I’m thrilled to be heading to Chicago in June speak at the Business Marketing Association’s Annual Meeting. As you can see, the conference theme is to un-learn and empower brands to better adapt to the dramatically changing world of B-to-B marketing.

The “dynamic personalization” dream team
Last fall I was part of a really fun session on CRM integration for marketers with Joel Book (ExactTarget) and Sallie Anthony (Genworth Financial).  We’ll be back together for our session in Chicago, where we’ll discuss Direct Digital Marketing (ie. email) best practices.

Diagrams to makes sense of complexity
Digital marketing may not be rocket science, but explaining its complexity can make it seem that way. So, I’ll be working with a friend who is a specialist in information illustration to create visualizations of how nearly any organization can personalize their message for 1:1 impact. I’ll post some finalized illustrations here before the conference, so we can incorporate your thoughts.

It would be great to see you
If you’re planning to attend BMA, please drop me a note at <strategy2.0 at gmail.com>. It would be great to cross paths in Chicago.

The Governor of the State of New York wants to address their $15 billion deficit by taxing, well, almost everything. Among the specifics is the taxing of digital downloads. The so-called “iPod Tax” would be 4 percent on all music and video downloads.

For years, we’ve been waiting for the axe to drop on e-commerce by the issuance of taxes on internet-based sales. The arguments against it (and there are many, as there should be) include complexity (which state charges what rate for what type of item, and if states, why not counties and cities?), the cost to revamp shopping cart software and accounting practices, and the obvious fact that government really doesn’t need to tax everything.

What is interesting about this specific tax proposal is that it will also include pornography. Opponents of the tax argue that taxing such a thing legitimizes it. The government would profit from porn.

This is not new. Sin taxes have been around for a very long time (ask a smoker). Inevitably, the argument for a sin tax is the very thing that ultimately dooms it: diminishing returns due to reduced use of the product or service. The state gets hooked on the juice from it, then when it falls off, the tax rate increases. This then accelerates the drop-off in use, and there we go down the spiral. The people who adopt such tax policies aren’t very bright. But of course, you can pass any tax as long as it’s For The Children.

With every state in some measure of financial turmoil, any hope of keeping the tax hounds off the net will likely fail, and soon. What remains to be seen is how complex and unwieldy the new system of internet taxation will be, and just how far states will go to establish “nexus.” Can you really do business in a state you’ve never entered, and what would this mean for international jurisdictions?

Avatars may not be taxed directly yet, but their creators may soon be.

China and Australia are already experimenting with taxation of sales in virtual worlds. Now, in the US, the IRS’s “taxpayer advocate” has encouraged the service to consider taxation in virtual worlds. The Washington Post suggests the IRS could improve voluntary tax compliance by issuing guidance on how taxpayers should report economic activities in virtual worlds.

It used to be that the only thing avatars needed to worry about was avoiding virtual packs of flying phalluses. But pretty soon they may also need chops in accounting, paying taxes, and avoiding virtual audits.

Web Videos of Oakland Shooting Fuel Protests “The devices people carry in their pockets give them the ability to turn what would normally be a case played out in the courtroom into one in which anyone with an Internet connection can serve as virtual judge and jury.” This both shows how online movements start, and how video has jumped from being a novelty to a standard tool in online discourse.

Israel’s Web 2.0 Strategy for Gaza War PR Israel is becoming increasingly tech-savvy, taking its war message to the blogosphere, using live webcams, social networking sites and YouTube to explain its assault on Gaza.

Amtrack Photo Contestant Arrested by Amtrack Police in Penn Station Amtrack marketing asks riders to photograph their trains; Amtrack police arrest them for doing so.

New York “Amazon Tax” Upheld by NY Supreme Court The court found that Amazon’s affiliate program created a sufficient nexus to allow it to be taxed for conducting business in the Empire State. Other states are certain to expand online taxes.

Massachusetts May Tax Internet Sales Governor Patrick supports a law that would collect taxes from Internet retailers. Because participation is voluntary, Massachusetts officials estimate the state would collect an additional $15 million in taxes a year.

Feds Want to Snoop on Your Dialing – Federal Judge Disagrees The Justice Department says it doesn’t need to a wiretap order to extract dialing noises from telephone calls in progress. A federal judge says otherwise.

Fake CNN Site Delivers Trojan An e-mail looks like it comes from CNN but links instead to a fake CNN Web page offering “graphic” video related to the Israel-Hamas conflict. Visitors are infected by a Trojan that steals sensitive data.

Your Front Door Managed Over the Web Lock company Schlage is launching a suite of products to allow over-the-Web control of a home’s locks, lights, and thermostats. Do you think just maybe there’s a built in back door, to give authorities access to, well, your back door.

Massachusetts Introduces Bill to Ban Non Compete Agreements for Employees We’ve described non-competes as the “DRM of human capital”, and cheered California’s recent banning of such agreements. Now the Bay State may join-in.

As state real estate and income tax collections head downward, tax collectors have turned their gaze toward online commerce. At the same time, a few states are emerging as havens from taxation.

