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California State Assembly Passes Online Sales Tax Bill

WASHINGTON June 7, 2011- The California State Assembly passed a bill last week that would require online retailers such as Amazon to collect state sales taxes on all goods the site sells within the state.

The bill is similar to those that a number of other states and the U.S. Congress are currently debating.

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WASHINGTON June 7, 2011- The California State Assembly passed a bill last week that would require online retailers such as Amazon to collect state sales taxes on all goods the site sells within the state.

The bill is similar to those that a number of other states and the U.S. Congress are currently debating.

“Each year, California loses over $1.145 billion in revenues as a result of unreported use taxes.  A large percentage of this use tax gap is attributable to out-of-state Internet sales,” said Assemblyman Charles Calderon, the author of the bill.  “More importantly, the lack of use tax collection has provided a competitive advantage to many out-of-state companies, allowing them to undercut their in-state competitors.”

The bill passed the lower house of the California legislature by a 47-16 vote and will now move the state Senate.

The California State Board of Equalization, which administers and collects sales tax, estimated that on average each household owes $61 in taxes for online sales that are not collected. Collecting taxes on Amazon sales alone would generate $83 million in revenue for the state.

“[The bill] would help to level the playing field by imposing a use tax collection obligation on retailers that use in-state sister companies to help develop or sell their goods,” Calderon said.

South Dakota, Missouri, Nevada and Connecticut are all also currently investigating collecting sales taxes from online retailers.

Illinois passed a similar piece of legislation in April, which the state estimated would generate $170 million in revenue.

After the Comptroller of Public Accounts in Texas asked Amazon to pay $269 million in uncollected sales taxes, the online retailer closed its distribution facility in Irving, Texas in February.

When the North Carolina legislature passed a law last October requiring Amazon to collect sales taxes for goods sold through its North Carolina-based affiliates, the retailer shut the affiliates program down in that state. The program allows small businesses to sell goods on the Amazon site.

New York passed a piece of legislation similar to the North Carolina law in 2008.  Amazon is currently challenging both the New York and North Carolina laws in state courts.

In May, Rep. Lamar Smith (R-TX) proposed the Digital Goods and Services Tax Fairness Act of 2011, which would create a simplified way in which digital goods and services could be taxed. Sen. Dick Durbin (D-IL) is also working on an online sales tax bill.

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Artificial Intelligence

FTC Commissioner Says Agency Report on AI for Online Harms Did Not Consult Outside Experts

The FTC released a report that warned about the dangers of AI’s use to combat online harms.

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Photo of FTC Commissioner Noah Phillips

WASHINGTON, June 22, 2022 – Federal Trade Commissioner Noah Phillips said last week that a report by the commission about the use of artificial intelligence to tackle online harms did not consult outside experts as Congress asked.

The FTC’s “Combatting Online Harms through Innovation” report – approved by a 4-1 vote to send to Congress and released on June 16 – warns against using AI as a policy solution for online problems, as the commission says it contains inherent design flaws, bias and discrimination, and features commercial surveillance concerns. The commission concluded that the potential adoption of AI could increase additional harms.

However, the report found that amid the use of AI by Big Tech platforms to address online harms, “lawmakers should consider focusing on developing legal frameworks that would ensure that AI tools do not cause additional harm.”

The one dissenting opinion on the report was from Phillips, who said the FTC did not do the study that was required by Congress. As part of the 2021 Consolidated Appropriations Act, Congress asked the FTC to conduct a study on how artificial intelligence could address online harms such as fake reviews, hate crimes and harassment and child sexual abuse.

“I do not believe we conducted the requisite study, and I do not think the report on AI issued by the Commission takes sufficient care to answer the questions Congress asked,” Phillips said in his dissenting statement.

Phillips said the report mainly focuses on the technology of AI itself and lacks the outside perspective from individuals and companies who use AI and try to combat the harms of AI online, which he said is “precisely what Congress asked us to evaluate.”

Phillips added that in the 12 months the FTC was given to complete this study, “rather than use this time to solicit input from all relevant stakeholders, the Commission chose to conduct a kind of literature review.

Phillips said in his statement he would have liked to see interviews of market participants or surveys conducted, which allegedly isn’t included in the recent report and adds that he is instead concerned about the “quantity of self-reference” used by the FTC in the report.

“Still, we should at least endeavor to produce a report that reflects the full diversity of experiences and viewpoints on these important issues concerning AI.” Phillips also noted the report doesn’t include a serious cost-benefit analysis of using AI to combat online harms.

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Blockchain

U.S. Must At Least Be ‘Fast Followers’ On Digital Currency, Panel Hears

Panelists discussed the benefits of a digital currency backed by the Federal Reserve.

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Dante Disparte, the chief strategy officer at digital financial services company Circle

WASHINGTON, May 24, 2022 – Industry and a House representative pushed the benefits of a central bank digital currency on Thursday, arguing that the regulated coin would help reduce banking costs and bring those who otherwise don’t use banks into the financial system.

Rep. Jim Himes, D-Conn., told an event hosted by the Center for Strategies and International Studies, that the digital coin, backed by other currencies, would bring in people who don’t use the banking system, which are about 5.4 percent of American households, according to the Federal Deposit Insurance Corporation. Roughly three times as many more are “underbanked,” referring to those who engage in costly nonbank services such as check cashing, money orders, payday lenders and international remittance services, the data show.

Himes, who said the U.S. is late to the digital currency game, added that by enabling these Americans to access this new digital system, this would lower prices for remittances and foster financial inclusion.

Separately, high-powered law firm Skadden, Arps, Slate, Meagher and Flom explained in a recent memo that a CBDC could provide “safer, faster and cheaper payments.”

