Title: Tax issues for online retailers and consumers

Authors: James G.S. Yang

Addresses: Montclair State University, Montclair, New Jersey 07043, USA

Abstract: This paper deals with tax issues that concern the online retailers and consumers. It points out three basic problems: internet access, taxable base, and sales tax collecting duties. Internet access fee is not taxable, while telecommunication is. However, they are quite often bundled together. This paper illustrates the necessity to separate them. Online products are taxable only to the extent of tangible personal properties. Today's digitised products confuse the aspect of tangible products. Only the output is taxable, but not the input. A great many of software is used as an input; nevertheless, it is disguised as an output. This paper identifies what is taxable and what is not taxable. An out-of-state online retailer is required to collect sales tax from an in-state buyer only when there is nexus between the seller and the state. However, the concept of nexus is so controversial that it has resulted in at least 11 lawsuits in courts. This paper analyses them all. It further points out that the concept of nexus has been evolving from physical presence to economic nexus. This paper also offers some tax planning strategies for online retailers and consumers.

Keywords: online business; internet commerce; internet access; taxable base; interstate commerce; due process; physical presence; economic nexus; Amazon tax; online retailers; online consumers; e-business; e-commerce; electronic business; electronic commerce; electronic retailing; e-tailing; taxation; tax issues; sales tax collection; tax planning; USA; United States.

DOI: 10.1504/IJEMR.2013.052892

International Journal of Electronic Marketing and Retailing, 2013 Vol.5 No.3, pp.265 - 286

Received: 13 Jun 2012
Accepted: 31 Dec 2012

Published online: 05 Jul 2014 *

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