270 lines
12 KiB
Plaintext
270 lines
12 KiB
Plaintext
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New Massachusetts Modem Tax Proposed (For Real)
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Channel 1 BBS in Cambridge is having the unpleasant experience
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of being targeted for an "experiment" in revenue collection by the
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Massachusetts Department of Revenue.
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The DOR threatened Channel 1 with a bill for back taxes plus
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usurous interest and penalties on fees paid for information access
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and retrieval. While telecommunications transmission services
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(such as telephone, satellite, etc) have been taxed by state
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statute since September 1990, information access and message
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services are explicitly excluded in the state tax code (see refs).
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This is the first time that the state has ever tried to collect a
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tax on online information access in Massachusetts (the
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"transmission" is taxed in your phone bill).
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After considerable negotiation and $20,000 worth of legal and
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accounting assistance, the DOR has put Channel 1's case on shelf
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until the end of the year. However, it has become clear that the
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DOR is continuing to advance their justification for an information
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tax through several tactics, including "creative" interpretation
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and a legislative re-write of the telecommunications sections of the
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tax code.
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Under the revision to either the code or its interpretation, all
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charges for online access and data retrieval would be subject to 5%
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Massachusetts sales tax. Consumers of online services, database
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access, email, legal and scientific or commerical research data,
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pay bbs's, and Internet access services would be among those affected.
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It is possible that feedback from those concerned might influence
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policy decisions apparently scheduled for completion by the end of
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1993. The "proposed new regulations" are being revised now. The
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public (and the legislature) will never be less-informed about the
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tax and its implications. Unless consumers speak up now, new taxes
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will just get buried in new telecomm code revisions.
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-----------------------------------------------------------------
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A little effort now may save you alot of money later.
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Call, write or FAX these numbers, make your feelings
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and opinions known, and pass this information on.
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NO TAX ON INFORMATION!
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-----------------------------------------------------------------
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Governor Weld
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Suite 360 The State House
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Boston, MA 02133 Telephone: 727-9133 Fax: 523-7984
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Mitchell Adams Commissioner of Revenue
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100 Cambridge Street Room 706 N
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Boston, MA 02204 Telephone: 727-2640 Fax: 727-4241
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Edward J Markey
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2133 Rayburn House Office Building
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Washington, DC 20515 Tel: 202 225-2836 Fax: 202 225-1716
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Boston Globe
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135 Morrissey Boulevard
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Boston MA 02125 Tel: 617-929-2000 Email: voxbox@globe.com
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For more information:
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Channel 1
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617-354-0100 info 617-354-5776 modem
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J MASSMODEMTAX at the menu (free access conference).
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------------------------------------
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Massachusetts General Law References
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------------------------------------
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Massachusetts Sales and Use Tax Regulation
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Chapter 64H section 1 (Definitions)
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"Telecommunications services," any TRANSMISSION of messages or
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information by electronic or similar means, between or among points by
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wire, cable, fiberoptics, laser, microwave, radio or similar facilites
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but not including cable television."
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Chapter 64H section 1.3 Computer Industry Services and Products (12)
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Transmission of Programming or Reports. Charges for transmitting
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computer software or reports of anytype by telephone lines, microwaves,
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or other electronic modes of transmission are not taxable, unless the
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vendor transfers an otherwise taxable storage medium imprinted with the
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programs or reports as part of the same transaction. (13) Access to
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Database Services (a) Exemption for database services. Charges for
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access by telephone or other means to databases stored in computer
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equipment not on the premises of the customer are generally not taxable.
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Related Letter Ruling 81-41 - Chapter 64 Section 1 (13)(c) provides that
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"sales" subject to tax do not include professional or personal service
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transactions which involve no sale or which involve sales as
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inconsequential elements for which no separate charges are made. Based
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on the foregoing .... charges to information providers for the right to
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place information in the (Brand X) computer will not be subject to
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Massachusetts sales or use taxes.
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Related Letter Ruling 85-61 - "You request a ruling regarding the
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application of the Massachusetts sales tax to monthly access charges for
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the use of ______ ("System"). "Transaction whereby a person secures
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access, by means of telephon or other lines, to equipment not on his
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premises, is not subject to tax if the person or his employees do not
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operate the equipment or direct or control it's operation while on the
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premises where the equipment is located."
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[Everything following is the 1990 revisions]
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Chapter 64H.1.6: Telecommunications Services...applies to sales of
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telecommunications services on or after September 1, 1990. Section (2) -
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Telecommunications services, any TRANSMISSION of messages or information
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by electronic or similar means, between or among points by wire, cable,
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fiber-optics, laser, microwave, radio, sattellite, or similar facilities
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but not including cable television. (ADDING the following) In general,
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telecommunications include telephone and other transmissions between or
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among specific parties or specific location, but do not include public
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broadcasts.
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Section (5) Residential Telephone Service Exemption and services not
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eligible for Residential exemption.
