Tuesday, September 2, 2008

Newegg Stops Collecting Sales Tax for NY

The Return of Tax-Free Online Shopping in NY?
For online retailers cranky about a controversial new law in New York requiring them to collect sales tax on purchases shipped to that state, Newegg has an solution: don't do it.

Newegg, a Web-only merchant that sells computers, accessories and consumer electronics products, has reversed its policy of collecting sales tax on New York purchases, the company confirmed.

When the law took effect June 1, Newegg began collecting the tax like other retailers. It was not immediately clear what prompted the change, and company spokespeople did not respond to requests for comment.

The tax provision sits in a murky legal area that online retailers and some tax-policy analysts say places an unreasonable burden on interstate commerce. Amazon, which is collecting the tax, has filed a lawsuit against New York, charging that the measure is "invalid, illegal and unconstitutional."

The most relevant precedent is a 1992 Supreme Court ruling involving a mail-order company that concluded that a business must have a physical presence in a state in order to be responsible for collecting sales tax on purchases shipped there. Under the new law, New York is requiring online retailers that derive sales through referrals from affiliates who live in the state to collect the tax, even if they have no employees or operations there.

Like many online retailers, Newegg maintains an affiliate program. Web site owners who post banner ads and links promoting Newegg earn commissions of 1 percent to 2 percent of the sales they refer.

The new law led one store, Overstock.com, to drop its affiliate program in New York. Overstock has joined Amazon in its legal dispute against the state.

New York estimates that the provision will generate $50 million in revenue for the state in the fiscal year. Tax experts look to other cash-strapped states to adopt similar measures if the New York law holds up in court.

Newegg collects sales tax on purchases shipped to California, where it is headquartered, and New Jersey and Tennessee, where it maintains operations.

On the policy page of its Web site, Newegg states that, "Sales tax is only required for orders shipping into states where we have or may have nexus for state tax purposes under applicable laws."

When companies don't collect sales taxes on out-of-state purchases, the consumer is still responsible for paying it in the form of a use tax that is reported on the state income tax return. Most people either don't know about that rule or ignore it.

This article appears courtesy of InternetNews.com, where it ran Aug. 25, 2008.

Convenience and Security Boost Payment Card Industry

The Green Sheet 2.0 :: Newswire
With card companies offering benefits such as redeemable reward points, and cash-back offers, customers are being beguiled into using their cards for payment of various products and services. Cards represent a fast, secure and convenient means of payment for goods and services purchased by customers.

Apart from replacing the cumbersome and often risky paper-based transaction system, electronic payments have boosted business prospects of organizations worldwide. By using electronic systems, business organizations and customers are now able to conduct safe and hassle-free transactions. With the rapid expansion of point-of-sale (POS) networks and online markets, electronic payment systems are becoming accessible to increased number of wholesale and retail outlets across the world. Growing adoption of payment cards has also led to a decline in the direct and indirect costs associated with plastic payment cards.

Contactless technology is expected to be a major driving force in the global payment cards market. As compared to conventional magnetic stripe cards, contactless payment cards offer improved security, ensure faster transaction, and eliminate the need for user authentication measures such as signatures. Reduction in the cost of development of contactless technology-based cards is expected to drive up the market for contactless debit cards and RFID smart cards. However, the absence of a large user base for such cards prevents merchants/businesses/retailers from adapting their POS systems to the technology.

Payment Cards: A Global Outlook

Types of payment cards in use across the world include credit cards, debit cards, charge cards, commercial cards, and cash/prepaid cards. Credit cards have emerged as the world's most popular form of borrowing. With Internet emerging as a major medium for purchase of goods and services, debit and credit cards are being widely utilized. Credit cards is a relatively mature market and presently faces testing times with consumers shifting towards debit cards. However, credit card usage in countries such as the United States, UK and France is anticipated to grow. Another form of payment card that is gaining popularity among consumers is the 'top up' card or prepaid card, which is targeted chiefly at consumers without bank accounts.

