In Kentucky, a case involving the seizure and potential forfeiture of 141 internet gambling domain names has the potential to set a precedent hundreds of miles east as well as around the world. The way that the State of New York may handle disputes with online retailer Amazon as well as iTunes distributor Apple could hinge on the outcome of the case in the Bluegrass State.
One of the central organizations involved on the ground in Kentucky is the Interactive Media Entertainment and Gaming Association, or iMEGA for short. Its Chairman, Joe Brennan, described why the State of New York and Amazon may soon be at odds: “What New York is trying to do is look for new revenue streams. They see the internet as an untapped source for revenue. What you have is the state legislature in New York set to establish the tax policy for the whole of the internet by treating affiliate marketers as full extensions of the companies they represent.” Affiliates drive traffic to Amazon through links placed on their own websites. Some of these affiliates are based in New York, even though Amazon itself has no physical presence there.
In the case of Apple, New York is trying to solicit 5% of the purchase price for downloadable digital content. Brennan explained, “Apple would be on the hook for collecting that tax and then paying it to the State of New York. Even though it’s a virtual transaction, iTunes has no presence in New York. However, there are Apple retail stores located throughout the state. None of the stores sell downloadable digital content.” If a customer purchases a $0.99 song on iTunes, for example, the State would add in a $0.05 tax to make the total purchase price $1.04. The central issue, according to Brennan, will be who is charged with collecting the taxes – Apple or New York.
In a trend that has developed in recent months as the economy has sagged, states, cities, and other municipalities are searching for new sources of revenue. Brennan explained why New York may potentially pursue action against affiliate marketers of Amazon as well as Apple for downloadable music: “You now have states that are cash-strapped and looking for new ways to bring in revenue. New York has been forward-thinking, so to speak, when it comes to approaching the internet.”
According to Forbes, Amazon.com is fresh off reporting one of its most lucrative years of all time. Forbes commented, “Seattle-based Amazon said last week this holiday season was its ‘best ever,’ with a 17 percent increase in orders on its busiest day.” The prospect of revenue derived from internet gambling may cause New York to pursue legal action against either Amazon or Apple.
The state’s actions may depend on the outcome of the internet gambling case in Kentucky. In the southern location, the Governor, Steve Beshear, ordered the seizure of 141 internet gambling domain names, including those belonging to online poker rooms Ultimate Bet, PokerStars, Full Tilt Poker, Doyle’s Room, Cake Poker, and PlayersOnly, among others. Several of those rooms have since departed the Kentucky market, abiding by a mandate from Judge Thomas Wingate.
A ruling by the Kentucky Court of Appeals, according to Brennan, may allow New York to pursue the seizure of websites. In total, iMEGA believes that a dangerous precedent may be set. Brennan commented to Poker News Daily, “All you have to do is look at what is going on in Kentucky and see that states may have a leverage option available to them should Kentucky prevail.”
