law will be enforced.
Newsbytes was told by Assemblyman Tonko's office that Tonko had
neither attended a meeting on Sept. 7 nor offered any compromise. A
subsequent call to Tedisco's office received the same response. The
assemblymen's offices were also contacted by Newsbytes reader Paul
Eng who raised the question as to whether all parties were being
truthful about the matter.
Sysop Marty Winter, chairman of NYBBS, an amalgamation of Albany
BBSs, told Newsbytes that he did attend the Sept. 7th meeting and
commented "There were 16 sysops and the meeting and, contrary to what
Tony said, there were no legislators. We did have material provided
by legislative offices for review and we have been in constant
connection with the Dept. of Taxation on this matter."
Winter continued "NYBBS is a group of sysops and users, formed
initially a few years ago when a bill introduced by State Senator
John Dunne threatened the rights of computer users. We were
successful in opposing that legislation and, since then, have
continued to attempt to educate users and legislators concerning
computer matters. We keep a close watch on new legislation and
normally would have picked up this tax problem soon but the
amendments involved were all over the place in the tax code.." NOTE:
the text of the amendments were posted on bulletin boards in the
Albany & New York City area by Mack and are available for reading on
the Dorsai Diplomatic Mission (212 431-1944, 1948,1950).
Winter said that he agrees with others that there is no immediate
threat to BBS activities from the new law and feels that the
community to direct its attention to obtaining the same exemption
from the tax on information services that newspapers and periodicals
have.
Winter and Mack are also complainants in a case involving the alleged
attempts by a 16 year old to "trash" local BBSs. Winter told
Newsbytes that someone uploaded a file that, when "unzipped"
attempted to erase the CMOS section of a computer, "The only effect
on my board since I have an 8088 non-CMOS system was the constant
hanging of my Virex program. I have not really had any contact with
the case since filing the complaint."
Mack had previously told Newsbytes that, upon his filing of a
complaint in this action, he has become the source of harassment and
that his home has been vandalized and burglarized. Winter told
Newsbytes that he had heard of the reported incidents but had not
been to Mack's house to witness the reported damage.
Another Albany area sysop, speaking to Newsbytes under the promise on
anonymity, said "Albany has, for the last few years, been the scene
of some pretty nasty BBS stuff with systems being trashed and heavy
'flames' and threats being exchanged in the community. I know the 16
year old and, while I don't think that he has completely clean hands,
I don't think that his actions were much worse than other things done
in the area. I don't know Winter but I have heard good things about
him. I, however, tend not to believe the tales about burglaries and
would have to see the evidence of vandalism to be convinced."
(Barbara E. McMullen & John F. McMullen/Press Contact: Joel Ford, New
York State Dept. of Taxation, 518-438-8581; Marty Winter, NYBBS,
518-436-0581/19910917)
------------------------------
Date: Mon, 16 Sep 91 22:02:09 PDT
From: elrose@well.sf.ca.us
Subject: File 7--Clarification of NY BBS Law
I talked today to Paul Rickard, director of the NYS Dept. of Tax and
Finance (and, BTW, personally familiar with BBS's and shareware).
Here's what seems to have happened:
BBS's have been subject to sales taxes as information services for
years, under Section 1105(c)(1) of NYS's tax law, though few if any
paid these taxes.
Recently, there was a change in the NYS tax laws relating to
"prewritten software". The purpose of the change was to enable the
state to assess sales taxes on transactions where prewritten sw was
slightly customized by the vendor, then claimed to be "custom" and
thus not covered at all by the tax. Under the tax law change, where
sw is partially custom and partially prewritten, sales tax will apply
to the prewritten portion.
As is its custom, the NYS tax dep't. mailed out notice of this change
to the "prewritten software" definition to all people and businesses
that were listed in its recordkeeping system as possibly interested in
the law. Among the recipients were BBS's - the tax dep't. files such
operations as "computer-related", thus they are mailed all
computer-related tax changes. This was notice N-91-34, dated July,
1991.
Some sysops, reading the prewritten software provisions, became
alarmed at the language stating that all "transfers of possession" of
software would be taxable. They inferred that since they received
this notice in their capacity as BBS's, the prewritten sw law must
apply to all BBS software transfers.
When some of these sysops called the state tax department in response
to the notice, and asked if their BBS file transfer operations were
taxable, they were told these operations were taxable. However, the
tax department taxes those operations as a tax on information services
under 1105; it does not take the position that file transfer
operations (except those that are clearly sw sales or license in the
colloquial sense) invoke sales taxes under the prewritten software
law. Note that this information services tax covers not only file
transfers, but *all* transfers of information of any kind. It's far,
far broader than a program file transfer tax.
Essentially, it seems there were a number of fortuitous coincidences
leading to the current panic: (1) BBS's were specifically selected to
receive notice of the prewritten sw law changes based on their general
classification as computer-related businesses, (2) the language of the
prewritten sw law contained in the notice was broad enough to look
like it might apply to all BBS program file transfers, and sysops
naturally assumed that being sent such a notice meant it was thought
to apply to their BBS operations, and (3) when sysops called the NYS
tax people to inquire about the law described in the notice, the tax
dep't. confirmed their taxability, but under a different tax section -
but the difference in the exact tax sections involved was never made
clear!
