Big Brother Really IS Watching You
While this is not a political blog, government actions that
specifically affect online marketing or e-commerce are fair game.
Several states have recently begun sending nasty letters to taxpayers
who purchased tobacco products online from several e-retailers,
including eSmokes.com.
How did they obtain information on these customers? This issue is
about far more than the perils or expense of smoking; these actions
have the potential to affect anyone and everyone involved in online
marketing or e-commerce, anyone who buys or sells anything online. Do
you sell products online? Are you absolutely positively certain that
you comply with EVERY state and federal tax statute enacted in the
last 100 years? Ever purchased anything online, maybe a book or CD,
perhaps some jewelry, say back in 2001? Are you certain that the
online retailer paid all appropriate taxes on your purchase?
Disturbing? Absolutely. Please read on.
First, the state actions: the Minneapolis Star Tribune reported on
this activity in late July of this year, although for some mysterious
reason the articles can no longer be found on their site. I was able
to track down one of the articles here. Minnesota, among other states,
is apparently using a dusty 60-year-old law called the Jenkins Act,
originally enacted to combat cross-border cigarette smuggling by the
Mafia, to bypass the normal channels of obtaining evidence and simply
demand that legal, private companies in other states simply throw open
their customer records to state investigators. This law may run afoul
of the Internet Tax Freedom Act, not to mention Indian tribal
sovereignty.
There are several problems here. First, no state has any more right to
search through your online purchasing records than they do to break
down your door and search your home. There needs to be evidence of a
crime, probable cause to believe that you were involved in it, and a
warrant granted by a judge before the state can legally search your
online history or your home. Several states have therefore violated
the Fourth Amendment prohibition of unreasonable searches. The Jenkins
Act itself may be an unconstitutional violation of the Tenth
Amendment.
Second, if the online retailers were acting illegally, isn't it
logical to prosecute them? To use an offline analogy, if the
proprietor of a local retailer in your neighborhood, let's call it
John's Bait Shop and Beauty Supply, decided to increase his profits by
simply failing to pay sales taxes to his state, that would be clearly
be illegal. The state would no doubt pursue John in this case.
However, it is inconceivable, unless the state not only knew but could
prove that John's customers were in on this activity, that the state
would track down John's customers for payment of back taxes.
Minnesota, along with Michigan and at least 10 other states, have
violated the Constitution in their pursuit of higher revenues; even
more disturbing than the fact that online retailers have been forced
to throw open their confidential customer information is that the
major credit card companies are also exposing their records (which
means of course, your records). And Minnesota "intends to work with
the U.S. Postal Service and commercial transportation companies to
monitor cigarette deliveries to residential addresses." So Big Brother
is now searching your mail and FedEx packages as well.
Wisconsin governor Jim Doyle is one of the few sane politicians
fighting this practice.
The state of Minnesota, along with the other participating states,
apparently believe that it is fine to violate the Constitution in
their pursuit of revenue. They've violated the privacy of their
citizens. They've violated certainly the spirit, if not the letter, of
the Internet Tax Freedom Act. Worst of all, however, they have
violated the trust of the entire e-commerce marketplace.
To the long list of nefarious cretins intent on stealing your private
online information -- hackers, spammers, perpetrators of fraud -- we
can now add state revenue officials. They want your money. They won't
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