New York Goes After Affiliate Marketers with the Amazon Tax
New York implemented the so-called Amazon tax. It seeks to change the common interpretation of online tax law, which holds that states don’t have jurisdiction to force sites to collect taxes unless the site has a sufficient presence, or nexus, such as offices or employees, in the taxing jurisdiction.

The New York legislature voted that companies running affiliate marketing programs should be considered as doing business in the jurisdications affiliate websites are operated from. This idea of affiliate liability stretches though issues such as online tax and liablity for trademark infringement by affiliates. Amazon and others are in court fighting this, but New York’s actions have forced many e-commerce sites to start collecting taxes.

Taxing Music Downloads: The iTax
Five states have already levied iTaxes to tax downloads: Nebraska, Tennessee, Indiana, South Dakota, and Utah. Eight states in all have proposed such taxes this year, while others, such as my home state, Massachusetts, are considering this as one way to overcome revenue shortfalls. This failed in California, but expect a second attempt at taxing iTunes later this year.

Of course, like New York’s online taxes, the problem lies in compelling out-of-state websites to collect taxes for the state or municipality.

Chicago Goes After StubHub and eBay for Amusement Tax
The legality of reselling tickets online has been a favorite topic on this blog. In Chicago, that activity is taxed, and the city claims that any business anywhere reselling a ticket for an event in their jurisdiction needs to collect amusement tax for them. That’s not so far fetched; Boston claims that anyone reselling a ticket for a Boston event is guilty of scalping.

Georgia Wants Room Taxes from Online Travel Sites
Over the last several years, Georgian courts have tried to get municipalities to work out a system to collect room taxes from online booking sites. The sites generally contend they are immune from tax requirements, so this seems headed back to court.

Finding an Online Tax Haven
If you run an entirely online business without a nexus of employees or offices, then you can pretty much pick where you want to incorporate as your only nexus. Nevada and Wyoming are tax havens, which can provide a relatively tax-free home state for incorporations. There are various techniques to keep company proceeds within these states, allowing online business operators from having a taxable nexus in less tax-friendly jurisdictions.

As reported back in November, the State of New York is now requiring e-commerce sites “doing business in the state” to collect sales tax.

New Yorkers were previously required to pay sales tax, but previous court rulings had exempted out of state sites from being required to collect that tax, unless they had sufficient manpower or points of presence in New York to be considered to be conducting business there.

The new law classifies promotion of an online store through an affiliate web site based in New York as constituting a sufficient nexus for taxation. Although Amazon.com doesn’t have a store in New York, individuals and organizations in New York get revenue if they refer customers to Amazon. Legislators, in fact, referred to this as the “Amazon Tax”.

Not surprisingly, Amazon has filed suit, both claiming to have been unfairly singled out for taxation, and arguing the broader point that affiliate promotion isn’t a sufficient nexus to be subject to New York tax laws. Overstock.com has ended its relationship with 3,400 New York based affiliate sites, and filed a similar suit.

New York is now one of five states for which Amazon collects sales tax. Amazon has distribution centers in three of these: Kansas, Kentucky and North Dakota — and they are headquartered in the state of Washington. Amazon has no physical presence in New York state.

Whenever a governmental body makes a statement that voices support for an ethical principle, you should look for the real underlying reason: money.

In a recent meeting, the Los Angeles County Board of Supervisors stated that copyright infringement “substantially interferes with the interest of the public in the quality of life and community peace, lawful commerce in the county, property values, and is detrimental to the public health, safety, and welfare of the county’s citizens, its businesses and its visitors.”

Going beyond a public statement in support of LA County’s major industry, Big Media, the board passed legislation that allows it to close a business for copyright infringement, with the owner fined $1,000 for each infringing work produced on site.

According to Wired.com:

The regulation was crafted at the urging of the Motion Picture Association of America and the Recording Industry Association of America.

The county retains the right to shutter a property for up to a year for violating ordinance 13.90.010 [PDF] and also gives local authorities the right to bring a civil action to “temporarily restrain, preliminarily enjoin, and/or permanently enjoin the person or persons intentionally conducting, or knowingly maintaining or permitting the public nuisance from further conducting, maintaining, or permitting such a public nuisance.”

Property owners who knowingly permit such activity can also be dinged $1,000 for each counterfeited work produced on the property.

The precedent of having the RIAA and MPAA coercing municipal governments into imposing additional fines beyond those of the federal government is profoundly dangerous, vulnerable to mass inconsistencies across the nation, and scurrilous.

The temptation for governments to secure an additional revenue source while helping a foolishly run industry is a Mickey Mouse idea that I wouldn’t pay 50 Cent for.

Last week the Italian tax office posted the names, addresses, income and tax status of every single Italian citizen on a public website. No kidding. They performed this public service just days before the outgoing centre-left Prodi government was due to leave office.

Tax officials explained this was “to allow the free circulation of information in a framework of transparency,” and was “in line with privacy guidelines.” Citizens jammed the agency’s servers looking up the incomes of neighbors, politicians, and sports stars. Newspapers republished the most juicy information. Italia Oggi has planned a series of special supplements with more details and analysis of the data.

