Sunbelt Blog

Are Smart Phones Tax Exempt?

When was the last time you perused the Internet Tax Freedom Act of 1998? Well over a decade old, the Internet Tax Freedom Act doesn't specifically discuss smart phones. After all, back in the late 1990s, cell phones were used mainly for talking on the phone, not surfing the Web or checking email. However, technology has changed the way people access the Internet and it's now extremely common to connect via an iPhone, Blackberry, or other portable device.

Currently, several lawsuits are in the works, alleging that cell phone providers are illegally imposing sales tax on Internet access. For example, in Connecticut where Internet access is specifically excluded from sales tax under the state's telecommunications laws, the law isn't so clear about excluding data plans from the 6 percent sales tax. Several lawsuits have been filed across the United States with similar complaints.

The Connecticut case seeks class action status on behalf of AT&T smartphone customers. Because so many similar lawsuits have been filed, a multidistrict litigation panel has been formed to determine whether the cases should be combined into one.

While we'll need to wait and see how these cases play out, let's take a look at how "Internet Access Service" is defined by the Internet Tax Freedom Act of 1998. According to the Act, Internet Access Service is a term used to mean ". . . a service that enables users to access content, information, electronic mail, or other services offered over the Internet and may also include access to proprietary content, information, and other services as part of a package of services offered to consumers. Such term does not include telecommunications services."

This definition will likely be carefully considered. For example, if you use a Blackberry to access your email, aren't you in fact using an Internet Access Service to access the email? Or are bundled data plans actually telecommunications services?

The Act further defines "Internet access services" as "the provision of computer and communications services through which a customer using a computer and a modem or other communications device may obtain access to the Internet, but does not include telecommunications services provided by a common carrier."

Now let's look at how "telecommunications services" is defined by the Internet Tax Freedom Act. The Act says that "telecommunications service" uses the same meaning given in section 3 of the Communications Act of 1934 which defines telecommunications service as ". . . the offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used."

While some states such as Connecticut can, and do, charge sales tax on telecommunications services, it will be interesting to see how the courts interpret smart phones. Are they "other devices" that are used to access and Internet Access Service? If so, they shouldn't be subject to sales tax. Or are they a telecommunications service offered for a few which may be subject to sales tax under state laws?

What do you think? Does the Internet Tax Freedom Act of 1998 apply to checking email and Web surfing on mobile phones? Share your thoughts with us.

Outsourcing Legal Services: Set Yourself Up For Success

Earlier, we discussed some of the common pitfalls of outsourcing offshore transcription services and how to overcome many of the obstacles both here and abroad. If you plan on outsourcing any of your legal services, it's smart to do so with a plan. Not only should you do your homework and select a capable company, you should also have your own standard master service agreement, communicate with the decision makers throughout the negotiations, and understand your approval process.

Draft Your Own Master Service Agreements

As a legal professional, you have the skills and expertise needed to draft your own master service agreement. Doing so provides you with the terms and conditions you expect and ensures that you are not left to the mercy of "but this is how we always do it." This doesn't necessarily mean that your master service agreement is the one and only agreement, but it does provide you with a good starting point from which to build. Taking your stock agreement and the outsourcing company's agreement, you can then work together to create a document that is mutually satisfying.

Communicate with Decision Makers

What's more frustrating than getting through a difficult negotiation or meeting only to hear, "I'll see what my boss has to say and get back to you with an answer"? Realizing that this situation is completely avoidable. Long before you enter into a negotiation, find out if the person you are dealing with has any authority to make decisions and to what extent that authority extends. Ask questions such as:
• Are you the key decision maker?
• Do you have the authority to make decisions about ____?
• Who in your company must make the final decision?
• Do you need to run any decision by anyone else in your company? If so, who?
• Is a committee involved in making these types of decisions?

Once you understand who the decision makers are, try to work directly with those people. Doing so saves time and minimizes miscommunication. This isn't always possible such as when decisions must be run past an approval committee. When this is the case, you'll want to work with a senior person, preferably one who sits on the committee.

