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Internet Taxation Final Presentation


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Internet Taxation Final Presentation

  1. 1. Should Sales Tax be required for Internet Purchases<br />Anil, Harry, Kaye, Jason<br />MBAD 260<br />
  2. 2. Internet Tax Freedom Act<br />Internet Tax Freedom Act was introduced on October 21, 1998<br />Has been extended by another seven years and will expire in 2014 if not renewed.<br />Prevent states from either applying sales taxes to categories of electronic services or goods with no physical counterpart or applying discriminatory sales taxes on Internet commerce that do not, for example, apply to catalog sales. <br />Internet – A “global free trade zone”<br />“In my view, the Internet has the most profound liberating potential since Gutenberg’s invention of the printing press, which allowed the mass distribution of ideas, thoughts and information. This legislation is a step forward to keeping the Internet free of unfair, discriminatory taxation policies that would impede its future growth as a source of commerce, education and information.”<br />U.S. Senator George Allen (R-Virginia)<br />On the introduction of S. 777,<br />Internet Tax Nondiscrimination Act<br />April 26, 2001<br />
  3. 3. Challenge<br />There are over 8,000 tax jurisdictions in the U.S.<br />If you&apos;re an individual seller, such as an e-bay seller, some states only require sellers to collect sales tax on sales they make to residents within their state. Other states have a longer arm and may require collection by out-of-state sellers on sales made to their residents. It is the individual seller&apos;s responsibility to figure out the rules for each jurisdiction and abide by them.<br />As of 2008, 43 states have approved a model interstate agreement that establishes uniform sales tax rules and definitions.<br />In 2003 most national chains cut a deal with the states in which they were forgiven all of their back taxes in exchange for collecting sales taxes online from that point forward.<br />In 2008 New York became the first state to extend its definition of nexus to cover some web-only retailers, including <br />
  4. 4. Total U.S. Retail Sales (Online)<br />U.S. retail ecommerce sales for the fourth quarter of 2008, adjusted for seasonal variation, but not for price changes, was $31.9 billion<br />
  5. 5. U.S. E-Commerce Sales Forecast<br />Source:<br />
  6. 6. State Dependence<br />Source: Legislative analyst’s office (CA):<br />
  7. 7. Pro<br />45 states assess sales taxes, from which they receive on average 25 percent of their total revenue each year.<br />Sales tax revenues currently amount to about $150 billion annually and make up approximately one-third of all state revenues.<br />Funds Used For:<br />Education<br />Public Safety<br />Public infrastructure <br />Public Transportation<br />Health Services<br />Park and Recreation<br />Technological Infrastructure Services<br />
  8. 8. Pro<br />Ease the tax burden from individuals<br />Use tax must be paid to your state if the retailer did not collect during transaction<br />Adopting a standardized tax collection model will ease the burden on the individual to track and pay every year<br />
  9. 9. Pro<br />Upper and Lower class differences<br />Internet access<br />Households earning &lt; 50k per year 35%<br />Households earning &gt; 50k per year 76%<br />Statistics show that as salary and education levels increase so to does Internet accessibility<br />Should tax rates apply to just some?<br />
  10. 10. Con<br />Complicated tax system<br /> Different items subject to sales/use tax depend on each jurisdiction<br /> Numerous and varying definitions<br /> High compliance cost<br />Negative impact on the growth of e-commerce<br /> Extra burden on customer: paying tax in addition to existing handing and shipping costs<br /> Fairness: Businesses receive no benefits or services from a jurisdiction when they are located elsewhere.<br />Potential diminishing fiscal autonomy of States and Local Governments due to necessary simplification and standardization of tax system<br />
  11. 11. Con<br />Enhances future growth and strategically position the nation to compete in the global economy<br />Americans can have affordable access to the Internet and promotes further broadband deployment in rural and outlying areas that may lack high-speed Internet access<br />Gateway to entrepreneurship, regardless of race, income or neighborhood.- Higher taxes on technology will stifle the ability of small businesses to operate, grow, and create new jobs.<br />Impede consumer demand for access, cripples innovation, creativity and competitiveness<br />Multiple points of consumption – makes it more difficult for independently administered tax agencies to identify, monitor, and resolve international “tax” transactions.<br />
  12. 12. Con<br />Ability of consumers to buy goods and services from merchants located outside the reach of their own government’s taxing authorities <br />The buying and selling of intangible “goods” from external (or non-domestic) sources <br />Internet sales tax could encourage exporting jobs to different states<br />Enforce vital tax policy initiatives and decisions independent of trade and investment considerations. <br />Globalization growth will be curtailed<br />Applying a provincial average sales tax of 14% to all Internet sales in Canada would reduce the number of online buyers by as much as 44%.<br />
  13. 13. Group Discussions<br />