TRIBUTAÇÃO NA ERA DA INTERNET - FGV DIREITO RIOdireitorio.fgv.br/sites/direitorio.fgv.br/files/u... · A Internet e a Tributação da Renda em face da globalização 17.10.2016

GRADUAÇÃO 2016.2

TRIBUTAÇÃO NA ERA DA INTERNET

AUTOR: LEONARDO DE ANDRADE COSTA

SumárioTributação na Era da Internet

I. PROGRAMA DA DISCIPLINA .................................................................................................................................. 3

TRibUTAçãO NA ERA DA iNTERNET

FGV DIREITO RIO 3

I. PROGRAMA DA DISCIPLINA

I.1 EMENTA

Estudo dos impactos da Internet sobre a tributação na era digital em face das transformações do modo de produção, distribuição e prestação de servi-ços nas cadeias globais, regionais e locais no Século XXI.

I.2 CARGA HORÁRIA TOTAL

30 horas/aula — 15 encontros

I.3 OBJETIVOS GERAIS

A Disciplina Eletiva tem por objetivo identificar os elementos estruturais e os desafios para os fiscos e os contribuintes em razão da aceleração do pro-cesso de integração de mercados e novos modelos de relações econômicas e sociais causadas pela Internet e tecnologias digitais.

I.4 OBJETIVOS ESPECÍFICOS

O curso, que é subdividido em 4 Blocos, conforme abaixo apresentado, tem como objetivo essencial que os alunos compreendam a estrutura da In-ternet e a natureza dos vários instrumentos de regulação dessa mídia, a fim de permitir a aplicação desses conceitos ao estudo da tributação das atividades online e bem assim daquelas decorrentes das novas tecnologias que se conec-tam a web.

Bloco I (3 aulas) — A Internet: Estrutura, Governança e Regulação.— Análise e compreensão da estrutura técnica da Internet e dos

principais atores econômicos e políticos que influenciaram a evolução da Internet

— Análise e compreensão dos principais mecanismos de governan-ça da Internet, ao nível nacional e internacional

— Análise e compreensão do papel do estado e das entidades pri-vadas a fim de regular as redes eletrônicas e as plataformas que compõem a internet


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Bloco II (4 aulas) — O Impacto da Internet na tributação sobre o Con-sumo na Era Digital— E-commerce e tributação: uma realidade virtual?— Conclusões da Conferência Ministerial de Ottawa de 1998— O paradigma Americano: da proposta do bit tax e do Internet

Tax Freedom Act (ITFA; P.L. 105-277), de 1998, ao Perma-nent internet tax freedom act, de Julho de 2014. O Streamlined Sales and Use Tax Agreement e o Marketplace Fairness Act.

— Internet e tributação na Europa: o comércio eletrônico e erosão da base de tributação.

— O desafio global e o OECD Action Plan on Base Erosion and Profit Shifting (BEPS): Addressing the Tax Challenges of the Digital Economy (ACTION 1: 2015 Final Report). p. 97-118 e p.119-129.

— A miopia tributária brasileira no modelo de incidência sobre o consumo em face da flexibilização dos conceitos de mercadoria e de serviço na Era Digital.

Bloco III (3 aulas) — A Internet e a Tributação da Renda em face da globalização— Análise e compreensão dos efeitos da Internet e das novas tec-

nologias sobre a Tributação da Renda em face da globalização

Bloco IV (2 aulas) — Apresentação de trabalhos em sala

I.5 METODOLOGIA

A metodologia proposta é híbrida, na medida em que envolve tanto aulas expositivas como dialogadas, o estudo participativo de casos empíricos bem assim a apresentação de trabalhos pelos alunos.

I.6 AVALIAÇÃO

A avaliação será realizada por meio da aplicação de uma prova escrita com consulta, no dia 03/10/16, e a apresentação de um trabalho em sala, em gru-po, nos dias 07/11/16 e 21/11/16, cada qual correspondendo a 45% (qua-renta e cinco por cento da nota). Os 10% (dez por cento) restantes, para se alcançar 100% (cem por cento) da nota atribuível, dependerá da presença e efetiva participação do aluno nos debates realizados em sala.


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I.7 CONTEÚDO PROGRAMÁTICO POR SEGMENTO

Aula 1 25.07.16Apresentação do curso, dos seus objetivos, e da metodologia a ser adotada.

BLOCO I(3 aulas)

A Internet: Estrutura, Governança e Regulação

01.08.16 AULA 2 — A arquitetura da Internet: Code is Law

22.08.16AULA 3 — A governança da Internet: entre privatização e par-ticipação

29.08.16AULA 4 — A regulação da Internet: redes eletrônicas e platafor-mas online

BLOCO II(4 aulas)

O impacto da Internet na tributação sobre o Consumo na Era Digital

05.09.2016

AULA 5: Os problemas estruturais da incidência de tributos so-bre os diferentes canais de consumo na era da Digital (B2B, B2C, C2C, streaming, M2M) e o paradigma Americano:• Do Internet Tax Freedom Act (ITFA; P.L. 105-277), de 1998, ao

Permanent internet tax freedom act, de JULY 3, 2014.• State Taxation of Internet Transactions: da proposta do bit

tax ao Streamlined Sales and Use Tax Agreement (http://www.streamlinedsalestax.org/index.php?page=modules) como resultado das decisões da U.S. Supreme Court em Bellas Hess v.IIlinois e Quill Corp. v. North Dakota

• Marketplace Fairness Act: 2013 e 2015 (http://marketplace-fairness.org/bill-text/)

• The 10th Circuit Court of Appeals decision in Direct Ma-rketing Association v. Brohl (February 22, 2016)

12.09.2016

AULA 6: O desafio global e o OECD Action Plan on Base Erosion and Profit Shifting (BEPS): Addressing the Tax Challenges of the Digital Economy• Conferência Ministerial de Ottawa de 1998• Internet e tributação na Europa: o comércio eletrônico e

erosão da base de tributação.• Base Erosion and Profit Shifting — OECD/G20 Project —

Action 1: 2015 Final Report. Addressing the Tax Challenges of the Digital Economy— Chapter 8. Broader indirect tax challenges raised by the digital economy and the options to address them. p. 119-129.

http://extras.mnginteractive.com/live/media/site36/2016/0223/20160223_112958_Court_Of_Appeals_Amazon.pdf

http://extras.mnginteractive.com/live/media/site36/2016/0223/20160223_112958_Court_Of_Appeals_Amazon.pdf


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BLOCO II(4 aulas)

19.09.2016

AULA 7: A miopia tributária brasileira na incidência sobre o con-sumo em face da flexibilização dos conceitos de mercadoria e de serviço na Era Digital:• A gravação de software em mídia e a confecção de software

bem como sua transferência por meio eletrônico: Solução de Consulta n° 77 Diana/SRRF09, de 12/06/2013 e Solução de Consulta Disit/SRRF09 78, 12/06/2013

• O ICMS sobre a comunicação (e telecomunicações) e o im-pacto da Emenda Constitucional nº 87 de 2015 e do Convê-nio ICMS nº 93/2015 sobre Comércio Eletrônico.

• O Convênio ICMS 181/2015 e a disciplina da matéria no Estado do Rio de Janeiro: o Decreto nº 23.109/97, Decreto nº 27.307/2000 e o Decreto nº 27.308/2000.

