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Internet Law - Taxation & 'Nexus'
by Elonka at 1:56 pm EST, Feb 20, 2003 |
This page contains a collection of recent judgments involving challenges to taxation law regarding internet services. For example, Tennessee sued America Online, claiming that Tennessee has a right to subject AOL to Tennessee state taxes because of such things as AOL maintaining dial-up lines in Tennessee, circulating AOL disks in Tennessee, and having volunteer staff who logged on from Tennessee. The key word in all this seems to be "nexus", as in "Does a company have sufficient nexus within a state in order to be taxable in that state?" I have to admit, that in regards my own online games, the idea that we'd have to figure out how to calculate and pay a bewildering array of different tax rates to every single state, country, and locality from which a user accesses us, is unsettling. In Europe, legislation was evidently recently passed which covers digitally-downloaded software, and makes any such download taxable in the location that it's downloaded *to*, and subject to VAT (Value Added Tax), even if the software is being provided by a non-European company -- Non-EU companies will be required to register (with any European country of their choice), in order to figure out how to get the VAT collected. Frankly, this sounds like such a bureaucratic nightmare, I can see some companies simply refusing to sell software in certain areas of the world, because of the complexity in working out tax issues. A NY Times article also came out yesterday discussing the debate over online sales tax issues. NYT registration required, but here's the link:
http://www.nytimes.com/2003/02/17/technology/17ECOM.html |
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RE: Internet Law - Taxation & 'Nexus'
by logickal at 8:11 pm EST, Feb 20, 2003 |
Elonka wrote: ]
] Frankly, this sounds like such a bureaucratic nightmare, I can
] see some companies simply refusing to sell software in certain
] areas of the world, because of the complexity in working out
] tax issues.
] Working for an accountant, I've seen evidence that this dread is seeping into even the most non-wired businesses. Much evidence can be found in the TN sales tax hike of last year. It seems to me that the straw to break the back of this particular camel is not too far away. Options? Either A) Institute a tax structure with so many tiers, exceptions, tables and loopholes (let's not forget those loopholes!) where no-one really knows if they are going to be taxed or not, causing them to refrain from engaging in commerce in your particular (county, city, state, country - your choice) OR B) You make a drastic simplification of your tax rules, eliminating loopholes in favor of an equitable, "even-keel" or "flat" taxation system, that somehow still manages to encourage people to sell things and for other people to purchase them. Not so easy, methinks - but boy, will the economists have a ball over the next few years! |
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RE: Internet Law - Taxation & 'Nexus'
by Elonka at 8:19 pm EST, Feb 20, 2003 |
logickal wrote: ] Either A) Institute a tax structure with so many tiers,
] exceptions, tables and loopholes (let's not forget those
] loopholes!) where no-one really knows if they are going
] to be taxed or not, causing them to refrain from engaging in
] commerce in your particular (county, city, state, country -
] your choice) One article I read said that compliance with the European VAT requirement would probably be "voluntary" on the part of any company, since enforcement would be such a nightmare. Only companies seeking public status or some type of official governmental approval would be incentivized to comply. |
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