Ecommerce Information

Distinguishing Features of E-Commerce

E-commerce offers customers the chance to eliminate many stages in the sales/distribution chain. The mark-ups that occur between manufacturers, wholesalers, distributors, retailers and consumers can add the cost of goods purchased by consumers. In contrast, when consumers deal directly with manufacturers on the internet, the process whereby intermediaries between the manufacturer and the final consumer are eliminated from the supply chain is known as "disintermediation".

E-commerce differs from mail order and telephone solicitation, the two most traditional forms of business using remote sellers, because these involve the delivery of goods by common carrier to and from a specific physical location. In short, there is still a physical delivery of property from an identifiable seller to an identifiable buyer. E-commerce presents an unprecedented challenge to federal and state tax authorities. States and local jurisdictions have wrestled with the issue of collecting taxes from out-of-state mail order sellers and telephone solicitors for decades; e-commerce enables almost any business large or small to sell to customers in different states and countries.

Out-of-state vendors engaged in e-commerce do not have an obligation to collect sales taxes if traditional remote sellers, such as mail-order and telephone solicitation vendors, do not collect sales taxes. Sales tax cannot be levied on a transaction just because the purchaser uses e-commerce to access the seller's computer to acquire property, goods or service. Also, states cannot use an "agency nexus" theory to claim that a purchaser's ISP is an in-state agent for the seller.

Commerce Defies Traditional Tax Jurisdictions

Using the internet, a company can, in theory, move its e-commerce business to a tax-haven country and conduct e-commerce outside the jurisdiction of any country that would otherwise tax the transaction.

Also, because of the speed in which transactions occur and the frequent absence of a traditional paper trail, it will be very difficult, if not impossible, to apply traditional notions of tax jurisdiction. This is especially true with intangible property transmitted by computer such as software, digital music or electronic books and services.

While governments which depend on an income tax might have difficulty taxing e-commerce, states and local jurisdictions that rely on sales and property taxes to fund their operations could be in deeper trouble .

Lack of a Paper Trail

Unless a tangible product is delivered by common carrier, it is impossible for a taxing jurisdiction to determine that an e-commerce transaction occurred. For instance, if a consumer downloaded a computer game from a computer located in a foreign country for $19.95, paying by credit card, how would a taxing jurisdiction discover that such a transaction occurred? How would it determine the physical location of the seller? What if the purchaser had an internet service provider (ISP) in a foreign country as well?

Transmitting Property from Tangible to Intangible

Consider the following issues: Would the receipt of a computer game in electronic form convert the game into a non-taxable intangible item, whereas the purchase of the same game at a local computer store would be taxable because it is a tangible product? Also, if a newspaper has an exemption from sales tax will a newspaper that is downloaded in electronic form receives the same exemption? If not, would the tax levied on the electronic version of the newspaper be a discriminatory tax in violation of the commerce clause?

E-cash Issues

Electronic money is a type of debit card similar to a telephone calling card where the card itself keeps track of the remaining balance, rather than a third party bank. This could emerge as the preferred medium of exchange for e-commerce. E-cash will have the same anonymity as cash does in the current "underground" economy. Use of e-cash will further frustrate states and local jurisdictions on taxing e-commerce.

Multiple Taxes

Multiple taxes on the same transaction or service, either in the same taxing jurisdiction or two or more taxing jurisdictions, are prohibited. This could occur if a state-taxed internet access services as telecommunications and then taxed located telephone services as well. Unless a credit is given to eliminate any double-taxation, such a tax would violate the prohibition against multiple taxes.

The writer is an advocate of High Court and practicing immigration and corporate laws in Pakistan since September 2001. He is a self employed and pioneer in research on electronic commerce taxation in Pakistan. His articles were published widely in the critical areas of cyber crimes, electronic commerce, e-taxation and various other topics. He wrote LL.M thesis on titled "Legislation of electronic commerce taxation in Pakistan" in which he provided comprehensive legal proposals for statutory reconstruction of tax laws for purpose of imposition of taxation on e-business in Pakistan. Currently he is conducting is research on topic 'Electronic commerce taxation: emerging legal issues of digital evidence'.

Author can be contacted by



5 Ecommerce Mistakes to Avoid: A Newbie's Guide
Entrepreneur (blog)
“But the growth of your e-commerce business depends on the ability to acquire new customers and increase sales from existing ones. Every marketing channel has a cost in time, money or energy -- it's up to you to find the right balance.” To help you ...

Entrepreneur (blog)

4 Ecommerce Strategies That Turn Browsers Into Buyers
Entrepreneur (blog)
In the first quarter of 2014 alone, ecommerce purchases reached $63.4 billion, according to analytics firm ComScore, with desktop ecommerce seeing double-digit growth for the fourteenth consecutive year. While the gains are impressive, most companies ...

Wunderman-Controlled Shop Buys Ecommerce Firm Applogix
MediaPost Communications
WPP's Wunderman has acquired marketing and ecommerce technology company Applogix, based in Johannesburg, South Africa. Terms were undisclosed, but the deal was made via Aqua — which WPP claims is the largest digital agency in the country and ...
WPP's Aqua acquires ApplogixResearch Magazine
Daily Research News OnlineDaily Research News Online
WPP plc: Aqua acquires marketing technology business Applogix in South AfricaThe Wall Street Transcript

all 10 news articles »

Moving The E-Markets: Today's Top Trading Ideas In E-Commerce
Seeking Alpha (registration)
At the end of August, the median e-commerce stock in our Index trades for 16.6x TTM cash flow. Standing 987%, 543% and 101% above that level are Zulily, FragranceNet and Groupon. Based on my experience as an M&A advisor in the sector, I'm not ...

Economic Times

Success of e-commerce spawns name-copying trend
Economic Times
NEW DELHI: You have an e-commerce business model, you have startup funding, you are all fired up, and now you need a name for your company. Take note — the online bazaar is stuffed full of something 'kart' or something 'deal', a manic copying frenzy ...


Xoin introduces prepaid bitcoin to drive SA's ecommerce and adoption
From Ghana to Kenya there are interesting startups trying to tackle the issue of remittances, while in South Africa popular payment gateway PayFast recently introduced bitcoin integration to more than 30 000 of its ecommerce clients. But although this ...

and more »

What Ecommerce Retailers Need to Translate in a Global-Local World
Multichannel Merchant
Ecommerce, global ecommerce, website translation, website localization, ecommerce localization, ecommerce platform Ecommerce is a big industry, and it's only getting bigger. Some research estimates that, by the end of 2014, total global ecommerce sales ...

For personalisation and direct sales, airlines must set ecommerce free
Direct sales are obviously a powerful way to build customer relationships and defend tight margins. And online is the key to growing direct sales. NB: This is an analysis by Boyan Manev, vice president of business development and product marketing at ...

Kitsap Sun

Business spotlight: E-commerce sales, outlets on the rise
Kitsap Sun
Jason and Jack Chow look through the shelves of LEGOS in their Chowren Toys warehouse in Poulsbo. They sell their product exclusively online and are one of a growing number of Internet-only retailers in Kitsap County. The volume of online sales for ...

Hey, Ecommerce Companies – Location Still Matters!
Small Business Trends
If you have an eCommerce business, you probably think that location doesn't matter. But that isn't always the case. New research from the Wharton School suggests that real-world factors such as location can actually have a big impact on online businesses.

Google News

Article List | Index | Site Map
All logos, trademarks and articles on this site are property and copyright of their respective owner(s).
The comments are property of their posters, all the rest is Copyright © 2006 - All Rights Reserved.