overviewtoe-commercetaxationissues.docVIP

Overview to E-Commerce Taxation IssuesSan Jose Silicon Valley Chamber of CommerceSeptember 26, 2001 Annette Nellen, J.D., CPASan José State University /facstaff/nellen_a/ What are Some of the Issues? Policy Focused Should governments be allowed to tax Internet access fees? How broadly or narrowly should such fees be defined? Will taxation of e-commerce hinder its growth? Should state and local governments be allowed to collect sales and use tax from remote (non-present) vendors? (That is, should Congress reverse the1992 Quill case decided by the U.S. Supreme Court?) Will incomplete taxation of e-commerce hurt state and local government revenues and Main Street retailers? What companies and transactions today are and should be subject to telecommunications taxes? Does this tax system need updating? Practical Focused A California software company has employees in California and Rhode Island and servers in Maine. Do any of these states require sales tax collection? Where is state income tax owed? What if employees sometimes enter other states where customers are located to help with software installation, but it is not more than 4 days per year in any one state? Similar issues exist at the international level for multinational companies – where should a transaction be taxed and how should it be characterized (sale of services or goods)? Several states subject digitized products to sales and use tax. How is a company to know if its customers reside in such states? A U.S. business sells software or other digitized products to a customer outside of the U.S. or vice versa? How should sales tax or VAT be assessed and for which country? Should the answer depend on whether the customer is a business or individual? How will collection be enforced? Federal income tax issues also exist, such as when are costs to create a web site deductible rather than capitalizable? When is the sale of a domain name considered a sale of a capital asset? Do Internet brokers of produ