1 / 17

Taxation on the Internet

Taxation on the Internet. Wolguine Stervil. Introduction. The purpose of the discussion : Explosion of E-Commerce Tax Law before E-Commerce Politics view on Tax Brick and Mortars View Resulted Tax Law. Explosion of E-Commerce.

dalia
Télécharger la présentation

Taxation on the Internet

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Taxation on the Internet Wolguine Stervil

  2. Introduction The purpose of the discussion: Explosion of E-Commerce Tax Law before E-Commerce Politics view on Tax Brick and Mortars View Resulted Tax Law

  3. Explosion of E-Commerce • When the Internet was dreamed up, no one knew how E-commerce was going to blow. • 4th Quarter of 1999 Consumers spent >5.3 billion in sale, 64% was the total retail sale for that quarter • Gartner Group predicts that B2B E-Commerce will exceed 7 trillion in 2004. • Internet Commerce has touched all aspect of business: Technology Infrastructure,B2B,B2C, new business portal,growth and decline of tech stocks, and new marketing strategies

  4. Tax Law before E-Commerce • Online sale caught the eye of business execs, local, federal and state political leaders. • They wanted to know if the Internet should be taxed. • Existing tax law did have the internet in mind. • Internet allows anyone with net access to make purchase from anywhere in the world. • Questions that were being asked: Should the internet be taxed? If yes, then how can we developed a system to make it fair for everyone?

  5. Tax Law B4 E-Commerce Cont. • How can you regulate tax, while continuing to support the growth of the internet? • When is a shoe not a shoe? • How do you tax someone internationally? • To tax or not to tax is the million dollar question

  6. Politics view on Tax • Taxation on anything is the constant political hot potato • State governments want to tap in this new source of revenue to pay for schools, roads and critical infrastructure. • State, local governments and Brick-n-Mortars are pro-tax. • NGA & NRF tried to find ways for the B&M to compete fairly with the dotcomers.

  7. Political View Cont. • 2 issues arose: 1) State officials has the right to collect tax 2) Tax Fairness Laws to make it fair for B&M and dotcom. • The states have the right to collect tax on goods and services within the state • State revenues consist of Property Tax, Individual Income Tax, Corporate Income Tax, and sales and gross receipt taxes.

  8. Political Views Cont. • Forrester Research conducted a study that 13 billions of taxable items was sold online but 20% was tax, as a result of 525 million in tax loss. • Sales and use taxes are charged to the consumer. • It’s the merchant who is required to collect the tax and send it to the states’ authorities

  9. Political View Cont. • This works when the consumer is located in the same state as the vendor or merchant. • Scenario changes when a consumer purchases something from an out-of-state. • The physical presence/nexus requirement is based on 2 important Supreme Court Decisions: The 1967 National Bellas Hess decision and and the 1992 Quill decision

  10. Political View Cont. • The Supreme Court ruled that a state could collect sales and use taxes if the business has a physical presence in the state. • Physical presence can include any office, distribution house, sales office, warehouse, etc, as well as an agent, salesman, or representative to take orders. • If the business did not meet that requirement, then the state could not require the business to collect sales taxes • Due to the complexity of the different state and local sales taxes. • This complexity was seen as a barrier to interstate commerce.

  11. Political View Cont. • To further complicate the issue, in 1998, Congress passed and President Clinton signed into law the Internet Tax Freedom Act (ITFA). • This law imposes a 3-year suspension on new Internet taxation. • States are prohibited from imposing any new taxes on Internet sales exactly at the time when Internet sales are heating up

  12. Brick and Mortars View • Brick-and-mortar business owners are at a disadvantage with Internet businesses. • The brick-and-mortar stores are required to collect sales taxes. • Internet businesses are not required to collect sales taxes. Except when they conduct with consumers in its own state. • Consumers and businesses will opt to make their purchases online, rather than at the brick-and-mortar stores.

  13. Brick & Mortars Cont. • Brick-and-mortar loses and so do the states, which cannot collect the sale taxes. • States also have to contend with another problem: the click-and-mortar trend. • Wal-Mart and K-Mart are Click and Mortars that have created Internet businesses that are separate and distinct from their brick-and-mortar counterparts. • They can take advantage of the Quill decision and avoid sales and use taxes. • Another blow to state tax revenues .

  14. Conclusion..Resulted Tax Law: • The Advisory Commission on Electronic Commerce (ACEC) met for the final time in March 2000 and failed to reach the broad consensus required by Congress. • Advisory Commission recommended to congress the following (which was not adopted): 1)Repealing the 3 percent federal excise tax on telecommunications services. 2) Permanently barring states and local tax jurisdictions from taxing Internet access fees 3) Encouraging states to find a more simplified state sales and use taxation system 4) Extending the suspension on multiple and discriminatory taxes until 2006 .

  15. Conclusion..Resulted Tax Law: • To be continued…..

  16. References: • References 1. “Retail E-Commerce Sales for the Fourth Quarter 1999 Reach $5.3 Billion, Census Bureau Reports.” United States Department of Commerce News, March 2, 2000 http://www.census.gov/mrts/www/current.html • 2. Linda Rosencrance, “Report: Biz-to-Biz E-Commerce Exploding.” InfoWorld, March 24, 2000 http://www.infoworld.com/articles/ic/xml/00/03/24/000324icb2b.xml • 3. Christopher Swope, “With Congress’ Internet Tax Commission deadlocked, governors and mayors are desperately seeking solutions to their e-commerce sales-tax dilemma” http://www.boe.ca.gov/members/dandal/eleccomm/marchissue.htm

  17. References Cont.. • 4.The Internet Tax Fairness Coalition, “Facts about Electronic Commerce and Taxation” http://www.nettaxfairness.org/facts/default.html • 5.Federal "Moratorium" on Internet Commerce Taxes Would Erode State and Local Revenues and Shift Burdens to Lower-Income Households by Micheal Mazerov and Iris J. Lav May 11, 1998 http://www.cbpp.org/512webtax.htm#Summary • 6.Internet Tax http://www.nado.org/legaffair/internet.html • 7.The Future of Internet Taxation, The San Francisco Examiner Newspaper,November 14, 1999, http://www.taxprophet.com/faq/991114.htm • Turban, Lee, King, Chung Electronic Commerce: A Managerial Perspective, Prentice Hall 2002

More Related