Wilmington sued by sweepstakes game makers (Wilmington Star News)
Wilmington is one of five cities named in a lawsuit aiming to abolish local privilege fees on sweepstakes businesses and machines.
Two out-of-state software companies filed the suit in Burke County Superior Court late last week seeking to prohibit cities from charging fees on sweepstakes parlors. They also seek an injunction to prohibit the cities from collecting privilege fees currently owed by the businesses.
The other defendants are the cities of Fayetteville, Lumberton, Pembroke and Morganton.
Each city charges privilege fees for businesses that operate sweepstakes games. Wilmington charges a semi-annual fee of $1,500 per machine, or $1,000 per machine for parlors that close between 11 p.m. and 8 a.m., said Carolyn Johnson, Wilmington city attorney.
City Council decided to enact the fees earlier this year as the businesses began to spread rapidly throughout the city.
According to the suit, the tax “schemes” enacted by Wilmington and the other cities are invalid and should be struck down because a federal law, the Internet Tax Freedom Act, doesn’t allow taxes on any means of Internet access.
The plaintiffs are International Internet Technologies, of Oklahoma, and Hest Technologies, of Texas. Both license software for use at Internet cafes, business centers and other locations in North Carolina and other states. Customers use Internet cafes, or sweepstakes parlors, to buy Internet time, through which they can play sweepstakes games for cash or prizes.
Johnson said Tuesday morning that the city received the lawsuit on Friday and that she is still reviewing it.
“We will discuss it with the attorneys for the other names co-defendants and will respond accordingly,” she said.
Included in the lawsuit is an affidavit from Anthony Parker, a Florida resident and president of Cyber World Inc., which provides equipment for Internet cafes in locations throughout North Carolina, including Cyberspot on Van Campen Boulevard in Wilmington.
Cyber World uses software licensed from International Internet Technologies to allow Cyberspot to sell Internet access and conduct sweepstakes games, according to the affidavit.
Wilmington is requiring Cyberspot to pay a semi-annual tax of $1,500 per computer terminal in the café, which amounts to $75,000.
But if required to pay the tax, Cyberspot couldn’t stay in business “because the semi-annual tax is excessively high in proportion to its revenue from Internet café customers,” the affidavit states.
Read the complaint. Read a brief in support of the motion.
by Pat Gannon
August 10th, 2010 11:24am
