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Thursday, June 17, 2010

Internet sweepstakes legislation languishing

Posted by on Thu, Jun 17, 2010 at 12:05 PM

internet-sweepstakes-1.JPG

This post was updated Thursday at noon.

Just when you thought Internet sweepstakes was dead this session, House Bill 80, which would ban them, is scheduled to be voted on in the Senate Monday night. Here's the text of the bill: HouseBill80.pdf

The bill runs counter to one filed by State Rep. Kelly Alexander, a Charlotte Democrat, introduced House Bill 2030 that would assess a fee per establishment—as much as $5,000—and would tax revenues at 20 to 25 percent. The terminals would also be connected to the N.C. Department of Revenue, Alexander said, “so you know instantly in the revenue department how much is being generated. You’re doing daily deposits; the government is getting paid up front and you don’t have the opportunity of losing the revenue stream.”

However, in April, the Mt. Airy Business Center challenged in federal court the city of Kannapolis’ taxing authority, contending the taxes and zoning regulations are unconstitutional. The court has not ruled on the case. kannapolis_complaint.pdf

Christopher McLaughlin, UNC assistant professor of public law and government argued on the School of Government blog that counties and cities can make fine distinctions in zoning regulations. They also have the authority to levy privilege license taxes on businesses unless it violates “the somewhat squishy requirement in the N.C. Constitution that all taxes be ‘just and equitable.’”

“We don’t know what tax level is discriminatory,” McLaughlin told the Indy. “You have to ask the question ‘Are you eliminating all opportunity for profit?’”

Mt. Airy Business Center might have a case against Kannapolis under the federal Internet Tax Freedom Act, McLaughlin said. That law prohibits state and local taxes on Internet access. However, if state and local taxes are aimed at the machines and not the Internet access, then that erodes the Mt. Airy Business Center’s position.

For several years, the nimble gaming industry has been one step ahead of state law. Legislators outlawed video poker in 2006, but according to a post by Richard Ducker, UNC associate professor of public law and government, on the School of Government blog, “by the time the 2007 ban became effective, the gaming industry had already begun to reprogram their machines and modify their methods of operation to qualify games as a form of sweepstakes in order to avoid the law.”

Ducker told the Indy that criminal law, in order to be effectively enforced, must be written with very specific language, but “the nature of software development is one of those things that’s hard to get a grip on defining.”

The legality of the North Carolina Education Lottery has muddied the legal waters. “It’s an awkward situation where you have the state involved in certain activity and then you make illegal another activity that’s not terribly far removed from it,” Ducker said.

Sweepstakes supporters have flooded the General Assembly with e-mails pleading their case, says Alexander. “They employ a lot of people. Vacant storefronts are being rented and there are other services offered,” Alexander said.

That sounds a lot like the fax Triangulator received from Fish the Net, a sweepstakes café in Durham. It instructed café owners to stress “1. Jobs 2. This is not gambling. 3. Good tenants renting space that would otherwise be empty. 4. Providing a service of both access to the Internet as well as entertainment…”
Alexander said constituents have told him “I work. I got a job. This is my recreation. Who are you to tell me how to spend my recreational time?”

Triangulator pointed out that the same argument could be applied to prostitution.

“That might be the debate in Nevada,” Alexander said. “But not in North Carolina.”

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