26.09.2016

AULA 8 (26/09/16): O ICMS e o ISS: as propostas em tramitação no Congresso Nacional• Proposta de Lei Complementar 366/13, Projeto de Lei do

Senado nº 386/2012• Condecine — Fundo Setorial do Audivisual

03.10.16

10.10.16

Avaliação 1 — P1 (Prova com consulta)

Vista e Correção de Prova

BLOCO III(3 aulas)

A Internet e a Tributação da Renda em face da globalização

17.10.2016

AULA 10: O impacto da Internet e novas tecnologias sobre a tri-butação da renda em bases mundiais (worldwide taxation)• Tax Competition and E-commerce• O conceito de estabelecimento Permanente

24.10.16 AULA 11: O princípio do arm’s length e o transfer pricing

31.10.16

AULA 12 (31/10/16): Os “paraísos fiscais” na nova ótica de tribu-tação sobre a renda a ser implementada pelo Plano BEPS — Ac-tion 1• BEPS_Action 1-Broader direct tax challenges raised by the

digital economy and the options to address them

BLOCO III(2 aulas)Avaliação 2

Temas específicos

07.11.16 • Trabalhos em grupo a serem apresentados em sala

21.11.16 • Trabalhos em grupo a serem apresentados

http://normas.receita.fazenda.gov.br/sijut2consulta/link.action?visao=anotado&idAto=42817




http://www.fazenda.rj.gov.br/sefaz/faces/menu_structure/legislacao/legislacao-estadual-navigation/coluna1/menu_legislacao_decretos/Decretos-Tributaria?_afrLoop=6502331069000&datasource=UCMServer%23dDocName%3A80708&_adf.ctrl-state=kp48wg8k1_1124


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http://www.oecdobserver.org/news/archivestory.php/aid/416/E-commerce_and_taxation:_a_virtual_reality.html

E-commerce and taxation: a virtual reality Interview with Simon Woodside, Fiscal Affairs at OECD. Fiscal Affairs Division

David Rooney

Taxing e-commerce is a global challenge for governments and business alike. It is also not without its controversies. We asked Simon Woodside of OECD’s Fiscal Affairs division to explain.

Observer: Why is taxing e-commerce such a controversial issue?

Simon Woodside: Everyone likes to argue about tax. And the tax treatment of e-commerce is no exception. Some of the controversy stems from such notions as the idea that e-commerce is somehow so special that governments shouldn’t tax it at all. That’s not an argument that I buy – there’s no rational case for granting e-commerce more favourable tax treatment than conventional trade. That would only distort the market and if, as expected, e-commerce continues to grow, it could lead to an expanding hole in the revenue base.

E-commerce gets more of the headlines, probably because it’s recognised as such an important new feature of the global economy. It does beg fundamental questions about the way our taxation systems work – whether it’s taxation of company profits or taxation of private consumption. The technology that makes e-commerce what it is puts more of a spotlight on the possible challenges to effective taxation – just how do you tax a cyber-business, or all those sales over the Net? E-commerce makes international trade in particular so much easier, and so the debate about taxation moves up the international level, too. That’s where the OECD fits in.

Most mainstream opinion accepts that e-commerce should properly fall in the taxation net. What we need to consider is how that works internationally, to provide the same level of certainty to governments and businesses that we aim for today in relation to conventional commerce. We need to be clear about where taxation takes place, and how – especially to avoid the risks of double taxation, or unintentional non-taxation.

Observer: What are the problems of taxing e-commerce?

SW: The priority has to be to identify practical and reasonable ways of applying internationally accepted taxation norms to e-commerce; and, where necessary, of clarifying or developing those norms. So, for example, for direct tax purposes, we’re


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clarifying how such concepts as ‘permanent establishment’ – that’s the rule which determines the right of a state to tax the profits of an enterprise of another state – should operate in the electronic world. Elsewhere, for indirect taxes (such as value-added tax, or VAT) we’re confirming how international transactions should be treated, and tackling such tricky issues as how you collect the tax on a product that is delivered online.

So, yes, there are a good few technical issues that need to be examined in detail. And that’s precisely what the OECD process is all about – bringing together, through our Technical Advisory Groups, experts from business and government. And those government representatives are not only from OECD member economies, but from many other economies too – Singapore, Brazil, South Africa, China, India to name just a few. And, of course, we are looking for additional input from participants at the Dubai 2001 conference.

The key thing is to maintain and strengthen the international dialogue. On the whole, there aren't any fundamental differences of opinion, although there are some differences of emphasis. It's important that we recognise these.

Observer: Is it purely a trans-border issue, or are there domestic complications too?

SW: Not entirely – although the focus of the OECD's work has been on the international aspects of taxation. That's where we have the strongest role to play. That's why, too, we're so committed to a dialogue that actively involves economies across the globe.

At the domestic level, one of the most important issues is how governments can seize the opportunities presented by e-commerce technologies to improve taxpayer service, whether it's electronic filing, electronic transfer of payments, or just Internet access to tax-related information. There's a lot that governments can do and are doing here – and the OECD is actively promoting these efforts.

Observer: Why is there so much fuss right now about how VAT systems should apply to e-commerce?

SW: Most of the fuss is actually about a relatively small part of the overall picture – namely b-to-c (business-to-consumer) cross-border deliveries online from, say, a US supplier to private consumers in Germany. The vast majority of e-commerce is b-to-b (business to business) – whether it's domestic or international – and there are existing VAT principles and collection systems that can be readily applied here. So the focus is then on B2C transactions. Here too, in many instances, existing tax collection mechanisms can work – especially when the transaction involves goods, or is a domestic one.

It's the international online deliveries that present the greatest challenge, especially when the supplier has no presence at all in the jurisdiction of the customer. Self-assessment by individuals is never a great way to secure this sort of tax – but looking to the supplier to collect the tax, as is the norm for VAT-type taxes, is not so easy either because the supplier is in another state. There are no simple answers right now – governments and businesses are agreed on that. We're agreed too that the best way


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forward is to look towards technology-based systems – for example, ones where the tax calculation and remittal is undertaken by a trusted third party as part of the online transaction. There's a lot more work needed on the detail of such systems. In the interim, states are probably going to have to consider implementing a simplified registration system for such non-resident suppliers.

Observer: Where do countries stand on e-commerce taxation?

SW: OECD and many non-OECD countries, as well as the business community, are firmly committed to the basic principles as set out in the Taxation Framework Conditions (endorsed at the Ottawa Ministerial Conference in October 1998). Those conditions are the foundation for all our current work – all the participants in the debate, government and business, recognise them as such.

Observer: What are those basic principles?

SW: In short, non-discriminatory treatment of e-commerce; the application of existing rules and concepts; the importance of a fair sharing of the tax base internationally; and a commitment to pursuing these ends through intensified dialogue with business and non-OECD members. Since Ottawa we've achieved a broad level of consensus on such issues as the interpretation of the existing permanent establishment rules, the characterisation of business income for tax purposes, and the way forward on VAT. In early 2001 we'll be issuing comprehensive reports on these and other topics, and so starting to draw firm conclusions from the work of the past couple of years.

Observer: Finally, some people argue that e-tax is unworkable and go to the extreme of saying it will spell an end to government. What do you think of these views?

SW: I think they're misguided.

E-commerce can and will be taxed – the important thing is that it be taxed fairly and efficiently (just like conventional commerce). There's no question of governments suddenly allowing their tax revenues to evaporate. Talk of the "end of government" is wishful thinking on the part of a maverick (and slightly naïve) fringe. The truth is, governments are duty-bound to provide their citizens with core services (schools, hospitals, transport infrastructure, social security provisions, etc.). Private provision may be possible in some cases, but in practice taxation still plays a central role in securing the funds to pay for those services. So taxation of e-commerce is a normal part of the accepted pattern of how our countries operate. What tax administrations have to do is exploit the technology available to improve taxpayer service and at a lower cost. It's not the "end of government" we should be talking about, but the emergence and development of "e-government".

