e-commerce and Taxes

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e-commerce and Taxes

Rasik Sanghvi 

An interesting battle is being fought about the imposition of sales tax on the sales of taxable items sold through the  Internet commerce. On the one side are private organizations representing the interest of private business groups advocating tax free e-commerce. On the other side are the various state and local governments and organizations who are arguing that loss of revenues due to tax free e-commerce will ultimately hurt the citizens in the form of poor service, infrastructure and various safety net provisions.   Basically and conceptually Internet business is not much different from the snail ways and days of mail order business minus speed in which it differs.  The principle of taxability applicable to mail order business can be applied to Internet business as well. But the problem is the omnipresent nature of Internet business. Unlike mail order business requiring some form of solicitation to reach new markets in the beginning, e-businesses are instantly reachable from every corner of the world. The internet business solicits commercial dealings instantly all the time by its very constant presence. With thousands of jurisdictions and tax rates and differences in taxability throughout the country,  it was argued by the private organizations that it would be impossible to collect for and report the taxes to each taxing authority. Fortunately, it is within the grasp of modern technology to provide the programs by using zip codes to determine the jurisdictions, rates and  taxing authorities. The taxability of transactions can be predetermined by the business initially and by update procedures later on. Therefore the concerns of the businesses in that respect can be adequately addressed. If some consensus can be arrived at by both the parties, a commerce clause nightmare of violations of Federal constitution and due process rights involved in taxing foreign (out of state)corporations and concerns about due process in measuring minimum presence in relation to nexus can be put at rest by voluntary accepting the liability of registering, collecting and reporting the taxes for each jurisdiction by the private businesses. The consensus can relieve the businesses about uncertainty associated with the audit - tool used by the different taxing authorities to fight the defense of nexus and less than adequate presence.



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