State Taxation Of The E-commerce

The fast growth of the Internet raises important issues about the fundamental nature of taxation on the state level. According to the Federation of Tax Administrators, Sales Taxation of Services: An Update on May 2005, most of the US states impose a sales tax on the "transmission" component of electronic commerce. This includes interstate or intrastate telecommunications. Approximately, one-half of the states impose a sales tax on specific categories of on-line content, such as the electronic transmission of software or cable television. Nearly one-quarter of all states impose an even broader sales tax on a variety of on-line content, such as electronic information or computer services. These taxes are subject to the limits of the Internet Tax Freedom Act, which permits states to tax electronic commerce. However, the states generally impose sales and use taxes only with respect to sales of tangible rather than digital or intangible goods.

The following questions have been addressed in this article:

What are the sales tax issues raised by Electronic Marketing?
Is it not reasonable for States to expect to benefit from the internet activities and the resulting products and services which it has fostered?
What are the implications and affect of State taxation of internet services in a global tax environment?


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