Debit card transactions across the world are growing rapidly, driven by consumer shift from credit cards to debit and prepaid cards. This shift is mainly attributed to the fact that debit card transactions do not result in any debt accumulation, making it extremely attractive among consumers wanting to keep a check on their expenses. Government agencies are also using debit cards to make payments for medical and health insurance reimbursements. Debit cards offer attractive prospects for financial institutions, which are evolving new strategies to ensure their higher uptake among consumers. Reward programs and cash-back offers are some of the programs offered by issuers to lure prospective customers into using their cards.

Smart cards are being promoted as the future of secure payment transactions. Incorporating a microprocessor chip, smart cards are considered ideal for user identification and authentication. Smart cards find use in ID programs, network security, and transportation sectors. With growing number of consumers holding smart cards, local merchants are expected to upgrade their point-of-sale terminals for acceptance of these cards. This would subsequently promote conversion of magnetic stripe-based credit and debit cards to chip-based smart technology.

Card fraud is a major concern facing the payment cards industry. Card fraud, identity theft, and card skimming are some of the challenges faced by this industry. However, the development of advanced technologies such as RFID, and biometric authentication are expected to facilitate card issuers to effectively deal with card fraud.

The report titled "Payment Cards: A Global Outlook", published by Global Industry Analysts Inc, provides statistical anecdotes, market briefs, and concise summaries of research findings. The report provides a recapitulation of recent mergers, acquisitions, and other noteworthy strategic corporate developments. The report also offers a prelude to major regional markets, providing the reader with a macro level understanding of markets. Major markets discussed include United States, Canada, Japan, Europe, Austria, Belgium, Germany, Hungary, Italy, Switzerland, UK, China, Hong Kong, Malaysia, South Korea, Argentina, Brazil, and Mexico, among others. The report also includes an indexed, easy-to-refer, fact-finder directory listing the addresses, and contact details of 248 companies worldwide.

For more details about this research report, please visit

India - Debit,Credit a Hit/Scores Big - RBI

Mumbai: With a larger number of banks issuing plastic, and merchant acquisition business also scoring well with the advent of retail, it is no surprise that card transactions, both debit and credit, were up by more than 42 per cent to Rs70,459 crore during 2007-08, according to the latest data from the Reserve Bank of India (RBI).

The RBI's latest numbers testify that growth in plastic money was much higher than the 24.51 per cent recorded in 2006-07. This is in part on account of the greater adoption of banking technology by the public, and because of banks encouraging the use of cards on account of the lower per-transaction cost.

Besides convenience of not carrying cash, the ramping up of ATM networks for both cash and non-cash transactions, and the proliferation of merchant acquisition points across the country by both new organised retail and traditional retail merchants, card transactions have garnered wider acceptance. Additionally, banks have provided incentives such as cash-back schemes and discounts at certain retailers to popularise the use of plastic money.

The use of debit cards, for banks, also ensures that more cash stays in customer's accounts. Also, the card ensures fewer visits to the branch, as most account functions such as cash deposit / withdrawal, cheque deposit, ordering chequebooks and statements, and even funds transfers can be done via the ATM. Also, it is more cost effective for a bank to let a customer use the card, rather than service him at a branch.

RBI's data indicates that the number of cards issued increased by 46.7 per cent to 88.31 million as of March 2008, compared with 60.17 million at the end of financial year 2006-07.

During 2007-08, the total credit card outstanding rose 43.6 per cent to Rs 5,843 crore. Till May 23 this year, the outstanding shot up by 87 per cent to Rs 12,375 crore. In 2006-07, the value of credit card transactions went up by 22.06 per cent.

Another driver for the adoption of plastic money is the growth of e-commerce and transactions via the Internet. Travel services such as airline and railway tickets are the primary drivers in this segment, and an increase number of people use cards as a payment mechanism for utility services.

