The SHo Six-Pack (Part 3 of 6)
Extracting the Pound of Flesh –
Global Taxation and Privacy
There are two major issues related to the Internet on which governments
around the world are likely to attempt to take action during 2000 – taxation
and privacy. Because of the border-less nature of the Internet, these issues
will have global implications posing a plethora of Kafkaesque conundrums to
buyers, sellers and users.
International and domestic tax policies are now focusing on the realization
that billions in potential tax revenue are being, and will continue to be,
lost as a result of the Internet’s ability to dislocate transactions and the
paperless means of consummating those transactions.
Taxing in the Internet environment can come in a number of forms. Taxes can
be applied to the access charge, which is already done in a number of
jurisdictions under the guise of a utility tax; taxes can be applied to
purchases of physical goods made via the Internet; and virtual products
(PDF files, software, etc.) delivered via the Internet can be taxed.
As 1999 closed, the current United States administration, for the first
time, formally opposed proposals to ban the collection of sales taxes on
Internet purchases.
This represented a major move on the government’s part
and may signal the end of the now prevailing mail-order precedent relating
to physical goods delivered through traditional channels, such as U.S. Mail,
UPS and FedEx. Whether sales tax is collected on these sales is determined
by the rules of nexus – if the seller has some sort of physical presence
(nexus), such as a retail store, office or warehouse, in the buyer’s
jurisdiction, the purchase is subject to sales tax. The voices of the
traditional brick-and-mortar retailers are now being raised in support
of collecting existing sales taxes on Internet commerce.
The Internet poses an interesting twist to this rule of nexus – does
having a web site hosted within a particular jurisdiction create nexus
for the seller. Does a web site hosted on a server create physical presence
in the jurisdiction in which the server resides, and is the ISP hosting the
site a selling agent for that company?
Part 4 - Bandwidth, Bandwidth, Bandwidth
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