Field Notes from Olympia: Legislating virtual worlds

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Laws about taxing or not taxing online sales are an example of a cultural invention that dictates the way we view and behave in the "real" world.

On February 6th I watched the House Finance Committee consider two bills that would reshape the state tax code governing digital transactions and the delivery of “broadcast” content.

The first bill (HB 1678) proposed changes relating to the cultural concept of “nexus,” a bit of law that determines whether we pay state sales tax when we shop online. A prior court ruling required that we pay taxes only if the seller operates a “brick and mortar” store in the state where we, the shopper, “reside.” To an anthropologist, this idea of “nexus” — or what can and can't be taxed — is an example of a cultural invention; in this case, one that’s costing states billions of dollars in lost sales tax revenue.

Culture builds virtual worlds of belief so powerful that people experience these beliefs not as culture, but as objective reality itself. Take gender roles, for example, where certain attributes are “naturally” male or female; or social manners (bathing regularly is expected); or food preferences (eating cockroaches just feels wrong). So when legislatures or courts create notions of “nexus”, their inventions become concrete cultural realities.

In making laws and setting policy, legislators create important cultural categories that have far-reaching, day-to-day significance in the lives of their constituents. Cognitive anthropologists study how these kinds of cultural beliefs and the categories shape our experience of the world in profound ways that we are seldom aware of.

In the case of the debate on HB1678, for example, legislators mapped virtual spaces, virtual transactions and the borders of virtual realities in ways that dictate the amount and flow of cash in our non-virtual world. Their invention of “nexus” spawned a world where billions of dollars in potential revenue disappeared.

“Nexus” seems straightforward until we consider the definition of “reside” in a world where we increasingly occupy both physical and virtual spaces. Reside takes on different meanings depending on whether one defines it as the billing address or the physical location of the customer while making the purchase.

While these distinctions may seem somewhat trivial, they highlight a cultural shift: In a world where people increasingly reside in both physical and virtual space, once clear cut notions of location are now culturally reconstructed and codified by legislation. (I am in Lacey, Washington, writing these words on an encrypted cloud account located in Switzerland, so where am I actually creating this document?)

Discussion of a second bill (HB 1796) raised similar anthropological questions. This measure reconfigures shifts (in ways that initially appeared unclear to me, and apparently many legislators) in tax rates for broadcast content originating either locally or out of state. In a world where national and international media corporations increasingly distribute content to “local” radio or TV stations and internet sites, defining “local” creates new cultural fictions.

Legislators discussed the virtual spaces where online and televised content is generated and consumed as if these were concrete physical spaces. As discussions developed, committee members were soon searching for points of reference (of great legal importance) in this virtual landscape.

“When you watch Sports Center,” asked Rep. Chris Reykdal, one of the bill’s co-sponsors, “are you getting a physical product, or are you getting a service? These things matter at the end of the day.” Especially when you are drafting laws that seek to tax each of these experiences differently. Perhaps virtual realities become real once we tax them.

When Washington legislators introduced B &O taxes back in 1935, they were taxing an economic system that was producing physical things: timber, airplanes, apples, paper products. In the last three-quarters of a century our economy has shifted from manufacturing physical products to providing services and selling goods – often in the virtual marketplace.

As commerce becomes more virtual, so do cultural notions of “property.” This shift has given rise to new cultural concepts of “intellectual property,” where images, music, ideas, etc. are licensed, and unauthorized uses are legally prosecuted. In response, the state attempts to adapt its reach for revenue, although after listening to lawmakers debate the issue it is difficult to tell who stands to gain or lose with any proposed legislation.

From their numerous questions and furrowed brows, it did not appear that many Finance Committee members understood the details of HB 1796 any better than I did. Yet the cultural categories the legislature eventually imposes on these new virtual relationships will have significant tax implications; a point not lost on the Motion Picture Association lobbyist who had flown in from Hollywood to support HB 1796, which promises lower taxes for corporate content providers like the studios she represents.

And herein lies an apparent anthropological truth about politics: It is the presence and testimony of corporate lobbyists that clarifies who will benefit from pending legislation.


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About the Authors & Contributors

David Price

David Price

David Price is Professor of Anthropology in the Department of Society and Social Justice at Saint Martin’s University. He has conducted archaeological and cultural anthropological fieldwork in the Pacific Northwest and Middle East, and studies interactions between anthropologists and military and intelligence agencies. His most recent book is "Weaponizing Anthropology: Social Science in Service of the Militarized State" (CounterPunch Books 2011).