Visit www.oecd.org/daf

©OECD Observer No 224, January 2001

- See more at: http://www.oecdobserver.org/news/archivestory.php/aid/416/E-commerce_and_taxation:_a_virtual_reality.html#sthash.iFed2LyN.dpuf


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The Internet Tax Freedom Act: In Brief

Jeffrey M. Stupak Research Assistant

April 13, 2016

Congressional Research Service 7-5700

www.crs.gov R43772


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Congressional Research Service

Summary The Internet Tax Freedom Act (ITFA; P.L. 105-277), enacted in 1998, implemented a three-year moratorium preventing state and local governments from taxing Internet access, or imposing multiple or discriminatory taxes on electronic commerce. Under the moratorium, state and local governments cannot impose their sales tax on the monthly payments that consumers make to their Internet service provider in exchange for access to the Internet. In addition to the moratorium, a grandfather clause was included in ITFA that allowed states which had already imposed and collected a tax on Internet access before October 1, 1998, to continue implementing those taxes.

Previously under ITFA, the moratorium on Internet access taxes and the grandfather clause were temporary provisions. With the passage of the Trade Facilitation and Trade Enforcement Act of 2015 (P.L. 114-125), the moratorium on taxing Internet access was extended permanently, while the grandfather clause was extended temporarily through June 30, 2020.

The original three-year moratorium had been extended eight times before being converted to a permanent statute. As the original moratorium was extended, changes were made to the definition of Internet access to include and exclude different services and technology. Notable changes include the inclusion of digital subscriber lines under the moratorium and the exclusion of Voice over Internet Protocol services from the moratorium.

Over time the grandfather clause has protected a decreasing number of states’ abilities to tax Internet access. While 13 states previously taxed Internet access and were protected under the grandfather clause, 7 states now tax Internet access. In addition, changes made to ITFA in 2007 rendered the grandfather provision inapplicable for states that repealed or nullified their taxes on Internet access before the enactment of these changes.

As a public policy, the moratorium on taxing Internet access has economic and fairness implications. The policy likely improves lower income individuals’ ability to purchase Internet access, which has economic benefits, but the blanket nature of the moratorium likely results in some economic waste. Additionally, the moratorium results in unequal application of state and local taxes to the provision of services depending upon how the services are delivered.

Under the moratorium, state and local governments are prevented from taxing Internet access. This may have implications for state and local government revenues and provision of services.

The Internet Tax Freedom Act and its subsequent extensions are often conflated with issues related to the taxation of electronic commerce across state borders. ITFA is largely unrelated to these issues. For a discussion of interstate electronic commerce and taxation issues, refer to CRS Report R41853, State Taxation of Internet Transactions, by Steven Maguire, and CRS Report R42629, “Amazon Laws” and Taxation of Internet Sales: Constitutional Analysis, by Erika K. Lunder and Carol A. Pettit.


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Contents Legislative Status and Background ................................................................................................. 1 Moratorium on Taxing Internet Access ........................................................................................... 2 The Grandfather Clause ................................................................................................................... 2 Moratorium on Multiple or Discriminatory Taxes .......................................................................... 3 Use Taxes and Interstate E-Commerce ............................................................................................ 4 Economic Considerations ................................................................................................................ 4

Equity ........................................................................................................................................ 4 Horizontal Equity ................................................................................................................ 4 Vertical Equity .................................................................................................................... 5

Efficiency .................................................................................................................................. 5 State Revenues and Autonomy .................................................................................................. 6 Simplicity .................................................................................................................................. 7

Contacts Author Contact Information ............................................................................................................ 7


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Congressional Research Service 1

he moratorium on Internet access taxes prohibits states, or their political subdivisions, from imposing new taxes on Internet access services. The moratorium was recently converted to a permanent provision as part of Trade Facilitation and Trade Enforcement

Act of 2015 (P.L. 114-125), after being previously extended eight times as a temporary provision. Under the Internet Tax Freedom Act (ITFA), states who taxed Internet access before 1998 can continue taxing Internet access through June 30, 2020. Legislative Status and Background The Internet Tax Freedom Act of 1998 (ITFA; P.L. 105-277) imposed on state and local governments a three-year moratorium, from October 1, 1998, to October 1, 2001, on (1) new taxes on Internet access, and (2) multiple or discriminatory taxes on electronic commerce. It also established the Advisory Commission on Electronic Commerce. The moratorium includes a grandfather clause allowing states that already had “imposed and enforced” a tax on Internet access to continue enforcing those taxes. The evolution of the Internet, its interaction with telecommunication services, and disputes over state autonomy have led to a number of changes in the law with its successive extensions.

The Internet Tax Nondiscrimination Act (P.L. 107-75), enacted in 2001, was the first extension of ITFA. It extended the Internet tax moratorium and the grandfather clause protections through November 1, 2003, but made no additional changes to the law.

In 2004, the Internet Tax Nondiscrimination Act (ITNA; P.L. 108-435) extended the Internet tax moratorium through November 1, 2007. Before the passage of ITNA, some states had implemented taxes on digital subscriber line (DSL) Internet connections, claiming they were a telecommunication service and therefore exempt from the ITFA tax moratorium. ITNA changed the definition of Internet access to include DSL connections under the moratorium. Taxes on DSL service were given grandfather protection through November 1, 2005, and grandfather protection for other Internet access taxes in place before October 1, 1998, was extended through November 1, 2007. Changes in ITNA also excluded Voice over Internet Protocol (VoIP) services from the moratorium, allowing state and local governments to tax this service. Lastly, ITNA directed the Government Accountability Office (GAO) to investigate the impact of the Internet tax moratorium on state and local government revenues and the adoption of broadband technologies.1

The Internet Tax Freedom Act Amendments Act of 2007 (P.L. 110-108) extended the Internet tax moratorium and the original grandfather clause through November 1, 2014. Additionally, the law revoked grandfather protections if states had voluntarily repealed their Internet access taxes since the passage of ITFA in 1998.

In the 113th Congress, ITFA was extended twice but no further changes were made to its provisions. As part of a continuing appropriations resolution (P.L. 113-164) enacted in 2014, ITFA was extended through December 11, 2014. Later in the 113th Congress, ITFA was extended through October 1, 2015, as part of the Consolidated and Further Continuing Appropriations Act (P.L. 113-235), but no additional changes were made.

1 The results of the GAO investigation were published in two reports in 2006. U.S. Government Accountability Office, Internet Access Tax Moratorium: Revenue Impacts Will Vary by State, GAO-06-273, January 2006, http://www.gao.gov/new.items/d06273.pdf, and U.S. Government Accountability Office, Telecommunications: Broadband Deployment is Extensive Throughout the United States, but it is Difficult to Assess the Extent of Deployment Gaps in Rural Areas, GAO-06-426, May 2006, at http://www.gao.gov/new.items/d06426.pdf.

T


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In the 114th Congress, ITFA was extended three times before the moratorium on taxing Internet access was made permanent by P.L. 114-125. ITFA was first extended through December 11, 2015, as part of the 2016 Continuing Appropriations Act (P.L. 114-53). An 11-day extension of ITFA was then passed as part of P.L. 114-100 through December 22, 2015. Shortly thereafter, ITFA was extended through October 1, 2016, as part of the 2016 Consolidated Appropriations Act (P.L. 114-113). Lastly, P.L. 114-125 extended the moratorium on taxing Internet access permanently, and temporarily extended the grandfather clause provision through June 30, 2020.

Moratorium on Taxing Internet Access The moratorium on Internet access taxes established by ITFA and its subsequent extensions prohibits states or their political subdivisions from imposing any new taxes on Internet access services. Internet access service is defined as “a service that enables users to access content, information, electronic mail, or other services offered over the Internet and may also include access to proprietary content, information, and other services as part of a package of services offered to consumers.”2 The sale and purchase of Internet access services is exempt from taxation under ITFA; however, costs related to acquired services, such as an Internet service provider (ISP) leasing capacity over fiber, are not covered by the moratorium and thus potentially subject to taxation.3 Internet access is often bundled with other services such as voice or video service. In these situations, if the ISP can reasonably separate the charges related to Internet access from the other service charges, the Internet access charges remain exempt from taxation; otherwise the Internet access charges can be taxed.4

The moratorium on taxing Internet access affects consumers of the Internet, ISPs, and state and local governments. One of the most significant effects of ITFA is that state and local governments cannot impose their sales taxes on the monthly payments that consumers make to their ISP, such as Comcast or AT&T, in exchange for access to the Internet. The moratorium prohibits taxes on Internet access services regardless of whether the tax is imposed on the consumer or the provider.

