Are Taxes Coming to the Internet?
- By: kidmercury [privmsg - website] On 14th Apr 2006 In
There's some evidence suggesting the tax-free ride on Internet purchases maybe coming to an end. Slashdot points to a News.com article noting that tax authorities in the United States are taking a closer look at iTunes:
"More states are beginning to tax downloaded products," said Steve Krantz of the Council on State Taxation, which represents companies that do business in many states. "Some are doing it through specific legislation. Others are doing it through the interpretation of previous law."
This means that more Americans will be obligated to pay more every April 15 because of a concept known as the use tax. If your home state taxes digital downloads, those levies are generally collected either when purchases are made or on tax day, depending on the location of the Internet retailer.
Amazon seems to be preparing to tax users as well, as suggested by a recent patent filing:
"Items are classified so as to select an appropriate import tax code for a destination country and/or to select an appropriate export tax code for an origination country, such as to allow calculation of estimated taxes for the items before the items are delivered," says the patent description.
Are taxes really coming to the web? If so, what are the long-term implications of this?
So many political borders
So many political borders blur when there are virtually no borders.
Taxes are already here.
If you're an American company shipping to Canada, you're actually required to charge and remit Canadian taxes. And you don't get a free pass because you're American. The two governments have some sort of funky arrangement where the Canadian gov't can enforce that on American companies.
Normally the Cdn gov't doesn't care too much because they collect the taxes when the shipment crosses the border. However in the case of advertising, the gov't is a bit more interested because there's no point for them to step in to collect the taxes. I'm surprised the Canadian gov't hasn't picked up on all the PPC Google/Yahoo/MSN is targetting at Canadians, charging Canadian companies for, yet not charging and remitting taxes for.
Most states have never
Most states have never waived taxes for products bought through the internet; this article deals with downloaded products.
Well Google charges me VAT
Well Google charges me VAT in the EU. I paid 5% taxes when I won an e-bay auction in Virginia for an ipod the other day.
I charge my customers VAT when they book my accommodation online.
Where is this tax free ride?
Sly? Not cutting corners? hmmm....
apparently, some of us have been living in different worlds (or at least different countries) SlyOldDog
Heh, I have become an
Heh, I have become an international tax expert since I started my own business. I know more about it than my mates who charge a thousand bucks an hour at PWC. And so far as I know there is no legal free tax ride because your services are internet based.
The one case I know of is when you sell download-only software for export. You are not obliged to add VAT at source because it's an export. But technically the consumer should pay import duty in his country. If he is a company he will have to add it or pay a fine.
You can get away without charging VAT if your business is based in a tax free jurisdiction. Otherwise you are just breaking the law.
There are safer ways of cutting your tax bill than tax evasion :)