Tax? What Tax?
Taxation, Disclosure, Privacy -- Pick Your Issue
Wednesday, 16 August 2000

It all started when I set out to buy some software...

My needs have at last exceeded the free WinDump packet sniffer which has served me well for so long. I decide, on Steve Gibson's well-considered advice, to buy TamoSoft's CommView product. So this fine morning, I surf on over to tamos.com to make the purchase.

As I often do, I set my Network Tracer to the task of identifying www.tamos.com. I like to know with whom I'm dealing. The tracer's report tells me TamoSoft is located in Cyprus, half a world away, and that their domain is hosted by Pair Networks of Pittsburgh, PA. Hardly unusual. The Net is nothing if not global.

Straight to the order page go I, and click "Buy Now" for the One-User CommView Professional License. A quick redirect, and in mere <insider joke>"electronic seconds"</insider joke> I am swept away to a special page at RegNow.com, who would happily take my money. (It's very common for purveyors of products on the Net, to use agents such as RegNow to manage their credit card sales transactions. I suspect it has particular advantages for overseas businesses.)

As usual, it is with a hint of trepidation that I enter personal information and a credit card number on the form. But I want my sniffer, so enter it I do, choosing (again) the $79.00 license. Then... Click. I blithely send the precious data on its way, wondering in the back of my mind just where it will wind up.

Then:

Order Verification

says the page, and:

Eh? What's this? Tax?

I am stricken with precisely $6.79 worth of Consumer Shock, that unique sensation (usually accompanied by Righteous Outrage in some degree) that results from an extra hand in one's pocket. I wonder, Can this be right? I'm buying software from someone in Cyprus. (Or is it Pittsburgh?) Has the jurisdiction of Washington State been somehow vastly expanded?

I must investigate. The Order Verification page is a mass of text. It says:

Purchase Agreement

This announcement is followed by all manner of legalese, much of it in shouting capitals, which in the usual and various legal terms places me at the usual complete legal disadvantage. No surprises here.

Then I see this, buried in a large paragraph near the end, in wee small type:

This purchase order shall be construed and enforced under the laws of the state of North Carolina exclusively in North Carolina courts.

North Carolina! Well, I won't sit still for THIS. Bad enough the fine State of Washington has its grips on my not-so-disposable income. They're charging me North Carolina sales tax?

The abovementioned Righteous Outrage now exceeds its $6.79 budget. Thinking of all the thousands of mistreated consumers, I set my sights on RegNow, having decided they must surely be charging an illegal tax. Guns loaded, I fire up the Tracer again. "www.regnow.com" I say, and pull the trigger.

To which the Tracer replied:

Registrant:
Universal Commerce, Inc. (REGNOW4-DOM)
   PO Box 1816
   Issaquah, WA 98027

   Domain Name: REGNOW.COM

Oh. They ARE in Washington State. My Consumer Shock remains afloat, but Righteous Outrage, bankrupt and deflated, is acquired and absorbed by Annoyance, Chagrin & Resignation. I sigh, and press:

There goes my $6.79. The tax is almost certainly totally legal. Knowing — because I told them — that I'm a Washington resident, RegNow has no choice but to charge it.

Mulling It Over

So I bought my software, I paid my tax, and there it might end. But it still bothered me: something really was wrong here. I thought it over. What was it?

Two things, I decided. Two distinct but connected things.

1. Nobody had told me, before I had entered personal information and a credit card number, that I might be paying tax on that purchase. They should have. I resent being asked to share personal info before I know precisely what I'm getting into, and that I really do want to go through with it. There are overtones of privacy issues here, but the main concern is disclosure.
2. The tax, once added to the charge, was unspecified as to what State Tax I was paying. I had to figure it out myself. That shouldn't be necessary. I have every right to know what tax I'm paying; and to be allowed to decide for myself whether it's appropriate. Disclosure again.

On the Internet, you can't assume anyone has the slightest idea where your business is located. In fact, it's sometimes damned hard for the average user to ever figure out. Location is almost meaningless on the globe-girdling Net. If you don't tell people where you are, they might never know.

Disclosure. People ought to buy things, and share personal information, only on a basis of full disclosure by the seller. That should apply anywhere, but it should apply most especially on the big, mysterious Internet where laws and taxes and jurisdictions are a blur and where the buyer's own trusting disclosure of personal details — which he can never recover and which could be going God knows where — is at stake.

This really isn't a small issue.

Loins Girded...

I set about making a case for change.

I needed to talk to the parties involved, I needed to know what the rules and laws really are, and I wanted to alert people to my concerns.

I called RegNow at the phone number I found in their domain record. I reached a patient receptionist who lent me her ear, and assured me she'd have the director, who was then out, call me back when she returned.

I then placed a message on the packetsniffing newsgroup at news.grc.com. Just earlier, I had noticed that Michael Berg, a representative of TamoSoft, had been posting to that same newsgroup. I cc'ed Michael Berg, and Steve Gibson as well, whom I knew might be interested (he was).

I searched the Revised Code of Washington Law to see what the legal requirements really are for notifying buyers of the sales tax they're paying. The one and only direct statement I found was this:

RCW 82.08.050
"The tax required by this chapter to be collected by the seller shall be stated separately from the selling price in any sales invoice or other instrument of sale." Arguably, RegNow's Order Verification page is an "instrument of sale," and it doesn't state the tax charge separately. But that's not really the problem. It's the disclosure; and it's which state.

A variety of other laws do exist which require full disclosure of costs to consumers, but there appear to be none that explicitly demand prior disclosure of the tax amount, nor a statement of what state's tax is being collected.

In search of more answers, I called a local office of the Washington State Department of Revenue. I was referred to an Olympia office (that's the state capitol). There, I was once again lent a kind and helpful ear. I was referred to the Legislative Liaison for the State Department of Revenue, for whom I left a message; and to the Legislative Hotline, where I was invited to leave a message for my State Senator and Representatives, which I did.

The phone rang. Jessica Dewell, director of RegNow, was returning my call. We had a friendly conversation. Jessica agreed with my concerns. We discussed the law, and we discussed good sense. We communicated very well in fact, with the result that she has promised to add to their order forms, notification of the three states in which RegNow must charge sales tax, just above the point where users begin to input their personal information. For technical reasons, naming the state on the Order Verification page isn't possible, she says, but this prior notification should suffice. I agreed. We parted friends.

The phone rang. Tim Sekerak, Legislative Liaison for the Washington State Department of Revenue, was returning my call. We had a long and very friendly conversation. Tim agreed with me wholeheartedly that there should be full disclosure of impending tax charges and for which state tax is being collected. In addition to passing on a recommendation for language to that effect in new legislation, he said he'd also recommend to the appropriate people in the Dept of Revenue that they include advice in the Department's own publications for retailers, that they practice such disclosures. To a certain degree, the Dept of Revenue can interpret the law (which does strongly suggest such disclosures) and publish those interpretations in its guidelines.

I reported on all this to the packetsniffing newsgroup, and to Michael and Steve. Michael, rightly I think, considered the notification on RegNow's order form as sufficient for his customers' needs. He thanked me for talking to RegNow about it, and offered a second agent in Europe where overtaxed Americans might place untaxed orders.

Well, By Golly...

...things can be changed.

I could hardly have asked for a quicker, more satisfactory result. Everyone agrees. Everyone communicates. A real issue was raised, and heard, and taken up by people who can do something about it. And it just might find its way into sensible law.

Take heed, my friends, and take heart. And take the phone in hand. Communicate.

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