Internet Taxation and the Expansion of E-Commerce Essay

The Internet over the past few years has seen a huge increase in online businesses and consumers. Electronic-commerce is expected to generate $36 billion in revenue during 1999, up 140% from last year alone.[1] With such a huge amount of money to be made on the Internet it is becoming very appealing for small businesses and start-up companies to try and make their niche in e-commerce. The Internet is drastically affecting the way companies and people conduct business now. E-commerce encourages growth in existing as well as new businesses because of lower overhead costs, the huge consumer base and the freedom of information flow. However the online revolution has created a large

Sales tax is a tax imposed by the government at the point of sale on retail goods and services.(Investopedia Contributors) It is collected by the retailer and passed on to the state.(Investopedia Contributors) Every Time you swipe your credit card, according to your state’s law, a percentage of the total amount worth of the goods is paid to the government. Inside the City limits of Tulsa, the sales tax and use tax is 8.517%.(“sales tax in Tulsa”) But when you go to another state and shop, such as california, the standard statewide rate of 7.50%.(“California City $ County Sales $ Use Tax Rates”) But when you shop online, it’s a different case, whether to pay sales tax depends on the retailer’s location. The current default rule throughout the United States is that you must collect sales tax on Internet sales to customers in those states where your business has a “physical presence”. (Steingold)

Also I looked into the regulations on e-commerce and according to Renee L Giachino, “attempts to regulate the Internet can cause national and international conflict and criticism. Individual attempts by states and countries to place burdensome restrictions on the free flow of trade over the Internet should be avoided in favor of unfettered growth of the many borderless opportunities and advantages that e-commerce

Here are some statistics. The internet accounts for, on average, 3.4 percent of GDP across the large economies that make up 70 percent of global GDP. If the Internet consumption and expenditures were a sector, it’s weight in GDP would be bigger than industries such as mining, utilities, agriculture, communication, and even education. Soon, we can expect the internet to surpass industries such as transportation. The Internet’s total contribution to global GDP has reached higher than the GDP of Canada and is growing even faster than the GDP of countries such as Brazil.

Imagine not having the option to depend on the internet. According to the Federal Communication Commission (FCC), “the internet became an ever-increasing part of the American economy, offering new and innovative changes in how we work, learn, and play, receive health care, create and enjoy entertainment, and communicate with one another” (Restoring Internet Freedom). The American people depend on the internet and its integration into our everyday lives. Businesses, because of internet dependency are employing and marketing products globally, hospitals are finding and sharing new innovations; helping patients live longer, and people are now connected with family, and friends around the world. The internet and its various rationales for dependency

There is also confusion regarding what is Constitutionally acceptable in the online marketplace. Many consumers and businesses believed that taxing products over the Internet was not allowed. . This misconception was cleared up in infamous Quill Corp. v. North Dakota case, which created the “nexus” law. This case has greatly effected the taxation of Internet sales. It stated that there must be a large physical presence of a company in a state for that state to lawfully require the company to collect taxes inside the state (Andes & Atkinson, 2013). With the growth of the Internet, many of these misconceptions are attempting to be understood through various forms of legislation.

We do a lot of things online, from watching movies, learning, to shopping or even buying groceries. People shop online because the prices are cheaper, which is reasonable. Even though the government might be foregoing income by not taxing overseas products bought online, it is important to note that it costs even more for the government to collect these taxes. The Productivity Commission predicted that the removal of the current $1000 tax-free threshold will generate revenue of $600 million. This value is still contended, with the Conference of Asia Pacific Express Carriers suggesting it could be lower than $315 million. However it is important to note that the government will be collecting these taxes at the cost of well over $2 billion, borne by businesses, consumers and the government. One of the main reasons for why it is so expensive is the fact that the Australia Post and Customs would need to employ a lot more people to sort out the taxes. It is estimated that there are over 47.5 million international mail parcels coming into Australia every single

