Week in review: The taxman cometh back

Momentum is growing, once again, for legislation that would impose taxes on Internet transactions and usage--and even on e-mail.

Steven Musil Night Editor / News
Steven Musil is the night news editor at CNET News. He's been hooked on tech since learning BASIC in the late '70s. When not cleaning up after his daughter and son, Steven can be found pedaling around the San Francisco Bay Area. Before joining CNET in 2000, Steven spent 10 years at various Bay Area newspapers.
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Steven Musil
5 min read
If you once scoffed at those e-mails warning of an e-mail tax, brace yourself: you may soon be paying a lot more to use the Internet.

The era of tax-free e-mail, Internet shopping and broadband connections could end this fall, if recent proposals in the U.S. Congress prove successful. State and local governments this week resumed a push to lobby Congress for far-reaching changes on two different fronts: gaining the ability to impose sales taxes on Net shopping, and being able to levy new monthly taxes on DSL and other Internet-service connections. One senator is even predicting taxes on e-mail.

Pro-tax advocates this week advanced a flurry of proposals pushing in that direction. A bill was introduced that would usher in mandatory sales tax collection for Internet purchases. Then, during a House of Representatives hearing the same day, politicians weighed whether to let a temporary ban on Net access taxes lapse when it expires on November 1. A House backer of another pro-sales tax bill said to expect a final version by July.

The response to the moves in CNET News.com's TalkBack forum was overwhelmingly negative, mostly along antitax convictions. However, some readers took a bigger-picture approach to the situation.

"Half the reason the Internet has become so successful is because the government has had little involvement," wrote one reader to the forum.

The U.S. Congress is also poised to create a set of massive new government databases that all employers must use to investigate the immigration status of current and future employees or face stiff penalties. The so-called Employment Eligibility Verification System would be established as part of a bill that senators began debating on Monday. The procedure that is likely to continue through June and would represent the most extensive rewrite of immigration and visa laws in a generation.

Because anyone who fails a database check would be out of a job, the proposed database already has drawn comparisons with the "no-fly list" and is being criticized by civil libertarians and business groups.

All employers--at least 7 million, according to the U.S. Chamber of Commerce--would be required to verify identity documents provided by both existing employees and potential hires, the legislation says. The data, including Social Security numbers, would be provided to Homeland Security, on penalty of perjury, and the government databases would provide a work authorization confirmation within three business days.

Crime and punishment
In their third effort to enact a federal law targeting spyware, members of the U.S. House of Representatives overwhelmingly approved criminal penalties aimed at anyone implanting certain types of malicious software on computers. The bill, called the Internet Spyware Prevention Act, or I-Spy for short, punishes anyone who intentionally causes software "to be copied onto" a computer--and damages it or steals personal information--with fines and up to five years in prison.

Among other things, the I-Spy Act attempts to make it unlawful to engage in various means of "taking control" of a user's computer, to collect personally identifiable information through keystroke loggers, and to modify a user's Internet settings, such as the browser's home page. It also includes a broad prohibition on collecting information about users or their behavior without notice and explicit consent.

In a reversal, MySpace.com unveiled a plan for cooperating with requests from state attorneys general for data pertaining to registered sex offenders. MySpace initially asserted it was legally unable to comply with the requests set forth in a letter sent earlier this month from the attorneys general of eight states. It appears, however, that an accord was struck late last week.

According to a statement from the company, MySpace will provide the Multi-State Attorney General Executive Committee with data from Sentinel Safe, the database of information on registered sex offenders that the company has compiled through its partnership with identity verification firm Sentinel Tech Holding.

Sentinel Safe, which contains data aggregated from state registries, has been in the works since late last year and was officially deployed May 2. So far, the software has flagged and deleted about 7,000 registered sex offenders from MySpace's user base of around 180 million profiles,

Meanwhile, a Michigan man who used a coffee shop's unsecured Wi-Fi to check his e-mail from his car could have faced up to five years in prison. Each day around lunch time, Sam Peterson would drive to the local coffee shop, park his car and--without actually entering the coffee shop--check his e-mail and surf the Net.

His ritual raised the suspicions of the village police, who approached him and asked what he was doing. Peterson, probably not realizing that his actions constituted a crime, freely admitted what he was doing.

However, Peterson won't be going to prison for piggybacking. Because he has no prior record, Peterson will have to pay a $400 fine and do 40 hours of community service.

Selling PCs
Dell is adding a new dimension to its sales strategy, but it's not yet clear if this move will get the company back on track. Since its beginning, Dell has prided itself on its direct-to-consumers sales model, but the company now plans to begin selling two of its Dimension desktop models in more than 3,000 Wal-Mart stores beginning June 10. Though it's a significant change of strategy, it does not mean Dell is abandoning its direct sales model. And it's not a completely unexpected move. Founder and Chief Executive Michael Dell made more waves in the retail community when he told Computer Reseller News in an interview that the company could be expanding into stores.

Dell also began selling three models of PCs with Ubuntu Linux preinstalled. The move fulfills a schedule the company committed to earlier this month. Dell announced the Linux PC plan after being inundated with requests from potential customers. The Round Rock, Texas-based company has been trying to engage with customers as part of an effort to restore its flagging competitiveness.

Do operating systems sell PCs? Microsoft Chairman Bill Gates trumpeted the fact that the company has sold 40 million copies of Vista since the operating system hit the market, but does that figure mean the operating system is boosting PCs sales?

When Microsoft releases a new operating system, it becomes the default on nearly all machines sold at retail stores. So if consumers want a new PC, they basically get Vista. That makes it tough to gauge whether Microsoft's latest creation is actually spurring people to buy new PCs.

Market researcher In-Stat issued a report saying Vista is not having a major impact on the PC market. The firm said some people delayed purchases last year to wait for the new operating system, a move that added some sales to this year, but that the software is not leading others to speed up their purchases of new machines.

Also of note
Facebook is finally opening up to third-party software developers--a move that comes three years after rival MySpace jumped to a staggering lead in social networking largely by throwing the doors open to outside services...A group of Carnegie Mellon University programmers launched a service called ReCaptcha that can help cut down on spam while letting people digitize books...Google has invested $3.9 million in a biotech start-up co-founded by the wife of Google co-founder Sergey Brin, according to a filing with the Securities and Exchange Commission.