According to this story on WXII's site the Winston-Salem city council is considering a new set of fees for Internet cafes. From the story:
The city of Winston-Salem could stand to generate more than a $500,000 if City Council members approve new taxes on Internet cafes.
The City Council has proposed a $2,500 license fee and a fee of $500 per machine for the nearly 50 new locations operating inside the city. Currently, the businesses pay no taxes to the city or state.
"We're getting no revenues from these very rapidly growing businesses that are in our communities," Winston-Salem Mayor Allen Joines said. "Our budget is very difficult right now, so any revenue enhancement we can come up with that will not really impact a business, we're trying to look at. We believe these are very lucrative businesses and could easily afford this fee we are proposing."
I haven't seen the actual proposal so I can't speak to the specifics, but what worries me about this is the definition of "Internet cafe". If the definition is too loose then here are some of the businesses that could get sucked into this:
- Any business that charges for wi-fi access – for instance Starbucks – could conceivably be charged for each person that pays to access the network.
- Hotels that charge for internet access in rooms, or that provide internet access on computers in their business centers and lobbies.
- Even coffee shops that provide free wi-fi could get hit for $3,000 – $2,500 for the fee and $500 for the computer/router. They aren't making a dime off the wi-fi, but if the proposal isn't worded correctly they could get hit with the fee regardless.
It sounds to me like the City Council is trying to target a specific type of business (essentially legal gambling parlors), but sometimes when fees or ordinances are adopted to target specific types of businesses then other "innocent" businesses get caught in the crossfire.
I can guarantee you this: if every company that offers free wi-fi learns that it's going to be hit with a $2,500 fee then you can bet your bottom dollar that free wi-fi will disappear in Winston-Salem. Paid wi-fi might survive, but you'd have to sell a LOT of daily access passes to justify it. As for hotels that charge $15.95 a night for internet access in your room? I'd like nothing better than to say "Hit 'em with your best shot!" since that's one of the most annoying business practices in the hospitality sector, but if you do they'll just pass it along as a higher daily rate.
That Winston-Salem is looking for additional sources of revenue is not surprising, and neither is the fact that the targeted industry is a "sin" business, but let's hope the City Council is smart enough not to tax itself. After all, this is the city that just a few years proudly unveiled its own free wi-fi on Fourth Street. The description of the free wi-fi service from the city's own website sounds to me suspiciously like what the rest of the world considers an Internet cafe:
Fourth Street Wireless Internet access is a free service provided by the City of Winston-Salem. Citizens in restaurants and businesses along Fourth Street can access the Internet through high-speed connections and enjoy browsing the Web, checking and sending e-mail, or chatting through instant messaging services.
Like I said, I just hope the City Council is very careful with this thing.
One last thought: Can anyone think of other fees that are targeted at specific industries? I'm sure there are some out there, but my fatigue-fogged mind isn't hitting on any right now.
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Befuddled 
It reminds me of the Amazon/nexus tax that NC imposed. By attempting to get their slice of the pie, they destroyed the entire pie. NC not only failed to gain sales tax revenue, they lost income tax revenue. The city could fall victim in a very similar way.
Coffee shops like Krankies provide free wi-fi, but many customers only buy one cup of coffee for several hours of Internet access. If they are hit with this new license fee, they would probably lose a significant portion of their business. They rewired their entire coffee shop so that every table is near an electrical outlet. The loss of wi-fi customers could cost them the ability to recoup that capital investment. With the narrow operating margins of most coffee shops, that could put them out of business. Those are the types of things government seems to forget.
I’m not sure if the $2500 fee would really hurt. I like the wi-fi at Panera. $2500, over say 5 years is less than $2/day – less than Starbucks is charging for WiFi. I think Panera makes up for the lost revenue of not charging for wi-fi by increased sales of their food. They know the wi-fi is a loss, and I don’t think an additional loss would cause them to stop offering the service, but I could be wrong.
You should be able to craft the language by specifying a terminal connected by wire, whose primary use is as a direct access terminal (so a server acting as a router would be exempt). It should not be that hard.
Even though the fee might not kill free wi-fi, taxing free wi-fi is a terrible idea.
Liquor licenses?
I agree leatherwing. As I said I havent seen the proposed fee so I dont know the specifics, and I think they could craft language that would expressly target the video gaming parlors, but thats dangerous territory and if the language isnt just right the fee could definitely hit businesses it isnt intended to hit. It will definitely be interesting to see how this works out.
Jim, to your first point when I read the article it sounded to me like this would be an annual fee so the $2,500 +$500/computer would be a yearly expense and I think that would definitely hurt in the restaurant biz where margins are very slim. If you have just one computer acting as a hub thats $3,000/year or $250/month. I agree that it wouldnt deter a Starbucks, and probably not a Panera, but thats probably a bitter pill for an independent like Krankies. I also agree with you that the language could be crafted to meet the intention of the city council, but its not a given that theyll do it.
Liquor licenses are a great example. Thanks!
I think how you get away with liquor licenses is that a lot of people don’t want them issued at all, and there could be some harm with dealing alcohol with no restrictions.
As for Panera, the one we frequent most is actually in Clemmons 🙂 The way you describe it, it would approach the deterrent level for not just locals like Krankies, but the Paneras too.
The internet cafe regulation/taxation issue isn’t limited to around here:
http://www2.tbo.com/content/2010/apr/15/gaming-cafes-would-be-legalized-regulated-under-pr/news-scitech/
Anytime a law is passed for a specific purpose, there’s danger that it will eventually be used for other purposes. Anytime there’s money involved, politicians seem to get tunnel vision and fail to look at the ramifications. I too haven’t seen the proposed fee, but even a well worded fee that only targets the gaming parlors can be expanded to target other businesses in the future.