Understand Your Own Approval Process

Not only must you understand the other side's approval process and know who their decision makers are, you must also understand your own approval process. Are you the key decision maker or must you also run your decision by your boss or an approval committee. If you must obtain approval to make decisions, find out which decisions can be made without approval and which must be submitted to others. Find out acceptable ranges and understand at which point you must defer to higher ups. It's helpful to meet with internal decision makers before a negotiation to go over objectives, expectations, positions, and reserve prices. Knowing when to walk away from a negotiation or when the committee needs to be involved is crucial. Ideally, the fewer people involved in the approval process, the better. If you can limit the size of an approval committee, consider doing so.

If you are the sole decision maker, you must also understand your process. What do are your objectives? What is your bottom line? When should you walk away? What are you willing to accept? What are you willing to give up? Take time beforehand for planning.

Starting with your own master service agreement, meeting with decision makers, and understanding your approval process are three smart steps you can take to ensure outsourcing legal services success.

Under Review: Cell Phone Privacy

Cell phones, when turned on, regularly communicate with cell phone towers, establishing a record of the phone's - and by extension, the user's - whereabouts. The process of communicating with cell phone towers ensures that the cell phone connects to a nearby tower capable of delivering the strongest signal. As the cell phone moves along a route, it is constantly searching for stronger signals and switching as necessary, creating a path that is easily tracked by cell phone companies. Techniques such as triangulation can pinpoint a standard cell phone's location down to as close to a few hundred yards. The location of GPS-equipped phones can be tracked even more precisely.

Lawyers, privacy rights advocates, and cell phone users are anxiously awaiting the outcome of arguments presented to the U.S. 3rd Circuit Court of Appeals last week. The court is hearing an appeal of an opinion issued in February 2008 by U.S. Magistrate Judge Lisa Pupo Lenihan. The 52-page opinion concludes that:

". . . the Government does not have a statutory entitlement to an electronic communication service provider's covert disclosure of cell-phone-derived
movement/location information, the Government's application(s) for such information, absent a showing of probable cause under Fed. R. Civ. P. 41, must be denied."

 

So, what's the big deal about letting a law enforcement agency look at cell phone location without probable cause? After all, wouldn't it be helpful to know that a suspect was within a few hundred yards of a crime scene at the time of the crime? Privacy advocates are concerned that without standards, agencies or the government could track a person's activities including attendance at political events, religious services, or even strip clubs. At issue isn't the law enforcement agency's right to cell phone location data, but rather the standard that must be adhered to in order to obtain a warrant requiring access to the cell phone location data.

While the case focuses on cell phone location data, it could extend to other GPS-enabled devices. For example, many new cars come equipped with onboard GPS systems such as Microsoft Sync or GM's OnStar system. Portable GPS devices have become increasingly popular, providing users with turn-by-turn directions and pinpointing their exact locations via global positioning satellites. Many businesses equip their fleets with transmitters that constantly monitor each vehicle's location, speed, and mileage. Other vehicle tracking technology, such as LoJack, is used for pinpointing a vehicle's location after a theft. Other current technologies that may be leaving a traceable location trail include portable computers, netbooks, music players, and PDAs. Even wireless devices such as the Kindle eReader may reveal the user's whereabouts based on which Wi-Fi connection was used to access an online account.

Judge Lenihan wrote:

"The movement/location information at issue here. . . is the subject of express Congressional protection. Indeed, Congress has reiterated throughout the legislative history of its electronic communications legislation, and reflected in the provisions of its enactments, its recognition of an individual expectation of privacy in "location information" and desire to protect this privacy right from unwarranted or unreasonable encroachment."

 

Do you think the 3rd Circuit will agree? Disagree? Share your insights with us.

Make an Impact with “A Day in the Life” Videos

Whether you're dealing with a wrongful death lawsuit or needing to prove how your client's life has been changed as a result of an accident, negligence, or product liability, "day in the life" videos can make a dramatic impact both inside and out of the courtroom. In fact, an effective video may even convince the other side to settle out of court.

Before you begin shooting video, consider the story that you are trying to tell and how video can help you to tell it. What purpose will the video serve? For example, are you wanting to illustrate the family's loss? Are you trying to humanize the victim? Do you want to contrast life before the event and after? Your approach to the video will largely depend on what story you are telling.

Video Sources

Family videos are an excellent place to begin. Ask the family to provide you with videotapes, DVDs, and photos and then team up with a video production company to create a montage that shows your client interacting with others (or performing tasks that are now impossible) before the personal injury occurred.