The moratorium affects state and local governments by limiting the activities that can be taxed, reducing their potential tax base, which may reduce state and local revenues. One estimate suggests that the moratorium on Internet access taxes could reduce potential state and local revenues by as much as $6.5 billion each year.5 It should be noted that this estimate assumes that all states and local governments would impose their sales tax on Internet access services. This revenue estimate is further discussed below in the “State Revenues and Autonomy” section.

The Grandfather Clause ITFA contained a grandfather clause to allow state and local governments to continue taxing Internet access if they already had a tax on Internet access that was generally imposed and actually enforced before October 1, 1998. Initially 13 states were included under the grandfather clause, but a number of states have voluntarily eliminated their Internet access taxes since the 2 47 U.S.C. §151, note. 3 U.S. Government Accountability Office, Internet Access Tax Moratorium: Revenue Impacts Will Vary by State, GAO-06-273, January 2006, pp. 10-11. 4 47 U.S.C. §151, note. 5 Michael Mazerov, Congress Should End - Not Extend - the Ban on State and Local Taxation of Internet Access Subscriptions, Center on Budget and Policy Priorities, Washington, DC, July 10, 2014, Table 2, at http://www.cbpp.org/cms/?fa=view&id=4161.


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passage of ITFA.6 Currently seven states claim to collect tax revenue from Internet access: Hawaii, New Mexico, North Dakota,7 Ohio, South Dakota, Texas, and Wisconsin.8 According to a recent survey, these seven states collect a combined $563 million per year from their taxes on Internet access.9 The grandfather clause protecting taxes on Internet access implemented before October 1, 1998, is set to expire on June 30, 2020

In addition to the original grandfather clause established in ITFA, an additional grandfather clause was established as part of the Internet Tax Nondiscrimination Act (ITNA) for certain taxes on Internet access imposed and enforced before November 1, 2003. The grandfather clause established under ITNA expired on November 1, 2005, which largely applied to state and local taxes on DSL Internet access services.

Moratorium on Multiple or Discriminatory Taxes ITFA also prohibits state and local governments from imposing multiple or discriminatory taxes on electronic commerce. The ban on multiple taxes prohibits more than one state, or more than one local jurisdiction at the same level of government (i.e., more than one county or city), from imposing a tax on the same transaction, unless a credit is offered for taxes paid to the other jurisdiction. However, the state, county, and city in which an electronic commerce transaction takes place could all levy their own sales (or use) taxes on the transaction.

The ban on discriminatory taxes prohibits additional taxes or an alternative tax rate on a good, service, or information delivered electronically that would differ from the tax or rate applied to the same, or similar, good, service, or information if it were purchased through traditional commerce (e.g., brick and mortar stores, catalog sales). In other words, under the moratorium the same tax rate must be applied to similar items regardless of how they were purchased. For example, purchasing a book through a local book store’s website cannot be taxed at a higher rate than purchasing it at the local book store’s physical location.

ITFA also lists conditions under which a remote seller’s use of a computer server, an Internet access service, or online services does not establish a minimal connection to a state for taxation purposes. These circumstances include the sole ability to access a site on a remote seller’s out-of-state computer server; the display of a remote seller’s information or content on the out-of-state computer server of a provider of Internet access service or online services; and processing of orders through the out-of-state computer server of a provider of Internet access service or online services. Some businesses have taken advantage of these nexus limits in ITFA’s definition of discriminatory tax to establish what are referred to as Internet kiosks or dot-com subsidiaries. The businesses claim that these Internet-based operations are free from sales and use tax collection requirements. Critics object that these methods of business organization are an abuse of the definition of discriminatory tax.10

6 Ibid., p. 18. 7 North Dakota voted to eliminate their tax on Internet access in 2015, as part of North Dakota Senate Bill 2096. The repeal of their Internet access tax is effective as of June 30, 2017. 8 Henry Reske, “Ending Internet Law’s Grandfather Clause Could Cost States $500 Million,” Tax Analysts, 2014-15565, June 24, 2014. 9 Ibid. 10 See CRS Report RL33261, Internet Taxation: Issues and Legislation, by Steven Maguire and Nonna A. Noto.


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Use Taxes and Interstate E-Commerce The collection of use taxes has become a larger issue in public debates recently; however, this issue is largely unrelated to ITFA and its moratorium on Internet taxes. ITFA deals specifically with taxes on Internet access, and multiple or discriminatory taxes on electronic commerce, while the issues related to taxing interstate electronic commerce center largely on the Supreme Court’s decision in Quill Corp. v. North Dakota and the Commerce and Due Process Clauses of the Constitution.11 Both clauses require that an entity have some type of connection, or nexus, with a state before the state can impose a tax on it. Quill established that, under the Commerce Clause, a retailer must have a “physical presence” in the state before the state can require the retailer to collect use taxes, while due process imposes a lesser standard.12 A great deal of electronic commerce involves firms that have a physical presence in a single state where they house their servers or warehouse their goods but sell goods to individuals in the other 49 states. Due to the definition of nexus established in Quill, firms cannot be compelled to collect use taxes from individuals at the point of sale when engaged in transactions in states where they have no physical presence. Instead, individuals making the purchase are supposed to remit a use tax to their own state governments; compliance with this requirement is low.13

For further discussion of interstate electronic commerce issues see CRS Report R41853, State Taxation of Internet Transactions, by Steven Maguire, and CRS Report R42629, “Amazon Laws” and Taxation of Internet Sales: Constitutional Analysis, by Erika K. Lunder and Carol A. Pettit.

Economic Considerations Tax policy is generally evaluated based on its equity, efficiency, and simplicity. The following sections will evaluate the ITFA, specifically the moratorium on taxing Internet access, with respect to these characteristics and other relevant factors, including its impact on state and local governments.

Equity The equity, or fairness, of tax policy can be thought of along two different axes. One axis, referred to as horizontal equity, is concerned with how the tax policy will affect similar individuals. All else equal, a tax policy which places a similar tax burden on similarly situated tax payers is considered horizontally equitable. The alternative axis, referred to as vertical equity, is concerned with how tax policy will affect dissimilar individuals. All else equal, a tax policy is viewed as vertically equitable if taxpayers with a greater ability to pay will tend to pay more in taxes, than those with a lesser ability to pay.

Horizontal Equity The Internet provides numerous services that are similar to services that are provided through more traditional means and are subject to taxation by state and local governments. The moratorium on taxing Internet access therefore provides a relative tax advantage to services

11 For more information on this case, see CRS Report R42629, “Amazon Laws” and Taxation of Internet Sales: Constitutional Analysis, by Erika K. Lunder and Carol A. Pettit. 12 Quill v. North Dakota, 504 U.S. 298, 308 (1992). 13 Linda O’Brien, “Tax Trends: States Address Declining Tax Revenues,” The Tax Magazine, April 1, 2005, p. 9.


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offered through the Internet. For example, an individual who would like phone service can obtain similar service either by purchasing plain old telephone service, which is often subject to state and local sales taxes, or they can purchase Internet access and use a free service, like Skype, to make phone calls and avoid paying any sales or use taxes.

The inequitable tax treatment under the moratorium violates the principle of horizontal equity. With the current Internet tax moratorium under ITFA, two firms that provide almost identical services can be subject to different tax rates based on how the service is provided, either over the Internet or by a brick-and-mortar business.