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Section (6) Deals with Sales for Resale of Telecommunications Services
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Section (7) Services Sold in Conjunction with Telecommunications
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Services. (b) The tax on the sale or use of telecommunications services
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under MGL c64H. 64I. is a tax on the "TRANSMISSION" of messages or
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information by various electronic or similar means. Generally, it is
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not a tax on the sale or use of information itself. In some
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transactions, such as telephone calls to "900 numbers" or to certain
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database services that are not otherwise excluded from the definition of
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a taxable sale under MGL c64H s.1(12)(f), a purchaser may purchase a
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telecommunication service (i.e. the telephone call or other
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transmission) and the information or data being transmitted
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simultaneously. Under such circumstances, the entire sales price of the
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transaction is taxable as the sale or use of telecommunications
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services, unless the sales price of the taxable tranmission and the
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sales price of information or data transmitted, are separately stated on
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any evidence of the sale issued or used by the vendor...If the two
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amounts are separately stated, the tax is assessed only on the sales
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price of the taxable transmission service.
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Message services excepting only beeper services which are to be taxed
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under the telecommunications transmission tax - were officially
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"re-exempted" under SIC 7389 (when the broader based sales tax was
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rejected by the DOR in March 1991 - ed.) .
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END of LEGALESE
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---------------
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Footnote
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--------
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No BBS (defined here as online service that does NOT resell telephone
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services) in Massachusetts collects the telecommunications tax from its
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customers for obvious reasons. ONE Massachusetts BBS was audited in
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early 1991 (after the telecommunications tax went into effect) and was
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NOT assessed or told to assess sales tax on its access fees.
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Most (but not all) online services in Massachusetts that DO PROVIDE
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telephone services do NOT collect or pay the sales tax -- Compuserve
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(which has several offices in the state as well as many telephone
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installations) and Prodigy for example, also UUNET and PSI. Though
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there are some telephone services PROVIDERs (Mead Data, Westlaw) which
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do collect the tax on the telephone portion of their services.
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July 26 1993
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Channel 1(R) BBS
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A sample letter on this subject follows:
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Date: 07-25-93 (19:38) Number: 4305 of 4305 (Refer# NONE)
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To: SYSOP
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From: FRED HAPGOOD
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Subj: draft of letter
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Read: 07-26-93 (09:08) Status: PUBLIC MESSAGE
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Conf: MassModemTax (16) Read Type: GENERAL (+)
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Dear Gov. Weld:
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I remember that when I read Justice Marshall's pronouncement that
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the power to tax is the power to destroy I thought it a
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rhetorical flourish. The past few months have shown me how wrong
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I was.
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For years I have been calling an electronic bulletin board in
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Cambridge called Channel1. This is a remarkable business,
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built from nothing but the sweat equity of two people, Brian
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Miller and Tess Heder, and their dedication to giving the highest
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level of service in the industry. Their success has been taken
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as an example of what is possible in this state and country, and
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over the years a number of stories have been written and
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broadcast about their achievement.
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Earlier this year the DOR informed Brian and Tess that they were
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going to be billed for more than $150,000 of back taxes -- an
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astonishing sum, considering the small income stream of their
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business, and twice over enough to put them out of business.
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This bill is based on two elements: a 'use' tax and a brand new
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tax that the DOR is 'experimenting' (its phrase) with: a data
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services tax.
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The use tax is at least a tax with legislative and judicial
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history behind it. The flaw in the DOR claim is that the use tax
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is not a publicized tax -- it is in theory a general tax,
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applicable to all taxpayers, yet appears nowhere (that I can see)
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in the literature given the public about their taxes. In my
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opinion part of the function of the DOR is to educate taxpayers
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about their liabilities. They ought not to be collecting back
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payments (plus 18% interest!) on taxes where they have abdicated
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this responsibility. A private company would not be allowed to
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bill its customers for charges that had not been disclosed during
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the actual sale. It seems clear to me that the DOR should not be
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permitted standards of conduct that would be immmoral and illegal
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in any other individual or organization.
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Perhaps there is room for a difference of opinion on that point.
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I am deeply shocked by the other component of this charge; DOR's
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experiment with taxing data services. A few years ago the
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legislature explicitly exempted data services from sales tax,
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while permitting a tax on telephone services. The DOR is now
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experimenting with declaring data services telephone services for
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the purpose of collecting sales tax. There are dozens of
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companies in Massachusetts selling data services. Of them all,
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only Channel1 has been targeted for this noxious experiment in
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label manipulation. I am astounded by this. It is like watching
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the secret police of the USSR at work.
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It is obvious to everyone that data services will be the next
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megaindustry. Channel1 is a small but model company in this
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industry, a business of extraordinary quality, winner of many
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national awards and known throughout the data services industry.
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Their case is already widely discussed all over the internet.
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You do not need me to point out that if the DOR puts Brian and
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Tess out of business though such sleazy practices the news will
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travel widely and impress itself deeply on those building this
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industry. Data services is not a business that depends on local
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resources. If we want to drive it out of this state, nothing
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would be easier. And putting Brian and Tess into bankruptcy
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court would be a great beginning.
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---
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<20> SPEED 1.30 #1339 <20>
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Downloaded From P-80 International Information Systems 304-744-2253
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