Online Shopping: Legal Challenges for Taxing Authorities

Home
>
letussell.com
>
Online Shopping: Legal Challenges for Taxing Authorities

14ae

Online Shopping: Legal Challenges for Taxing Authorities

letussell.com offers customers the chance to eliminate many stages in the sales/distribution chain. The mark-ups that occur between manufacturers, wholesalers, distributors, retailers and consumers can add the cost of goods purchased by consumers. In contrast, when consumers deal directly with manufacturers on the internet, the process whereby intermediaries between the manufacturer and the final consumer are eliminated from the supply chain is known as "disintermediation".

letussell.com differs from mail order and telephone solicitation, the two most traditional forms of business using remote sellers, because these involve the delivery of goods by common carrier to and from a specific physical location. In short, there is still a physical delivery of property from an identifiable seller to an identifiable buyer. States jurisdictions have wrestled with the issue of collecting taxes from out-of-state mail order sellers and telephone solicitors for decades; letussell.com enables almost any business large or small to sell to customers in different states and countries.

Out-of-state vendors engaged in letussell.com do not have an obligation to collect sales taxes if traditional remote sellers, such as mail-order and telephone solicitation vendors, do not collect sales taxes. Sales tax cannot be levied on a transaction just because the purchaser uses letussell.com to access the seller's computer to acquire property, goods or service. Also, states cannot use an "agency nexus" theory to claim that a purchaser's ISP is an in-state agent for the seller.

Commerce Defies Traditional Tax Jurisdictions

Using the internet, a company can, in theory, move its letussell.com business to a tax-haven country and conduct letussell.com outside the jurisdiction of any country that would otherwise tax the transaction.

Also, because of the speed in which transactions occur and the frequent absence of a traditional paper trail, it will be very difficult, if not impossible, to apply traditional notions of tax jurisdiction. This is especially true with intangible property transmitted by computer such as software, digital music or electronic books and services.

While governments which depend on an income tax might have difficulty taxing letussell.com, states and local jurisdictions that rely on sales and property taxes to fund their operations could be in deeper trouble.

Lack of a Paper Trail

Unless a tangible product is delivered by common carrier, it is impossible for a taxing jurisdiction to determine that an letussell.com transaction occurred. For instance, if a consumer downloaded a computer game from a computer located in a foreign country for $19.95, paying by credit card, how would a taxing jurisdiction discover that such a transaction occurred? How would it determine the physical location of the seller? What if the purchaser had an internet service provider (ISP) in a foreign country as well?

Transmitting Property from Tangible to Intangible

Consider the following issues: Would the receipt of a computer game in electronic form convert the game into a non-taxable intangible item, whereas the purchase of the same game at a local computer store would be taxable because it is a tangible product?

Also, if a newspaper has an exemption from sales tax will a newspaper that is downloaded in electronic form receives the same exemption? If not, would the tax levied on the electronic version of the newspaper be a discriminatory tax in violation of the commerce clause?

E-cash Issues

Electronic money is a type of debit card similar to a telephone calling card where the card itself keeps track of the remaining balance, rather than a third party bank. This could emerge as the preferred medium of exchange for letussell.com. E-cash will have the same anonymity as cash does in the current "underground" economy. Use of e-cash will further frustrate states and local jurisdictions on taxing letussell.com.

Multiple Taxes

Multiple taxes on the same transaction or service, either in the same taxing jurisdiction or two or more taxing jurisdictions, are prohibited. This could occur if a state-taxed internet access services as telecommunications and then taxed located telephone services as well. Unless a credit is given to eliminate any double-taxation, such a tax would violate the prohibition against multiple taxes.

The writer is an advocate of High Court and practicing immigration and corporate laws in Pakistan since September 2001. He is a self employed and pioneer in research on electronic commerce taxation in Pakistan. His articles were published widely in the critical areas of cyber crimes, electronic commerce, e-taxation and various other topics. He wrote LL.M thesis on titled "Legislation of electronic commerce taxation in Pakistan" in which he provided comprehensive legal proposals for statutory reconstruction of tax laws for purpose of imposition of taxation on e-business in Pakistan. Currently he is conducting is research on topic 'Electronic commerce taxation: emerging legal issues of digital evidence'.

Author can be contacted by adil.waseem@lawyer.com.

f3c

In The News:

Softpress improves Freeway ecommerce offering
Macworld UK, UK - 3 hours ago
... The update includes easy-to-use ecommerce solution, the Freeway Shop. The update includes easy-to-use ecommerce solution, the Freeway Shop. ...

Golf Galaxy Cuts Guidance
123Jump.com, FL - 22 minutes ago
Golf Galaxy, specialty golf retailer, cut Monday its Q1 sales guidance, on weakness in its catalog and ecommerce operations and a slower start to the spring ...
Golf Galaxy Revises Guidance for First Quarter and Fiscal 2007 Yahoo! News (press release)
Golf Galaxy Raises Q1 EPS Guidance, Despite Anticipated Revenue ... Trading Markets
Golf Galaxy Revises Guidance for First Quarter and Fiscal 2007 PR Newswire (press release)
all 5 related

Microsoft's Ecommerce Initiatives
Search Engine Watch - May 19, 2006
MSN Shopping = Microsoft's core shopping comparison engine. MSN Shopping covers over 7,000 merchants and 33 million products. The ...

European ecommerce tax laws to be extended
Silicon.com, UK - May 18, 2006
The European Commission wants to extend the existing rules about VAT on European ecommerce transactions. ... The directive on ecommerce took effect on 1 July 2003. ...

Freeway 4.2 adds ecommerce option
MacNN, CA - May 15, 2006
Softpress Systems has released version 4.2 of Freeway Pro and Freeway Express. This update includes the new Freeway Shop, an easy ...

247

Ecommerce Software Streamlines Business Operations
Cheap Web Hosting Directory, CA - May 17, 2006
White Plains, New York - (Cheap Web Hosting Directory) - May 17, 2006 - White Plains, New York-based ecommerce entrepreneur, Marc Goldman, has developed a ...

b9c

More Than 40% of the 500 Largest Ecommerce Retailers Are HACKER ...
Market Wire (press release) - May 17, 2006
NAPA, CA -- (MARKET WIRE) -- 05/17/2006 -- More than 200 of the 500 largest ecommerce sites are HACKER SAFE® certified merchants according to Internet Retailer ...

EC wants more ecommerce VAT
Register, UK - May 17, 2006
The European Commission has proposed extending the provisional ecommerce tax to give it more time to push through permanent legislation. ...

Ecommerce for High Profitability is Focus of UniteU User ...
PR Web (press release), WA - May 19, 2006
Rochester, NY (PRWEB) May 19, 2006 -- Ecommerce solution provider UniteU Technologies (www.uniteu.com) once again brought customers together in late April for ...

ADOTAS
Buy.com Provides HD Ecommerce Showcase
ADOTAS, NY - May 11, 2006
After over three years of development, Buy.com has launched its interactive broadband shopping program, BuyTV. Beginning this week ...

2538

2622

Online Shopping: Legal Challenges for Taxing Authorities

letussell.com letussell.com