Vertical Equity The Internet tax moratorium acts as a subsidy, lowering the effective price of purchasing Internet access by eliminating any state or local tax on the service. Higher-income individuals tend to have greater access to the Internet than low-income individuals. In 2013, 24% of adults making less than $30,000 per year did not use the Internet, while 4% of adults making more than $75,000 did not use the Internet. It is possible that this subsidy could help lower-income individuals gain access to Internet. However, only about 6% cited the cost of Internet access as the reason they do not use the Internet. 14

The structure of the Internet access tax moratorium and resulting subsidy does not satisfy the principle of vertical equity. Upper-income individuals are likely more capable of paying state and local sales taxes on their Internet access charges than lower-income individuals, however both upper- and lower-income individuals have access to the subsidy. Because these dissimilar individuals face similar tax burdens with respect to Internet access, the moratorium does not exhibit the concept of vertical equity.

Efficiency The ITFA, specifically the moratorium on taxing Internet access, likely improves economic efficiency by expanding access to the Internet among individuals who may not be able to afford the service otherwise. However, the blanket nature of the moratorium, where both low- and high-income individuals receive the benefits of a lower tax burden, likely reduces the economic efficiency gains produced by this policy.

Due to the nature of the Internet, having additional businesses and individuals connecting to the Internet provides benefits both to the new Internet users but also to those who were already using the Internet. Or in economic terms, when an individual purchases Internet access they receive personal benefits, in the form of increased access to goods, services, and information, but they also generate external benefits for other individuals already using the Internet, in that they now have another Internet user to interact with or engage in commercial transactions.15 When an individual is making a decision about whether to purchase Internet access, they tend to only consider their personal benefits from accessing the Internet and are unlikely to consider the external benefits they will create by purchasing Internet access. This results in fewer individuals accessing the Internet than is socially optimal. The moratorium on taxing Internet access acts as a subsidy to individuals and businesses by lowering the cost of Internet access. Lowering the cost

14 Kathryn Zickuhr, Who’s Not Online and Why, Pew Research Center, Washington, DC, September 25, 2013, p. 6, at http://pewInternet.org/reports/2013/non-Internet-users.aspx. 15 George R. Zodrow, “Network Externalities and Indirect Tax Preferences for Electronic Commerce,” International Tax and Public Finance, vol. 10 (2003), pp. 83-84.


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of Internet access should increase the number of individuals using the Internet. And increasing the number of individuals on the Internet could improve economic efficiency by bringing the number of people on the Internet closer to the socially optimal level.

Some have argued that the subsidy provided by the Internet access tax moratorium is too large in comparison to the external benefits generated by an individual joining the Internet.16 Additionally, scholars argue that as the Internet has grown the external benefits associated with an additional user have decreased, and at a certain point negative external consequences may arise from congestion.17

The subsidy offered to businesses and individuals through the moratorium on taxing Internet access also likely generates a certain amount of waste due to the blanket design of the subsidy. A large number of individuals would likely choose to purchase Internet access even if the price was higher due to state and local governments applying taxes to the service. Offering the subsidy to individuals who would have purchased Internet access regardless of the subsidy is considered wasteful from an economic perspective because the forgone revenue associated with the subsidy could be used elsewhere in a more productive capacity. Better targeting of the subsidy to individuals who struggle to afford Internet access would likely be a more economically efficient use of resources.

State Revenues and Autonomy As the Internet has grown in size and popularity, states have forgone a source of potential revenues because of the federal moratorium. As mentioned previously, one estimate suggests that states could collect as much as $6.5 billion in revenue each year from taxing Internet access.18 This estimate assumes that all states and local jurisdictions would impose their sales taxes on Internet access. This is unlikely to occur when considering that multiple grandfathered states eliminated their Internet access taxes voluntarily, and California even implemented a similar state-level moratorium on Internet taxes in 1999. Estimating the lost revenue from the Internet tax moratorium is difficult because it is necessary to speculate how states would have acted in the absence of the moratorium. The seven states that currently collect sales tax on Internet access raise an estimated $563 million per year.19

States have historically been allowed the freedom to determine how they want to raise their own revenues. ITFA is one example of a departure from this relationship in that the federal government restricted state and local governments from taxing certain activities. The National Governors Association has voiced concerns about the federal government encroaching on state autonomy, and hopes to revise parts of ITFA to shrink the definition of Internet access to allow taxation of more activities related to the provision of Internet access.20

16 George R. Zodrow, “Network Externalities and Indirect Tax Preferences for Electronic Commerce,” International Tax and Public Finance, vol. 10 (2003), pp. 85. 17 Austan Goolsbee and Jonathan Zittrain, “Evaluating the Costs and Benefits of Taxing Internet Commerce,” National Tax Journal, vol. 52 (September, 1999), pp. 413-428. 18 Ibid. 19 Henry Reske, “Ending Internet Law’s Grandfather Clause Could Cost States $500 Million,” Tax Analysts, 2014-15565, June 24, 2014. 20 David Quam, Testimony - Communications, Taxation, and Federalism, National Governors Association, May 23, 2007, at http://www.nga.org/cms/home/federal-relations/nga-testimony/page_2007/col2-content/main-content-list/may-23-2008-testimony—communic.html.


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Simplicity The moratorium on taxing Internet access likely simplifies complying with the tax code for ISPs. It is estimated that the number of different state and local tax jurisdictions ranges from 7,600 to 14,500.21 For any ISPs which span multiple tax jurisdictions, the moratorium on taxing Internet access likely reduces the administrative burden of complying with those multiple tax jurisdictions.

Author Contact Information Jeffrey M. Stupak Research Assistant [email protected], 7-2344

21 Glen Kessler, “McConnell’s Claim that There Are ‘Nearly 10,000’ Tax Codes Nationwide,” The Washington Post, April 29, 2013.


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INTERNET TAX FREEDOM ACT PUB.L. 105-277, DIV. C, TITLE XI, §§ 1100 TO 1104, OCT. 21, 1998, 112 STAT. 2681-719

Sec. 1101. Moratorium(a) Moratorium.--No State or political subdivision thereof shall impose any of the following taxes during

the period beginning on October 1, 1998, and ending November 1, 2003. [Oct. 21, 1998]--(1) taxes on Internet access, unless such tax was generally imposed and actually

enforced prior to October 1, 1998; and(2) multiple or discriminatory taxes on electronic commerce.

(b) Preservation of state and local taxing authority.--Except as provided in this section, nothing in this title [this note] shall be construed to modify, impair, or supersede, or authorize the modification, impairment, or superseding of, any State or local law pertaining to taxation that is otherwise permissible by or under the Constitution of the United States or other Federal law and in effect on the date of enactment of this Act [Oct. 21, 1998].

(c) Liabilities and pending cases.--Nothing in this title [this note] affects liability for taxes accrued and enforced before the date of enactment of this Act [Oct. 21, 1998], nor does this title [this note] affect ongoing litigation relating to such taxes.

(d) Definition of generally imposed and actually enforced.--For purposes of this section, a tax has been generally imposed and actually enforced prior to October 1, 1998, if, before that date, the tax was authorized by statute and either--

(1) a provider of Internet access services had a reasonable opportunity to knowby virtue of a rule or other public proclamation made by the appropriate administrative agency of the State or political subdivision thereof, that such agency has interpreted and applied such tax to Internet access services; or

(2) a State or political subdivision thereof generally collected such tax on charges for Internet access.

