Gambling Operators Sue Cities

Special Report - August 13, 2010
Two software companies who develop Internet sweepstakes gambling games are suing five North Carolina municipalities for implementing licensing fees on Internet sweepstakes gambling business operations in alleged violation of the Internet Tax Freedom Act. International Internet Technologies Inc. and Hest Technologies Inc. filed the lawsuit against Fayetteville, Lumberton, Pembroke, Morganton, and Wilmington in Burke County Superior Court on August 6. The suit argues that the federal Act from 1998 prohibits local governments from taxing methods or means of Internet access. The complaint says the "sweepstakes cafes" offer many customers their only access to “email, view social networking Web sites and look for jobs.”

According to the Fayetteville Observer, Adam Charnes, the Winston-Salem attorney representing the two companies, says these five municipalities were chosen because they have some of the highest privilege fees in the state. Between owner licenses per location of $2,000 to $5,000 and fees of $2,500 to $3,000 per computer terminal, some businesses could pay over $100,000 to local governments. Those fees would be due September 1. The recently passed ban on video sweepstakes gambling outlaws the games on December 1, 2010.

Both companies are also challenging the gambling ban in court by attempting to amend a Guilford County lawsuit over whether the older video poker ban includes sweepstakes gambling businesses. The amendment to the suit addresses the legality of the new ban on sweepstakes gambling. That suit argues that the ban represents a violation of First Amendment free speech protections.

Related article:
Perdue Signs Gambling Ban Bill - July 22, 2010

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