| E-commerce offers customers the chance to | | | | a Paper TrailUnless a tangible product is delivered by |
| eliminate many stages in the sales/distribution chain. | | | | common carrier, it is impossible for a taxing jurisdiction |
| The mark-ups that occur between manufacturers, | | | | to determine that an e-commerce transaction |
| wholesalers, distributors, retailers and consumers can | | | | occurred. For instance, if a consumer downloaded a |
| add the cost of goods purchased by consumers. In | | | | computer game from a computer located in a foreign |
| contrast, when consumers deal directly with | | | | country for $19.95, paying by credit card, how would a |
| manufacturers on the internet, the process whereby | | | | taxing jurisdiction discover that such a transaction |
| intermediaries between the manufacturer and the final | | | | occurred? |
| consumer are eliminated from the supply chain is | | | | How would it determine the physical location of the |
| known as "disintermediation".E-commerce differs from | | | | seller? What if the purchaser had an internet service |
| mail order and telephone solicitation, the two most | | | | provider (ISP) in a foreign country as well?Transmitting |
| traditional forms of business using remote sellers, | | | | Property from Tangible to IntangibleConsider the |
| because these involve the delivery of goods by | | | | following issues: Would the receipt of a computer |
| common carrier to and from a specific physical | | | | game in electronic form convert the game into a |
| location. In short, there is still a physical delivery of | | | | non-taxable intangible item, whereas the purchase of |
| property from an identifiable seller to an identifiable | | | | the same game at a local computer store would be |
| buyer. States jurisdictions have wrestled with the issue | | | | taxable because it is a tangible product?Also, if a |
| of collecting taxes from out-of-state mail order sellers | | | | newspaper has an exemption from sales tax will a |
| and telephone solicitors for decades; e-commerce | | | | newspaper that is downloaded in electronic form |
| enables almost any business large or small to sell to | | | | receives the same exemption? If not, would the tax |
| customers in different states and | | | | levied on the electronic version of the newspaper be a |
| countries.Out-of-state vendors engaged in | | | | discriminatory tax in violation of the commerce |
| e-commerce do not have an obligation to collect sales | | | | clause?E-cash IssuesElectronic money is a type of |
| taxes if traditional remote sellers, such as mail-order | | | | debit card similar to a telephone calling card where the |
| and telephone solicitation vendors, do not collect sales | | | | card itself keeps track of the remaining balance, rather |
| taxes. Sales tax cannot be levied on a transaction just | | | | than a third party bank. This could emerge as the |
| because the purchaser uses e-commerce to access | | | | preferred medium of exchange for e-commerce. |
| the seller's computer to acquire property, goods or | | | | E-cash will have the same anonymity as cash does in |
| service. Also, states cannot use an "agency nexus" | | | | the current "underground" economy. Use of e-cash will |
| theory to claim that a purchaser's ISP is an in-state | | | | further frustrate states and local jurisdictions on taxing |
| agent for the seller.Commerce Defies Traditional Tax | | | | e-commerce.Multiple TaxesMultiple taxes on the same |
| JurisdictionsUsing the internet, a company can, in | | | | transaction or service, either in the same taxing |
| theory, move its e-commerce business to a tax-haven | | | | jurisdiction or two or more taxing jurisdictions, are |
| country and conduct e-commerce outside the | | | | prohibited. This could occur if a state-taxed internet |
| jurisdiction of any country that would otherwise tax the | | | | access services as telecommunications and then |
| transaction.Also, because of the speed in which | | | | taxed located telephone services as well. Unless a |
| transactions occur and the frequent absence of a | | | | credit is given to eliminate any double-taxation, such a |
| traditional paper trail, it will be very difficult, if not | | | | tax would violate the prohibition against multiple |
| impossible, to apply traditional notions of tax jurisdiction. | | | | taxes.The writer is an advocate of High Court and |
| This is especially true with intangible property | | | | practicing immigration and corporate laws in Pakistan |
| transmitted by computer such as software, digital | | | | since September 2001. Author can be contacted by |
| music or electronic books and services.While | | | | Adil Law Company (Advocates and Immigration |
| governments which depend on an income tax might | | | | lawyers) Office No.3 2nd Flr Hafeez Chambers 85 |
| have difficulty taxing e-commerce, states and local | | | | The Mall Rd Lahore Pakistan Telephone: |
| jurisdictions that rely on sales and property taxes to | | | | +9242-6306195 +9242- 6360108 Fax: + 9242 6360108 |
| fund their operations could be in deeper trouble.Lack of | | | | Cell: +92300 4254910 E-mail: adil. |