(e) Exception to moratorium.--(1) In general.--Subsection (a) shall also not apply in the case of any person or

entity who knowingly and with knowledge of the character of the material, in interstate or foreign commerce by means of the World Wide Web, makes any communication for commercial purposes that is available to any minor and that includes any material that is harmful to minors unless such person or entity has restricted access by minors to material that is harmful to minors

(A) by requiring use of a credit card, debit account, adult access code, or adult personal identification number;

(B) by accepting a digital certificate that verifies age; or(C) by any other reasonable measures that are feasible under available

technology.(2) Scope of exception.--For purposes of paragraph (1), a person shall not be

considered to making a communication for commercial purposes of material to the extent that the person is—(A) a telecommunications carrier engaged in the provision of a

telecommunications service;(B) a person engaged in the business of providing an Internet access

service;(C) a person engaged in the business of providing an Internet information

location tool; or(D) similarly engaged in the transmission, storage, retrieval, hosting,

formatting, or translation (or any combination thereof) of a communication made by another person, without selection or alteration of the communication.

(3) Definitions.--In this subsection:(A) By means of the World Wide Web.--The term 'by means of the

World Wide Web' means by placement of material in a computer server-based file archive so that it is publicly accessible, over the Internet, using hypertext transfer protocol, file transfer protocol, or other similar protocols.

(B) Commercial purposes; engaged in the business.--(i) Commercial purposes.--A person shall be considered to make


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a communication for commercial purposes only if such person is engaged in the business of making such communications.

(ii) Engaged in the business.--The term 'engaged in the business' means that the person who makes a communication, or offers to make a communication, by means of the World Wide Web, that includes any material that is harmful to minors, devotes time, attention, or labor to such activities, as a regular course of such person's trade or business, with the objective of earning a profit as a result of such activities (although it is not necessary that the person make a profit or that the making or offering to make such communications be the person's sole or principal business or source of income). A person may be considered to be engaged in the business of making, by means of the World Wide Web, communications for commercial purposesthat include material that is harmful to minors, only if the person knowingly causes the material that is harmful to minors to be posted on the World Wide Web or knowingly solicits such material to be posted on the World Wide Web.

(C) Internet.--The term 'Internet' means collectively the myriad of computer and telecommunications facilities, including equipment and operating software, which comprise the interconnected world-wide network of networks that employ the Transmission Control Protocol/Internet Protocol,or any predecessor or successor protocols to such protocol, to communicate information of all kinds by wire or radio.

(D) Internet access service.--The term 'Internet access service' means a service that enables users to access content, information, electronic mail, or other services offered over the Internet and may also include access to proprietary content, information, and other services as part of a package of services offered to consumers. Such term does not include telecommunications services.

(E) Internet information location tool.--The term 'Internet information location tool' means a service that refers or links users to an online location on the World Wide Web. Such term includes directories, indices, references, pointers, and hypertext links.

(F) Material that is harmful to minors.--The term 'material that is harmful to minors' means any communication, picture, image, graphic image file, article, recording, writing, or other matter of any kind that is obscene or that--

(i) the average person, applying contemporary community standards, would find, taking the material as a whole and with respect to minors, is designed to appeal to, or is designed to pander to, the prurient interest;

(ii) depicts, describes, or represents, in a manner patentlyoffensive with respect to minors, an actual or simulated sexual act or sexual contact, an actual or simulated normal or perverted sexual act, or a lewd exhibition of the genitals or post-pubescent female breast; and

(iii) taken as a whole, lacks serious literary, artistic, political, or scientific value for minors.

(G) Minor.--The term 'minor' means any person under 17 years of age.(H) Telecommunications carrier; telecommunications service.--The

terms 'telecommunications carrier' and 'telecommunications service' have the meanings given such terms in section 3 of the Communications Act of 1934 (47 U.S.C. 153).

(f) Additional exception to moratorium.--(1) In general.--Subsection (a) shall also not apply with respect to an Internet

access provider, unless, at the time of entering into an agreement with a customer for the provision of Internet access services, such provider offers such customer (either for a fee or at no charge) screening software that is designed to permit the customer to limit access to material on the Internet that is harmful to minors.

(2) Definitions.--In this subsection:(A) Internet access provider.--The term 'Internet access provider' means a

person engaged in the business of providing a computer and communications facility through which a customer may obtain access to the Internet, but does not include a common carrier to the extent that it provides only telecommunications services.

(B) Internet access services.--The term 'Internet access services' means the provision of computer and communications services through which a customer using a computer and a modem or other communications device may obtain access to the Internet, but does not include telecommunications services provided by a common carrier.

(C) Screening software.--The term 'screening software' means software


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that is designed to permit a person to limit access to material on the Internet that is harmful to minors.(3) Applicability.--Paragraph (1) shall apply to agreements for the provision of

Internet access services entered into on or after the date that is 6 months after the date of enactment of this Act [Oct. 21, 1998].

Sec. 1102. Advisory Commission on Electronic Commerce(a) Establishment of commission.--There is established a commission to be known as the Advisory

Commission on Electronic Commerce (in this title [this note] referred to as the 'Commission'). The Commission shall--

(1) be composed of 19 members appointed in accordance with subsection (b), including the chairperson who shall be selected by the members of the Commission from among themselves; and

(2) conduct its business in accordance with the provisions of this title [this note].(b) Membership.--

(1) In general.--The Commissioners shall serve for the life of the Commission.The membership of the Commission shall be as follows:

(A) 3 representatives from the Federal Government, comprised of the Secretary of Commerce, the Secretary of the Treasury, and the United States Trade Representative (or their respective delegates).

(B) 8 representatives from State and local governments (one such representative shall be from a State or local government that does not impose a sales tax and one representative shall be from a State that does not impose an income tax).

(C) 8 representatives of the electronic commerce industry (including small business), telecommunications carriers, local retail businesses, and consumer groups, comprised of--

(i) 5 individuals appointed by the Majority Leader of the Senate;(ii) 3 individuals appointed by the Minority Leader of the Senate;(iii) 5 individuals appointed by the Speaker of the House of Representatives; and(iv) 3 individuals appointed by the Minority Leader of the House of Representatives.

(2) Appointments.--Appointments to the Commission shall be made not later than 45 days after the date of the enactment of this Act [Oct. 21, 1998]. The chairperson shall be selected not later than 60 days after the date of the enactment of this Act [Oct. 21, 1998].

(3) Vacancies.--Any vacancy in the Commission shall not affect its powers, but shall be filled in the same manner as the original appointment.

(c) Acceptance of gifts and grants.--The Commission may accept, use, and dispose of gifts or grants of services or property, both real and personal, for purposes of aiding or facilitating the work of the Commission. Gifts or grants not used at the expiration of the Commission shall be returned to the donor or grantor.

(d) Other resources.--The Commission shall have reasonable access to materials, resources, data, and other information from the Department of Justice, the Department of Commerce, the Department of State, the Department of the Treasury, and the Office of the United States Trade Representative. The Commission shall also have reasonable access to use the facilities of any such Department or Office for purposes of conducting meetings.

(e) Sunset.--The Commission shall terminate 18 months after the date of the enactment of this Act [Oct. 21, 1998].

(f) Rules of the Commission.--(1) Quorum.--Nine members of the Commission shall constitute a quorum for

conducting the business of the Commission.(2) Meetings.--Any meetings held by the Commission shall be duly noticed at

least 14 days in advance and shall be open to the public.(3) Opportunities to testify.--The Commission shall provide opportunities for

representatives of the general public, taxpayer groups, consumer groups, and State and local government officials to testify.

(4) Additional rules.--The Commission may adopt other rules as needed. (g) Duties of the Commission.--

(1) In general.--The Commission shall conduct a thorough study of Federal, State


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and local, and international taxation and tariff treatment of transactions using the Internet and Internet access and other comparable intrastate, interstate or international sales activities.