The engine of the Internet economy has countries scrambling to enact popular start-up markets, ease e-commerce taxation, and climates conductive to foreign investments in online media properties. As an example, Canada has the highest Internet usage in the world, but an unfavorable tax regime and a lack of start-up capital are causing the country to fall behind the United States in the e-commerce economy. Canadian taxes, government regulations, and capital markets created a slow growth of Internet business. Furthermore, this has eased the distribution and duplication of information and products from e-commerce sales across borders. Serious issues such as copyright, encryption, trademark, and regulation of currencies being raised, therefore are forcing the U.S. Federal Trade Commission and the Treasury Department to issue warnings against proliferation of commercial scamming, Internet fraud, and potential money laundering by unscrupulous agents operating over the

Right now the changing new world economy is a time bomb of territorial taxes, income taxes sales taxes, and other forms of taxes. (Richard, Jean Francois) So if everything is waiting to explode, and the only thing that can be thought of to fix the problem is more taxes to compensate for the current issue, then wouldn’t we just be setting ourselves up for failure.. So when Governors decide to take the matter of taxes into their own hands and take one of the most free things on the market to make money, so the idea of taxing the internet is arbitrary! False and just a useless noise presented by the head of state.

The National Council of Economic Education’s EconEdLink has an interesting module on the economics of Internet access at http://www.econedlink.org/lessons/index.cfm?lesson=NN10 Please review the materials provided. Is provision of Internet access a competitive industry? Briefly discuss.

Taxation on the Internet may also make on-line commerce more complicated and cumbersome. This is a logos argument that is based on facts, statistics, and evidence. Taxation of the Internet would in turn drive up costs of doing business via the web. In today’s economy, any form of disturbance upon the Internet could push the United States into a recession. The conservatives fear that this is happening to the economy today. The stock market has headed into bear territory because of the recent decline in technology and Internet e-commerce companies profits. Believe it or not, the Internet has a drastic effect on our nation well being. As of 2001 the United States has a budget surplus and tax cuts on the verge of becoming a reality for Americans. Why would we want to limit the Internet with taxation of the Internet when there is plenty of money to give tax cuts?

A major societal change that has resulted from the web is the proliferation of businesses on the web (eBusiness). Businesses on the web can be classified into two types: those who have physical stores outside of the web (like Gap) and those that were created for the sole purpose of functioning through the web (like eBay). According to Marshall McLuhan, in his book Understanding Media: The Extensions of Man, “once a new technology comes in a social milieu it cannot cease to permeate that milieu until every institution is saturated” (241). I believe this is exactly what the web has done to American and international societies. The web has saturated nearly every aspect of life including education, leisure,

There are always new opportunities to build our rapidly changing market economy that leaves no one behind. Markets use these opportunities to create an atmosphere of ambition between individuals to exceed one another and in turn generate a more dynamic, self sufficient economy. However, leading more toward a market economy there are greater responsibilities held on many retailer’s shoulders. The market place has grown so much that it is not just actual “professionals” exchanging/selling goods and services to consumers, but also people that are not necessarily a professional in a business through online markets. When discussing about online markets, many sellers use the advantage of the internet to increase revenues. We use online markets mainly to benefit both the buyer and seller in many ways. One specific benefit that they both find very favorable to them is the fact that there is no sales tax involved in the transactions made in certain online market systems. Amazon, E-bay, and other retailer websites that operate under this certain online market system do not collect sales taxes from customers. The only reason for the exemption of collecting and remitting of sales tax to the state in which they execute a sale in, is that they do not have a physical presence “nexus” in states where they sell their product to their online customers. This starts to become an issue to traditional businesses that have to collect and remit sales taxes to the state and also the state itself.

The table below is the U.S. Census Bureaus reports a sharp increase in the retail E-commerce sales as a percent of total quarterly retail sales since the first quarter of 2006 to the last quarter of 2015. E-commerce sales in 2015 accounted for 7.3 percent of total sales, which is 0.9 percent higher than what it accounted in 2014. The explosive growth of E-commerce transactions greatly affects the revenue of sales taxes and has made whether to levy taxes on Internet sales a hot debate. From the consumers’, online retailers’, and technology companies’ position, imposing sales tax on Internet sales will somehow limit the growth of both E-commerce and the Internet usage. From the side of brick-and-mortar retailers and the government body, tax

revenues via e-commerce in the next two to three years (Richter, 48). The core of e-