See Wonkette’s excellent headline.

Some countries do post tax information publicly. In Norway, tax returns have been publicly available since 1863, and accessible online since 2002.

America Joins In
Unlike the Italians and Norwegians who reveal data intentionally, in the United State we tend to reveal our data negligently. On the same day the Italian press was foraging tax returns, the US press foraged the California’s Riverside County Superior Court’s website, which posted:

• images of complete tax filings with social security numbers
• medical reports from cases in court
• images of checks with signatures, routing and account numbers

When we consider national data initiatives such as REAL ID, we should remember that governments can be petty and vengeful. Just this year, a US president ended the government committee charged with protecting citizens’ privacy.

So, could something like this happen in the US? Yes, except in Italy, their privacy agency was intact and forced the information to be taken down in a day.

And though we may smile about data disclosures far away, data negligence and misuse is certainly a problem closer to home which is easy to overlook until it makes the headlines.

At this year’s SXSW Music and Media Conference in Austin, an idea was floated that was supposed to “monetize anarchy” found in the music industry vis-à-vis illegal copying. The idea: a five dollar monthly surcharge on broadband internet service as a royalty for downloading music illegally. This is also known as a “utility model.”

But it isn’t really; it’s a private-industry tax on behalf of a failing industry. It’s like a shopping mall that combats shoplifting in one single store by forcing everybody who enters the mall to pay an entrance fee, just in case they might want to steal from that one store. This is insulting to consumers and a presumption of guilt — and it violates any notion of due process.

This “licensing proposal” is analogous to the 50 cent tax put on cassette tapes in ’80s, and is just as wrong. It’s a one-sided license which says everyone who uses broadband also distributes music and steals it, too.

According to AfterDawn.com:

The idea of a subscription licensing fee is hardly new. The Electronic Frontier Foundation made a very public presentation of a similar plan in 2004. What may be new is the recording industry’s willingness to listen. With the major labels’ lawsuit-driven strategy failing to either resuscitate the nearly dead CD industry [sic]. The legal download market hasn’t been able to make up for lost CD sales due to a consumer preference for singles rather than complete albums.

I smell buggy-whip maker here in this argument. I see no more reason to save a “CD industry” than I do an “8-track industry.” The music industry should see itself as selling music, not records, tapes, or CDs. Not only does this proposal presume we’re all criminals, the supposed compensation process to the artists would be no more workable than that of the rapacious RIAA. The RIAA and the member recording companies can’t even make that hand-off properly.

Digital forms are intrinsically easy to copy and move. In hindsight, records, tapes, and to some extent CDs had the “copyright advantage” of not being very transferable in the way digital files are. It took considerable effort to make and distribute copies. Indeed, it is the distribution of copies that violates copyright, according to recent a court case, not the copying itself.

Remember when teachers realized hall passes could be easily forged? They went low-tech and used obnoxious wooden knick-knacks with their names engraved on them (given to them by well-meaning relatives with absolutely no sense of taste) as proof a kid had permission to roam the halls. I’d rather see music attached to a 21st-century block of wood than to turn due process on its head just to save an industry that can’t seem to make a dime without essentially punishing its customers.

Article update: the New York law to require web sites to collect sales tax has been signed in to law, ands it is now drawing lawsuits from e-commerce sites.

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Last week, New York Governor Eliot Spitzer introduced–and quickly withdrew–plans to require Internet retailers who use affiliate marketers in that state to collect sales tax payments.

This would not have technically been a new tax on New Yorkers, who are already required to pay sales tax on goods purchased online. The state, however, lacks an effective collection mechanism for this, and although residents are asked to report such purchases on their annual tax forms, few ever do. So while it would not be a new tax, it would certainly result in new revenue.

Internet retailers generally have been exempted from collecting state sales tax under the US Supreme Court’s 1992 ruling in Quill Corp. v. North Dakota. It holds that “sales tax collection requirements cannot be imposed on an out-of-state corporation that does not have a substantial physical presence within the state.”

However, Internet commerce sites such as Amazon traditionally give commissions to other sites that send them traffic resulting in sales. New York Department of Taxation officials contended that these affiliate marketers function as agents, and therefore create a sufficient nexus to subject their sites to sales tax collection requirements. Once this status was established, commerce sites would be required to collect taxes for all purchases made by New Yorkers–not just those arriving from affiliate sites.

Maud Newton published an excerpt from the Department of Taxation’s memo, which shows they really did mean to make this happen right away. They threatened criminal penalties, and interest on back taxes, on any retailer not actively collecting tax for the state by December 7th 2007. The message to retailers was: Do it now, or big fines are headed your way.

As Internet commerce continues to grow, states are increasingly focused on finding ways to enforce the collection of sales tax. And change is in the air, with industry pundits such as Dave Taylor now asking if it’s time to reconsider the taxation of Internet purchases as a no-longer “sacred cow” of new commerce promotion.