Legal briefs Featured

9:48am EDT July 22, 2002

Web taxes in our future?

A commission charged by Congress with examining whether consumers should pay state sales taxes on goods purchased over the Internet from other states is moving ahead with a report that could be crucial to the future of electronic commerce.

The 19-member Advisory Commission on Electronic Commerce met in September and appointed a sub-committee to draft its final report. The nine-member subcommittee includes government officials, such as the governors of Washington and Virginia, and media executives, including the presidents of Time Warner Inc. and America Online Inc.

The 1998 Internet Tax Freedom Act defined business on the Internet as interstate commerce, which the Constitution protects from state sales taxes. State governments claim the Act deprives them of billions of dollars in sales taxes. The debate is almost certain to grow more heated if, as most experts believe, the Internet claims a rising share of retail business.

The Advisory Commission is scheduled to meet again in December. Its recommendations to Congress are due no later than April 21.

Mark A. Willard

Web law and the European Union

A proposed European Union law would allow dissatisfied Internet shoppers to sue e-commerce firms in their own national courts regardless of whether the company actively tried to sell its product in the consumer’s country. At present, unhappy online shoppers are often limited to seeking redress in the country in which the e-business is based.

If the law is enacted, a business whose Web site is accessible in the EU could face lawsuits in any of the 15 member countries, unless it undertook the considerable expense of complying with the laws of all 15 countries.

The proposed law compounds confusion over who has jurisdiction over Internet transactions.

Marc A. Willard

Suits uphold Web jurisdiction stance

Merely having an interactive Web site that is accessible to Pennsylvania residents does not make a defendant subject to jurisdiction in this state, according to two recent court rulings in Federal District Court in Philadelphia.

Rather, the Web sites must provide the defendant with a continuous, systematic and substantial business contact in Pennsylvania.

The rulings in Molnlycke Health Care v. Dumex Medical Surgical Products, a patent infringement case against a Canadian company, and Hurley v. Cancun Playa Oasis International Hotels, a personal injury case against a Georgia travel agency, follow the precedent whereby jurisdiction depends on a sliding scale measuring the degree and type of interactivity of a defendant’s Web site.

At one end of the scale, simply posting information on the Internet, which is accessible outside one’s home jurisdiction, is not enough to make a company subject to lawsuits in another jurisdiction, the court ruled. Otherwise, any business with the potential to reach residents and solicit business in a state by mail, telephone, or the media could be sued in that state.

At the opposite end, the deliberate, repeated transmission of computer files over the Internet to destinations in a state would clearly qualify as doing business there, exposing a company to potential litigation.

In the middle lies an interactive Web site, which allows a user to exchange information.

Marc A. Willard

Law briefs is written by attorneys from Eckert Seamans Cherin and Mellott, a national law firm based in Pittsburgh.