State E-Mail Taxes Begin to Bite

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The two states that have imposed an “e-mail tax” on legitimate senders of requested e-mail communications, as I described in this space last week, start to collect the tax this month.

Michigan’s law went into effect on Aug. 1, while Utah’s law takes effect on Aug. 15. In both cases, these dates are just 30 days after those states started inviting people to add their e-mail addresses to “Do Not Contact” lists. In most cases, as I explain below, it’s a felony — complete with hefty fines and prison terms — for a legitimate company to send e-mail messages to these addresses, even if the recipient requested and signed up for the communications.

Let me quickly sum up the new laws. We’ll then move on to the impact they’ll have on business-to-consumer e-mails.

A Tax On Businesses That Try To Comply

Like most state legislation, the Michigan and Utah laws have lofty-sounding titles. The Michigan act refers to itself as the “Michigan Children’s Protection Registry Act.” The texts of the laws, however, have little to do with this kid-friendly hype.

Since the two laws differ in their details, I’ll use the Michigan law here for illustration. That state makes it a felony to send any e-mail to an address on its Do Not Contact registry “if the primary purpose of the message is to, directly or indirectly, advertise or otherwise link to a message that advertises a product or service that a minor is prohibited by law from purchasing, viewing, possessing, participating in, or otherwise receiving.”

This wording is extremely vague and never mentions stopping spam, which is the law’s primary selling point. If it did mention spam, the law would obviously violate the U.S. CAN-SPAM Act, which prohibits individual states from regulating spam. The law also never mentions preventing adult-entertainment ads, which are presumably the target of the legislation’s sponsors. If it did mention adult entertainment, such a law would clearly contradict several U.S. Supreme Court rulings.

To get around the inconvenience of Congress and the Supreme Court, the two states’ laws are remarkably obtuse. I believe the primary effect of this vagueness will be millions of dollars in fees flowing into each jurisdiction as businesses try to avoid being sued. Under the laws, any resident on a registry can sue, even if the recipient personally subscribed to an affected company’s e-mail newsletter.

Legitimate publishers, therefore, may decide to “clean” their e-mail lists every 30 days, as required by the laws. Michigan is currently charging $7.00 per month per 1,000 addresses — $84.00 per year per 1,000 addresses — for a business to check its list against the state’s registry. If only 12 states adopt this revenue source, the fees would total $1,008 per year per 1,000 addresses. That’s more than $1 per year for each subscriber to your supposedly “free” e-mail newsletter. Think you want to pay that?

A Fee On Legitimate Senders, Not A Bar To Spam

The Michigan and Utah laws will certainly have no effect on spam, which is profitable, outsourced, and well entrenched. Instead, the laws will affect only legitimate senders of e-mail, and very broadly at that:

• Anyone in any state or country can add an e-mail address to the Do Not Contact registries, since the states perform no address verification. (Only residents could sue, but anyone can get on the lists.)

• Anyone of any age can register, because (despite the fluff about “child protection”) the states do nothing to verify anyone’s age.

• There’s no right for consumers to file class-action lawsuits against spammers, a step that might actually be effective against companies advertising in unsolicited bulk e-mail.

• There’s no exception for permission-based e-mails that recipients signed up for (remember, this isn’t about stopping spam).

As stated earlier, the Michigan law prohibits messages that link to any site advertising anything minors may not “purchase” or “possess.” That covers an enormous range of products and services. Can you really be sure that your company’s e-mails will never link to sites that carry ads for any of the following:

• R-rated videos, which are sold by, among many others, Amazon.com;
• Car-rental agencies, since kids can’t legally drive;
• Prescription drugs, such as those legally sold by Drugstore.com;
• Wineries, which the Supreme Court recently ruled can offer products across state lines;
• Sparklers, which may be legal fireworks in your state but cannot be sold to minors;
• Lotteries, even legal state-run games, which minors, of course, cannot buy into;
• Mortgage and financial products, which minors cannot sign up for;
• Abortion services, access to which varies widely in different states.

Almost any business e-mail newsletter will eventually link to some site that might carry such ads. The laws are absurd on their face, but a violation is a felony, and don’t forget — a single individual who signs up for your newsletter can drag you into court.

Legitimate Publishers Start To Wake Up

People in the publishing business have, indeed, started to take note of how broadly the new state laws are worded.

A teleseminar on the two states’ laws was held last month by Anne Mitchell, an attorney and the president of the nonprofit Institute for Spam and Internet Public Policy (ISIPP). During the seminar, which I covered as a press observer, Mitchell noted that the laws could even apply to an e-mail newsletter that linked to a site containing a single credit-card ad.

If a minor received an e-mail newsletter that linked to such a site, and the minor got a card and “runs up $100,000 in charges,” Mitchell said during the seminar, “a Michigan parent could definitely sue the sender of the e-mail.” Yes, that means you.

Joining Mitchell during the teleseminar was Tom Kulzer, the CEO of Aweber Communications, a large e-mail publishing service. After describing the reach of the state laws, Kulzer concluded, “The effort to make sure you don’t link to any of the forbidden material is probably greater than the cost of complying.”

If more states impose the fees that Michigan has, however, the cost of complying could cripple legitimate e-mail publishers. A free e-mail newsletter with 100,000 subscribers would have to pay Michigan $8,400 a year. If a dozen states adopt the same laws, how many free newsletters do you think can afford fees of more than $100,000 annually? Oh, and by the way, the Michigan law applies not only to e-mail, but also to any electronic message, including instant messaging and more.

In my opinion, U.S. publishers (and foreign publishers that are liable due to a “presence” in the U.S.) would find it much cheaper to fight than to comply.

Conclusion

The Michigan and Utah laws didn’t just fall from the sky. They were lobbied into existence. Not surprisingly, some of those lobbying for the laws have a lot to gain from them. Next week, I’ll identify them and exactly how they plan to duplicate these laws in several other states.