Tax Problems of Digitized E-Business

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Internet commerce involves sales tax, which is under the jurisdiction of the state and local governments. If the seller and buyer don't reside in the same state, the tax analysis can be complicated. The U.S. Supreme Court has ruled that there must be nexus between the seller and the state before the seller can be required to charge sales tax to the buyer and remit it to the buyer's state of residence. New York's Amazon tax law attempts to use Web site connection as a nexus between the seller and the state. Location of residence becomes critical. But in the digital age product can be transferred from one computer to another, and computers can be located anywhere. Residencies of the buyer and seller may be completely obscured. For international transactions the situation becomes even more complex. This article suggests that sales tax jurisdiction be changed from state and local governments to the federal government.



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