Dante Disparte, the chief strategy officer and head of global policy at digital financial services company Circle, said for countries that depend on foreign remittances, this is a pathway for accelerating currency receipts and increasing settlements.

Digital currency an international race

“We are seeing things we could not do with our money as compared to if our money stayed in physical or analog form,” said Disparte, adding on the international front, this is akin to the “space race.”

A panel at an event hosted by the Center for Strategic and International Studies said earlier this month that the U.S. was falling behind China, a technology powerhouse, on the digital currency front.

“We don’t need to win every technological race out there, but we need to at least be fast followers,” said Himes. “Let us not find ourselves left behind on the innovation this could provide.” Disparte agreed with Himes that the U.S. is late to the game, but added his caution to the Federal Reserve’s cautionary approach in April to develop a potential CBDC for the U.S.

“Better get it right than to get it first or fast,” Disparte said.

Himes said his ‘elevator pitch for a CBDC rests on the benefits the digital dollar provides for innovation. In the United States’ potential development of a CBDC, the framework or result will not satisfy everyone, but it will be a platform of innovation.

Disparte added that digital dollar currencies such as “blockchain and stable coin will change the world when people start to think of it less as a digital challenge to the dollar and to the U.S. banking system, but rather as foundational technology” for U.S. innovation.

Editor’s note: A prior version of this story referenced a report by the law firm of Skadden Arps and said that the report had argued that a CBDC would allow for “safer, faster and cheaper payments.” The article has been revised to clarify that the Skadden report was not mentioned at the CSIS event, and to note that the the firm explained that a CBDC could allow for such “safer, faster and cheaper payments.”

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Expert Opinion

Rahul Sen Sharma: The Metaverse is Not Web 3.0

The Metaverse is at the forefront of developments in seamless payments and richer information flows.

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The author of this Expert Opinion is Rahul Sen Sharma, managing partner at Indxx.

Web 3.0 is a concept for the next generation of internet architecture that envisions a decentralized ecosystem based on blockchain technology. It is an evolution of how users would control, own, and manage their online content, digital assets and identities.

Web 3.0 marks a departure from the centralized mega platforms and corporations that currently dominate the Web 2.0 ecosystem.

The Metaverse is at the forefront of the Web 3.0 internet revolution. It can be defined as a set of interconnected, experience driven 3D virtual worlds where users can socialize in real-time to form a persistent and thriving user-owned internet economy regardless of any physical or geographical constraints.

Both the technologies of Web 3.0 and Metaverse support each other perfectly. Even though the Metaverse is a virtual space whereas Web 3.0 favours a decentralized web, it could form the basis for connectivity in the Metaverse. While the development of the Metaverse is in nascent stages, the exponential growth of non-fungible tokens, P2E (Play to Earn) games and decentralised autonomous organisations have boosted the development of Web 3.0.

A future involving distributed and anonymous users

Web 3.0 envisions a future involving distributed anonymous users and machines interacting without the need for an intermediary, to form a composable human-centric and privacy preserving computing fabric.

These interactions would range from seamless payments and richer information flows, to trusted data transfers via a mechanism of peer-to-peer networks without the need for third parties.

The shift should lead to a wave of new business models that bypass the existing global co-operatives that we currently have, and replace them with decentralised, autonomous organisations and self-sovereign data marketplaces.

As mentioned, Web3 is built on blockchain technology and DAOs rather than the current model of centralized servers owned by large corporations. In the same way, the ideal structure of the Metaverse is also full decentralisation.

The technologies behind achieving decentralization would be distributed ledgers and blockchain technology which enables value-exchange between softwares, self-sovereign identities and the creation of a transparent and secure environment.

The blockchain is central to the Metaverse, and to Web 3.0

In an ideal form, both Web 3.0 and the Metaverse takes advantage of blockchain to give unrestricted, permissionless access to everyone with an internet connection.

Currently, development towards the Metaverse is being spearheaded by big tech corporations such as Meta, Microsoft, Nvidia, and more, all of which are major players in Web 2.0. The model of centralised Metaverse being built by them involves closed ecosystems that are only designed to extract value at the expense of their most valuable assets – users, content creators and customers.

This contrasts with the envisioned form of Metaverse and Web 3.0 with decentralization, interoperability and seamless interaction between different virtual worlds and the real world.

Still, the big tech corporations are investing resources into their Metaverse development and have their own vision and plans for what the Metaverse would be.

Meanwhile, decentralized Metaverses and Web3 initiatives are currently attracting record investment, pulling in around $30 billion in venture capital last year alone.

As we shift to what will likely be a more decentralized web, the creator economy is also evolving and likely to become a multibillion-dollar industry with immense potential for creators and publishers.

The creator economy in the Metaverse can supplement the vision of web 3.0 for developing a new financial world with decentralized solutions.

In Web 3.0, users can create content while owning, controlling, and monetizing them through the implementation of blockchain and cryptocurrencies. However, the model of this creator economy is likely to disrupt the business models of many current big-tech corporations.

Regardless, the Metaverse requires both big tech companies to build the technology and the creator economy to produce interesting content for driving engagement. Partnerships, reduced platform fees and creative commissions by big tech to creators within the metaverse can be a way to stimulate the already fast-growing creator economy.

Rahul Sen Sharma is a managing partner at Indxx and has been instrumental in leading the firm’s growth since 2011. He manages Indxx’s Sales, Client Engagement, Marketing and Branding teams while also helping to set the firm’s overall strategic objectives and vision. Prior to joining Indxx, Rahul was the Director of Investment Research for RR Advisory Group (now part of Mariner Wealth Advisors), a full service private wealth management firm based in New York that caters to high net worth individuals. This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views expressed in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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