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



E-commerce to be policed by up to nine government agencies including RBI ...
Economic Times
NEW DELHI: A panel of top central government bureaucrats is set to soon consider a proposal for potentially extensive regulation of the country's ecommerce industry, a move certain to raise the hackles of the sector whose furious pace of growth has ...
E-commerce may soon come under the lens of nine ministries, RBIHindu Business Line

all 2 news articles »

India Post to launch own e-commerce portal like Amazon or eBay
Economic Times
Directly stepping into the cyber world, India post is going to launch its own e-commerce portal in the shape of those like Amazon or eBay soon. The aggressive step of India Post, world's largest postal service, is a part of its massive IT based ...

and more »

Irish Times

Consumers are still hesitant about making mobile ecommerce transactions ...
Irish Times
Mobile traffic on Irish ecommerce sites may have surged 52 per cent last year, but consumers remain relatively hesitant to make transactions on mobile devices. The sturdy desktop still “punches above its weight” when it comes to purchases, says Alan ...

Tech in Asia

Mad Street Den raises $1.5 million to bring artificial intelligence to ecommerce
Tech in Asia
Click a picture of somebody wearing a dress you like, and MADstack – the artificial intelligence platform of one-year-old Indian startup Mad Street Den – will find its closest match on an ecommerce site – after first seeing if the person whose picture ...

New York Times (blog)

Chinese Government Takes Aim at E-Commerce Giant Alibaba
New York Times (blog)
HONG KONG — In unusually blunt criticism, a Chinese government agency on Wednesday took aim at the e-commerce giant Alibaba Group for what it said were unlicensed merchants, fake goods and other illegal practices on its hugely popular shopping ...
E-commerce Alone Won't Save the Chinese Retail IndustryCKGSB Knowledge
Nearly 40% of inspected products on Chinese ecommerce sites are fake ...Tech in Asia
Other e-commerce giant of China follows its own pathFinancial Express
MENAFN.COM -Financial Times -Forbes
all 776 news articles »

Financial Express

Govt mulling regulatory regime for e-commerce
Financial Express
e commerce, ecommerce in india, ecommerce website, ecommerce in india 2014, e During any probe on online frauds, the government will be troubled by problems in accessing data on servers and data centres situated overseas. (Illustration: Shyam) ...

and more »

Business News Daily

Magento Review: Best Enterprise E-Commerce Software
Business News Daily
The best e-commerce software lets you customize everything from your website's design to your storefront's interface and background processes. This allows you to create an online store that looks and works exactly the way you want it to, while making ...

and more » (registration)

Ecommerce Taking US Travel Business Places (registration)
Ecommerce is one of the most booming sectors of the U.S. economy. An increasing number of businesses are going online and not selling online is practically a sin for any organization. Therefore, it isn't surprising that the internet is playing a major ...

and more »

Channel News Asia

SingPost targets small retailers with all-in-one e-commerce service
Channel News Asia
SINGAPORE: With an increasing number of small local players muscling in on the online shopping action in recent years, the e-commerce arm of Singapore Post is starting a new avenue to support these businesses in more ways – from receiving orders to ...
DBS, SingPost and Google launch online shopping festivalMarketing Interactive

all 7 news articles »

FMCG products slowly gaining traction in India's booming ecommerce market
Economic Times
"Overall in ecommerce, we believe that after ticketing, electronics and fashion categories, FMCG is going to be the next wave that this industry would ride on. The beauty of this segment is that a customer exactly knows what his/her consumption ...

and more »

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.