(2) Issues to be studied.--The Commission may include in the study under subsection (a)--

(A) an examination of--(i) barriers imposed in foreign markets on United States

providers of property, goods, services, or information engaged in electronic commerce and on United States providers of telecommunications services; and

(ii) how the imposition of such barriers will affect United States consumers, the competitiveness of United States citizens providing property, goods, services, or information in foreign markets, and the growth and maturing of the Internet;

(B) an examination of the collection and administration of consumption taxes on electronic commerce in other countries and the United States, and the impact of such collection on the global economy, including an examination of the relationship between the collection and administration of such taxes when the transaction uses the Internet and when it does not;

(C) an examination of the impact of the Internet and Internet access (particularly voice transmission) on the revenue base for taxes imposed under section 4251 of the Internal Revenue Code of 1986 [26 U.S.C.A. § 4251];

(D) an examination of model State legislation that--(i) would provide uniform definitions of categories of property,

goods, service, or information subject to or exempt from sales and use taxes; and(ii) would ensure that Internet access services, online services,

and communications and transactions using the Internet, Internet access service, or online services would be treated in a tax and technologically neutral manner relative to other forms of remote sales;

(E) an examination of the effects of taxation, including the absence of taxation, on all interstate sales transactions, including transactions using the Internet, on retail businesses and on State and local governments, which examination may include a review of the efforts of State and local governments to collect sales and use taxes owed on in-State purchases from out-of-State sellers; and

(F) the examination of ways to simplify Federal and State and local taxes imposed on the provision of telecommunications services.(3) Effect on the Communications Act of 1934.--Nothing in this section shall

include an examination of any fees or charges imposed by the Federal Communications Commission or States related to:

(A) obligations under the Communications Act of 1934 (47 U.S.C. 151 et seq.); or

(B) the implementation of the Telecommunications Act of 1996 [Pub.L. 104-104, Feb. 8, 1996, 110 Stat. 56, which enacted part II of subchapter II of chapter 5 of this title (47 U.S.C.A. § 251 et seq.); for complete classification, see Tables] (or of amendments made by that Act).

(h) National Tax Association Communications and Electronic Commerce Tax Project.--The Commissionshall, to the extent possible, ensure that its work does not undermine the efforts of the National Tax Association Communications and Electronic Commerce Tax Project.

Sec. 1103. ReportNot later than 18 months after the date of the enactment of this Act [Oct. 21, 1998], the Commission shall

transmit to Congress for its consideration a report reflecting the results, including such legislative recommendations as required to address the findings of the Commission's study under this title. Any recommendation agreed to by the Commission shall be tax and technologically neutral and apply to all forms of remote commerce. No finding or recommendation shall be included in the report unless agreed to by at least two-thirds of the members of the Commission serving at the time the finding or recommendation is made.

Sec. 1104. DefinitionsFor the purposes of this title [this note]:

(1) Bit tax.--The term 'bit tax' means any tax on electronic commerce expressly imposed


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on or measured by the volume of digital information transmitted electronically, or the volume of digital information per unit of time transmitted electronically, but does not include taxes imposed on the provision of telecommunications services.

(2) Discriminatory tax.--The term 'discriminatory tax' means--(A) any tax imposed by a State or political subdivision thereof on electronic

commerce that--(i) is not generally imposed and legally collectible by such State or such

political subdivision on transactions involving similar property, goods, services, or information accomplished through other means;

(ii) is not generally imposed and legally collectible at the same rate by such State or such political subdivision on transactions involving similar property, goods, services, or information accomplished through other means, unless the rate is lower as part of a phase-out of the tax over not more than a 5-year period;

(iii) imposes an obligation to collect or pay the tax on a different person or entity than in the case of transactions involving similar property, goods, services, or information accomplished through other means;

(iv) establishes a classification of Internet access service providers or online service providers for purposes of establishing a higher tax rate to be imposed on such providers than the tax rate generally applied to providers of similar information services delivered through other means; or

(B) any tax imposed by a State or political subdivision thereof, if--(i) except with respect to a tax (on Internet access) that was generally

imposed and actually enforced prior to October 1, 1998, the sole ability to access a site on a remote seller's out-of-State computer server is considered a factor in determining a remote seller's tax collection obligation; or

(ii) a provider of Internet access service or online services is deemed to be the agent of a emote seller for determining tax collection obligations solely as a result of--

(I) the display of a remote seller's information or content on the out-of- State computer server of a provider of Internet access service or online services; or

(II) the processing of orders through the out-of-State computer server of a provider of Internet access service or online services.

(3) Electronic commerce.--The term 'electronic commerce' means any transaction conducted over the Internet or through Internet access, comprising the sale, lease, license, offer, or delivery of property, goods, services, or information, whether or not for consideration, and includes the provision of Internet access.

(4) Internet.--The term 'Internet' means collectively the myriad of computer and telecommunications facilities, including equipment and operating software, which comprise the interconnected world-wide network of networks that employ the Transmission Control Protocol/Internet Protocol, or any predecessor or successor protocols to such protocol, to communicate information of all kinds by wire or radio.

(5) Internet access.--The term 'Internet access' means a service that enables users to access content, information, electronic mail, or other services offered over the Internet, and may also include access to proprietary content, information, and other services as part of a package of services offered to users. Such term does not include telecommunications services.

(6) Multiple tax.--(A) In general.--The term 'multiple tax' means any tax that is imposed by one

State or political subdivision thereof on the same or essentially the same electronic commerce that is also subject to another tax imposed by another State or political subdivision thereof (whether or not at the same rate or on the same basis), without a credit (for example, a resale exemption certificate) for taxes paid in other jurisdictions.

(B) Exception.--Such term shall not include a sales or use tax imposed by a State and 1 or more political subdivisions thereof on the same electronic commerce or a tax on persons engaged in electronic commerce which also may have been subject to a sales or use tax thereon.

(C) Sales or use tax.--For purposes of subparagraph (B), the term 'sales or use tax' means a tax that is imposed on or incident to the sale, purchase, storage, consumption, distribution, or other use of tangible personal property or services as may be defined by laws imposing such tax and which is measured by the amount of the sales price or other charge for such property or service.

(7) State.--The term 'State' means any of the several States, the District of Columbia, or any commonwealth, territory, or possession of the United States.


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(8) Tax.--(A) In general.--The term 'tax' means--

(i) any charge imposed by any governmental entity for the purpose of generating revenues for governmental purposes, and is not a fee imposed for a specific privilege, service, or benefit conferred; or

(ii) the imposition on a seller of an obligation to collect and to remit to a governmental entity any sales or use tax imposed on a buyer by a governmental entity.

(B) Exception.--Such term does not include any franchise fee or similar fee imposed by a State or local franchising authority, pursuant to section 622 or 653 of the Communications Act of 1934 (47 U.S.C. 542, 573), or any other fee related to obligations or telecommunications carriers under the Communications Act of 1934 (47 U.S.C. 151 et seq.).

(9) Telecommunications service.--The term 'telecommunications service' has the meaning given such term in section 3(46) of the Communications Act of 1934 (47 U.S.C. 153(46)) and includes communications services (as defined in section 4251 of the Internal Revenue Code of 1986) [26 U.S.C.A. § 4251].

(10) Tax on Internet access.--The term 'tax on Internet access' means a tax on Internet access, including the enforcement or application of any new or preexisting tax on the sale or use of Internet services unless such tax was generally imposed and actually enforced prior to October 1, 1998.


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II

113TH CONGRESS 2D SESSION H. R. 3086

IN THE SENATE OF THE UNITED STATES

JULY 16, 2014 Received

AN ACT To permanently extend the Internet Tax Freedom Act.

Be it enacted by the Senate and House of Representa-1

tives of the United States of America in Congress assembled, 2

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HR 3086 RDS

SECTION 1. SHORT TITLE. 1

This Act may be cited as the ‘‘Permanent Internet 2

Tax Freedom Act’’. 3

SEC. 2. PERMANENT MORATORIUM ON INTERNET ACCESS 4

TAXES AND MULTIPLE AND DISCRIMINATORY 5

TAXES ON ELECTRONIC COMMERCE. 6

(a) IN GENERAL.—Section 1101(a) of the Internet 7

Tax Freedom Act (47 U.S.C. 151 note) is amended by 8

striking ‘‘ during the period beginning November 1, 2003, 9

and ending November 1, 2014’’. 10

(b) EFFECTIVE DATE.—The amendment made by 11

this section shall apply to taxes imposed after the date 12

of the enactment of this Act. 13

Passed the House of Representatives July 15, 2014.