Bankers expect debit card usage to surpass credit card usage mainly on account of convenience, which is a primary driver for the adoption of plastic money. Moreover, unlike credit cards, debit cards do not involve any borrowings / loan from the bank, and typically do not need a credit review before they are issued, making them ideally suited to a larger population of the banked public.

Credit, Debit Card Fraud and Skimming Cases Rise

Pictured below is an ATM Machine with a camera placed on what initally appears to be an innocent brochure holder, but in reality, captures PIN numbers of consumers withdrawing cash at the ATM. What isn't shown, is the skimming device, which captures the information off the magnetic stripe and wirelessly sends it to the perpetrators ususally parked in a car with a laptop about a block away. Here's a story from the Ventura County Star reporting on the recent surge in credit and debit card fraud cases around the country.

Some local police are reporting an increase in credit and debit card fraud cases this year, with thieves using high-tech tools to steal confidential financial data from unwary customers at stores, restaurants and gasoline stations.

The number of cases has "really exploded in the last month and a half," said Jim Graham, a detective with the Thousand Oaks Police Department. "There's been a big jump in this from Bakersfield all the way down the coast of Southern California," he said.

Many of the thefts are reported to banks but not police, so exact counts of victims and dollar losses are hard to come by, he said. Authorities estimate worldwide losses to be in the billions of dollars annually.

Thieves have an array of devices to pilfer credit and debit card numbers, including "sniffer" software programs that capture PINs and other sensitive information.

One of the more popular devices being used in Ventura County is a "skimmer," Graham said. The gadget captures information on a card's magnetic strip, which then is cloned to withdraw money out of a person's account at an ATM or to buy merchandise.

Skimming machines were once bigger, but thieves are now making "some the size of a matchbox," Graham said. That makes it easier for thieves to place them on pumps at gasoline stations or at store terminals where shoppers swipe their cards.

Police say thieves return a week or so later to retrieve the skimmers and extract the data inside.
"If you figure they're getting $300 to $400 for every card, it's not hard to see how profitable it can be," Graham said.

It's also a hard-to-solve crime, said Rick Kline, an Oxnard police detective who investigates fraud. "We're solving maybe five out of 100," said Kline. (Editor's Note: Are they actually recruiting people to get into the game?)

While many stores, ATMs and gas stations have video surveillance cameras, "the quality of the videos is often very poor," Kline said. Also, thieves "generally wear a hat" or other disguise, "making it very hard to identify them," he said.

"Most of these crimes are solved when the victim has an idea of who's behind it," Kline said. Susan Nettles of Ojai has yet to find out who stole her debit card information and then used it three times at ATMs in Huntington Beach to withdraw almost $600 from her account, although she thinks she knows where her card was compromised.

"I think it happened at the Cost Plus store in Oxnard," Nettles said. Cost Plus announced in July that the electronic PIN pads at eight of its Southern California stores, including the one in Oxnard, might have been tampered with between February and April. Since then, Cost Plus has made numerous changes to improve security, including replacing some of the PIN pad machines, said spokesman Dan Gagnier.

"The newer machines are a lot harder to tamper with," Gagnier said. The company "wants its customers to feel comfortable using their cards at our stores." Cost Plus also is working closely with credit card companies, banks and law enforcement agencies "to ensure that any of its customers affected by this incident are identified." Nettles filed a police report, something authorities say many victims fail to do. She said she now is leery of using her debit card. "Now I try to use cash when I can," she said.

Thieves aren't the only ones availing themselves of high-tech tools. Credit card companies and banks are increasingly relying on sophisticated software to monitor customer spending habits. The software flags out-of-the-ordinary purchases or payments and alerts authorities. Robert Meyers, a Ventura County supervising deputy district attorney who investigates fraud, said such software has "generated many more cases" for prosecutors. But investigators said victims also should report the crimes to police. For starters, it would give investigators a better idea of the scope of the problem, Graham said. "We're able to see if there are patterns," he said, including whether a sizable number of victims might have purchased things at particular stores or places.

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