From: Steve Schear <schear@lvdi.net>
Date: Tue, 30 Dec 1997 09:35:42 +0800
To: cypherpunks@Algebra.COM
Subject: Re: newscolumn1.html
In-Reply-To: <199712291845.NAA15134@yakko.cs.wmich.edu>
Message-ID: <v03102800b0cdf5ecec28@[208.129.55.202]>
MIME-Version: 1.0
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>     "People in the project run the gamut from those who want to apply
>     taxes responsibly to everyone to those who argue that electronic
>     commerce deserve special consideration, while others say we ought
>     to say it should be treated the same as mail order," he says.

Although there are a few U.S. state decisions regarding taxation of Net commerce, which vary considerably, most critical legal analysis I've read supports the mail order paradigm.  If so, states will be hard put to effectively pressure online merchants into compliance.  Cities are facing a similar bind.

>     
>     There are some similarities -- and some differences -- between mail
>     order and Internet commerce, says tax attorney Harvey Dunn of law
>     firm Schottenstein Zox & Dunn. If a company has some presence in
>     Ohio, say a store or a trucking company, then sales tax could be
>     charged. But an out-of-state mail-order company that ships a
>     product via common carrier doesn't have to charge sales tax.
>     
>     However, buyers should pay a "use tax" on items once they receive
>     them, he says. "But no one does," Dunn says.
>     

No kidding. 

>     
>     The difficulty comes in determining how to collect such a tax, says
>     Julie Carpenter, spokeswoman for the Ohio Department of Taxation.
>     Right now, there's no way for the state to police all the goods
>     that are bought elsewhere but used here.
>     
>     "An Ohio taxpayer's obligation is to pay the tax," she says.
>     "Realistically, is this going to happen? Probably not, without
>     guidelines and some oversight."

Read "tyranny."

>     
>     Online purchases are even murkier because the Net's unique nature
>     allows some products such as music, software or electronic
>     magazines, to be downloaded, Duncan says.
>     
>     While a CD purchased in a store can be taxed, how can a government
>     collect on a few megabytes sent over the Internet?

It can't. Too bad.

>     
>     The electronic commerce project is looking at a billing address
>     approach, Duncan says. If the commerce terminates in a state and is
>     billed to someone in that state, then that state could make a
>     strong case for collecting taxes on the commerce.

However, since a merchant delivering goods electronically doesn't know where his customer physically resides (and why would they want to) the merchant has plausible deniability.  However, this is one more reason government will press for Net drivers licenses.

>     Because of these and other issues, Duncan doesn't expect project
>     members to have a grasp of the issue until sometime next summer.

After this grasp will come the gasp, as they are forceed to admit that without a constitutional amendment allowing states greater control of interstate commerce (an unlikely event) they aren't likely to get their hands on this money.

--Steve