Some further items. First, I'm told an ex parte seizure of BBS's, w/o
hearings or proceedings, was not and is not contemplated. Second,
this is how the "hobby board" exception will be treated - if a BBS
does not charge money or other substantial consideration, and does not
claim "business losses" on their tax forms based on BBS costs, it can
be considered a hobby board. But the sales tax people look at
claiming BBS losses as "profit or loss from a business" as a
conclusive admission by the taxpayer that he's running a business, not
just pursuing a hobby (BTW, that reasoning doesn't bother me).
BUT, this leaves a much bigger question unanswered: the validity of a
tax on information services. The tax laws specifically exempt
newspapers and periodicals, and certain radio and television-related
services, from sales or service taxes, clearly on freedom of speech
grounds. BBS's don't get this presumption under the laws - their
services are fully taxable. This is not the fault of the tax dep't.,
but the legislature. It's probably not even the legislature's fault -
the growth of information services has been rapid and recent, and not
brought to legislators' attention.
Nonetheless, the tax laws should be changed to exempt BBS's and othe
information services, for the same reasons newspapers, etc., are
currently exempt - on the ground of protecting freedom of speech.
------------------------------
Date: Wed, 18 Sep 91: 23:19:29 PDT
From: 72187.8118@COMPUSERVE.COM
Subject: File 8--Summary of Significance of NY "BBS Download Tax" (reprint)
Originally posted on comp.org.eff.talk, where there has been
considerable discussion. <mrl>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
From: halcyon!walter@seattleu.edu
Subject: NY Tax on NY BBS Community?
Date: 17 Sep 91 19:03:43 GMT
I had what will probably be my last contact with the New York state
Department of Taxation & Finance yesterday James W. Morris -- a
Regulations Specialist in the Instructions and Interpretations unit of
the Sales Tax Section of the New York state Department of Taxation and
Finance.
At the outset, I wish to stress that information, henceforth, is
available from T&F by calling T&F at 518-438-8581 and asking for the
sales tax section, or by calling 1-800-CALLTAX if you are a resident
of New York state. 1-800-CALLTAX is NOT a line where lengthy Q&A is
appropriate. You ask short questions and receive similar answers. In
most cases, telephone response, of a more detailed nature, is provided
via callback from appropriate personnel.
My conversation with Morris was quite lengthy --somewhere in the
vicinity of an hour or so. It is my intuition that Morris was willing
to spend that much time with me in order to provide information that I
could disseminate and thereby moderate the plethora of phone calls and
mail coming into T&F concerning the alleged "download tax". The
following items are what we covered during our conversation.
1. Of paramount importance, from Morris' perspective, is the level and
quality of response to the new sales tax codes which were effective
on 9-1-91. Morris pointed out that it is quite possible T&F
personnel could have asserted a wide range of circumstances,
applicable to the new sales tax codes, depending on how well people
framed their questions. In other words: if a SysOp did not
accurately and completely describe how his system functions, he/she
may have been given an inaccurate or incomplete response by T&F
personnel.
2. AT THE PRESENT TIME, upload/download ratios do NOT determine
whether a BBS operator is engaging in taxable activities. HOWEVER,
since this is considered a form of barter -- at least from Morris'
point of view -- he could provide no guarantee that the current
status of upload/download ratios, as to taxable activity, might not
change in the foreseeable future. The new tax codes support an
interpretation that would allow taxation of the exchange of ANY
software having financial worth, or of an exchange where one must
do something of taxable worth in exchange for something of taxable
worth. This could especially impact subscription system, but not
necessarily exclude free access systems, in respect to value-added
information services where you add to the overall value or
financial worth of a system by enhancing its collection of software
available for download, and are compensated for adding value by
gaining access to more files proportionate to the amount of
material you upload. This concept, by they way, need not apply to
software alone, according to Morris. In order to GUARANTEE that
taxation will not occur in scenarios of the future where systems
maintain an upload/download ratio, new legislation in New York
state will be necessary.
2. Morris has no personal knowledge of anyone calling electronic
bulletin board systems to verify compliance with the new tax codes
in effect as of 9-1-91. Morris was quick to add that the New York
State Department of Taxation & Finance is a large agency with over
6,000 employees and many bureaus that do not necessarily acquaint
each other with ALL of their activities. Thus, another bureau might
engage in activities Morris wouldn't know about for weeks or
months. Morris, however, informed me that T&F's computer facilities
are a closed system. Access to the outside world via modem is
assigned to a select few who have desktop PCs. Modem use is a
tightly controlled privilege as well.
3. Morris is personally unaware of any intent to seize electronic
bulletin board systems not in compliance with tax codes in effect
as of 9-1-91. The same qualifier as to the activities of other
bureaus mentioned in item #2 applies here as well. Morris indicated
that it is HIGHLY unlikely any seizures of electronic bulletin
board systems could have taken place in the near future, and
certainly not within 8 days of the codes taking effect, in that
normal due process would prevent such lightning summary action.
4. Morris is personally unaware of any letters of complaint or
petitions that might have been filed by the organization NYBBS in
order to prevent implementation of new sales tax codes in effect as
of 9-1-91, or to request a new interpretation of new sales tax
codes in effect as of 9-1-91. Again, Morris indicates that he is
not aware of all or much of the correspondences from and to
individuals or organizations external to T&F.
With this last report, I'm leaving any further activities to others in
a better and more appropriate position to deal with relevant issues in
New York state. I hope that people in New York will research this
further and keep us posted. Thanks.
Walter Scott
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End of Computer Underground Digest #3.34
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