Corporate videos may also be available. For example, a video showing your client working in a professional environment, delivering speeches, or otherwise engaging in his or her professional can make an impact, especially if your client will no longer be able to perform in a similar capacity due to the injuries sustained.

If your client was involved in organized sports, check with the team for team video footage. Practice films, televised games, and even personal videos from other players or spectators may be available.

Before and After Videos

The older footage from family members, your client's company, sports teams, and other sources can be edited together to show a day in the life of your client before the incident occurred. This doesn't necessarily mean that you need to show your client waking up, getting ready for work, going to work, coming back home, and then eating dinner with the family. Rather, you'll want to create a montage showing your client enjoying his family, playing sports, working with others, and so on.

Keep your client's current injuries in mind as you edit the before footage. For example, if your client can no longer eat without a feeding tube, include footage of your client enjoying a meal with his family. Later, footage of family members adjusting the feeding tube will have a more profound impact because of the earlier videos.

If your client is still alive, contrast the before footage with an "a day in the life" video of your client now. Again, you'll need to team up with a video production company. Have a crew spend a few days with your client, videotaping the new reality of your client's life. Capture the challenges of routine tasks such as bathing, getting dressed, and eating as well as the pains and struggles of your client's family members. If your client's spouse has had to quit work in order to care for him full time, that's a part of the story that should be told. If your client's children are afraid of a prosthetic limb, show their distance.

Your client has a story to tell and the jury needs to hear it. In fact, the other side may settle because they do not want the jury to see what life is really like for your client. By creating an "A day in the life" video, the video may very well make your case.

Who’s Responsible for Libelous User Comments on Blogs and Web sites?

Anyone who runs a blog is likely aware of the user comments feature. When enabled, other users can comment on your blog posts. Allowing other users to comment on your blog has its pros and cons. For example, a blog post with lots of user comments and interaction is engaging and interactive. On the other hand, comment spam is problematic. Plus, what if a user says something controversial - or worse libelous? Who's responsible for libelous user comments on blogs and Web sites?

The obvious and common sense answer is "when in doubt, cut it out." However, if your blog's user comment settings are not moderated, or even if they are, you may not have noticed a libelous comment. Because the comment is posted on your blog, are you accountable?

In general, the federal Communications Decency Act protects sites and blogs from being held responsible for libelous comments by users. This act prohibits a "provider or user of an interactive computer service" from responsibility "as the publisher or speaker of any information provided by another information content provider."

Recently, a car dealer took on ConsumerAffairs.com, alleging that libelous comments appeared on the ConsumerAffairs.com Web site (Nemet Chevrolet v. ConsumerAffairs.com), arguing that ConsumerAffairs.com was the information content provider and therefore liable for the libelous comments. Nemet Chevrolet alleged that ConsumerAffairs.com solicited complaints, steered the complaints in such a manner as to attract attention from class action lawyers, contacted consumers to ask questions and help draft or revise the complaints, and suggested that financial recovery options were available via class action lawsuits.

Because of these allegations, the plaintiff argued that ConsumerAffairs.com was involved in developing the substance and content of the user comments. In short, the plaintiff argued that ConsumerAffairs.com was "responsible, in whole or in part, for the creation or development" of the user comments and was therefore a non-immune information content provider.

The plaintiff also alleged that eight of the 20 defamatory posts were fabricated by ConsumerAffairs.com because it could not identify the customers making the posts based on the information provided such as first name, date, or model of car.

The case was originally dismissed by a federal court in June 2008. On December 29, 2009, the 4th US Circuit Court of Appeals upheld the US District Court's earlier decision. In its Opinion, No. 08-2097, the appellate court said that, "Nemet fails to make any cognizable argument as to how a website operator who contacts a potential user with questions thus "develops" or "creates" the website content."

What about those eight fabricated posts? The opinion of the appellate court is that "This is pure speculation and a conclusory allegation of an element of the immunity claim. . . Nemet has not pled that Consumeraffairs.com created the allegedly defamatory eight posts based on any tangible fact, but solely because it (Nemet) can't find a similar name or vehicle of the time period in Nemet's business records." The opinion goes on to say that the posts could have been made anonymously, falsified by the consumer, or overlooked by Nemet.

If you run a law blog, do you allow comments? Do you monitor comments before allowing them to be posted? What are your thoughts on libelous blog posts?