Attest: KAREN L. HAAS, Clerk.

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for more information see http://marketplacefairness.org

What is the Marketplace Fairness Act?

Summary The Marketplace Fairness Act grants states the authority to compel online and catalog retailers ("remote sellers"), no matter where they are located, to collect sales tax at the time of a transaction - exactly like local retailers are already required to do. However, there is a caveat: States are only granted this authority after they have simplified their sales tax laws.

Simplification is required because of two Supreme Court rulings (Bellas Hess and Quill, described below) cite concern that collecting sales tax for multiple states would be too difficult.

The Marketplace Fairness Act requires that states must simplify their sales tax laws in order to ease those concerns and make multistate sales tax collection easy. Specifically, states seeking collection authority have two options for simplifying their sales tax laws.

Option 1: A state can join the twenty-four states that have already voluntarily adopted the simplification measures of the Streamlined Sales and Use Tax Agreement (SSUTA), which has been developed over the last eleven years by forty-four states and more than eighty-five businesses with the goal of making sales tax collection easy. Any state which is in compliance with the SSUTA and has achieved Full Member status as a SSUTA implementing state will have collection authority on the first day of the calendar quarter that is at least 180 days after enactment.

Option 2: Alternatively, states can meet essentially five simplification mandates listed in the bill. States that choose this option must agree to:

• Notify retailers in advance of any rate changes within the state • Designate a single state organization to handle sales tax registrations, filings, and audits • Establish a uniform sales tax base for use throughout the state • Use destination sourcing to determine sales tax rates for out-of-state purchases (a purchase made by a

consumer in California from a retailer in Ohio is taxed at the California rate, and the sales tax collected is remitted to California to fund projects and services there)

• Provide software and/or services for managing sales tax compliance, and hold retailers harmless for any errors that result from relying on state-provided systems and data

With states adhering to these provisions or the similar measures in SSUTA, retailers across the country will find collecting sales tax for multiple states much easier than it has ever been in the past.


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for more information see http://marketplacefairness.org

How did we get here? The 1967 Supreme Court case National Bellas Hess v. Illinois Department of Revenue set the stage for the debate on taxing internet sales when, in its majority (5 to 4) opinion, the court ruled that:

“the many variations in rates of tax, in allowable exemptions, and in administrative and record-keeping requirements could entangle [the company]'s interstate business in a virtual welter of complicated obligations to local jurisdictions” (emphasis added).

This quote demonstrates the ruling’s basis in complexity and burden, which has rippled forward to create today a tidal wave of unanticipated consequences. Since Bellas Hess, out-of-state retailers have been shielded from the obligation to collect sales tax, based purely on the notion that it would place too much of a burden on their businesses. To provide a sense of perspective, keep in mind that the year this ruling was issued was the same year the floppy disk was invented at IBM. It was also one year before the first plans were developed at MIT to create ARPANET, which laid the foundation for the internet we know today.

In 1992, the matter of sales tax on remote sales came before the high court again in Quill v. North Dakota. This time, the court reaffirmed the earlier Bellas Hess decision (8 to 1), primarily on the basis of stare decisis (“to stand by decision,” a doctrine that requires the court to respect the precedent set by prior rulings). The ruling went on to state,

“[O]ur decision is made easier by the fact that the underlying issue is not only one that Congress may be better qualified to resolve, but also one that Congress has the ultimate power to resolve. No matter how we evaluate the burdens that use taxes impose on interstate commerce, Congress remains free to disagree with our conclusions” (emphasis added).

Conclusion The retail world is a very different place today, forty-eight years after Bellas Hess, and twenty-three years after Quill. Today, keeping track of a few thousand local tax rates is no longer an insurmountable technical, administrative, or financial burden - certainly no more difficult than calculating real-time-shipping, a common feature on most web sites and online sales marketplaces. Thus, the basis for the Bellas Hess ruling no longer applies and the Marketplace Fairness Act will help the many states now facing significant budget shortfalls. Although some suggest these States have a "spending problem" rather than a "revenue problem," it is important to recognize that these States have already been reducing their spending levels year-over-year and increasing collection and enforcement efforts based upon their existing sales and use tax laws. However, a State can only enforce these laws within its own borders unless (or until) Congress recognizes the significant advances made by "man and his ingenuity with machines" over the last 48 years. Simply put, without the Marketplace Fairness Act, our States are unable to require remote retailers to collect the existing sales or use tax already approved by that state's residents.


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CRS Report for CongressPrepared for Members and Committees of Congress

State Taxation of Internet Transactions

Steven Maguire Specialist in Public Finance

May 7, 2013


7-5700 www.crs.gov

R41853


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Summary The United States Bureau of the Census estimated that $4.1 trillion worth of retail and wholesale transactions were conducted over the Internet in 2010. That amount was 16.1% of all U.S. shipments and sales in that year. Other estimates, based on different data, projected the 2011 so-called e-commerce volume at approximately $3.9 trillion. The volume, roughly $4 trillion, of e-commerce is expected to increase, and state and local governments are concerned because collection of sales taxes on these transactions is difficult to enforce.

Under current law, states cannot reach beyond their borders and compel out-of-state Internet vendors (those without nexus in the buyer’s state) to collect the use tax owed by state residents and businesses. The Supreme Court ruled in 1967 that requiring remote vendors to collect the use tax would pose an undue burden on interstate commerce. Estimates put this lost state tax revenue at approximately $11.4 billion in 2012.

Congress is involved because interstate commerce typically falls under the Commerce Clause of the Constitution. Opponents of remote vendor sales and use tax collection cite the complexity of the myriad state and local sales tax systems and the difficulty vendors would have in collecting and remitting use taxes. Proponents would like Congress to change the law and allow states to require out-of-state vendors without nexus to collect state use taxes. These proponents acknowledge that simplification and harmonization of state tax systems are likely prerequisites for Congress to consider approval of increased collection authority for states.

A number of states have been working together to harmonize sales tax collection and have created the Streamlined Sales and Use Tax Agreement (SSUTA). The SSUTA member states hope that Congress can be persuaded to allow them to require out-of-state vendors to collect taxes from customers in SSUTA member states.

In the 112th Congress, S. 1452 and H.R. 2701 would have granted SSUTA member states the authority to compel out-of-state vendors in other member states to collect sales and use taxes. H.R. 3179 would have also granted states the authority to compel out-of-state vendors to collect use taxes provided selected simplification efforts were implemented. S. 1832 would have granted SSUTA member states and non-member states that met less rigorous simplifications standards the authority to compel out-of-state vendors to collect sales and use taxes. For a constitutional analysis of the legislation, see CRS Report R42629, “Amazon Laws” and Taxation of Internet Sales: Constitutional Analysis, by Erika K. Lunder and Carol A. Pettit.

In the 113th Congress, S. 743, which was approved in the Senate on May 6; S. 336; and their House counterpart, H.R. 684, would grant SSUTA member states and non-member states that meet less rigorous simplifications standards the authority to compel out-of-state vendors with greater than $1 million in remote sales to collect sales and use taxes.

A related issue is the “Internet Tax Moratorium.” The relatively narrow moratorium prohibits new taxes on Internet access services and multiple or discriminatory taxes on Internet commerce. Congress has extended the “Moratorium” twice. The most recent extension expires November 1, 2014. An analysis of the Internet tax moratorium is beyond the scope of this report.

This report will be updated as legislative events warrant.


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Contents Introduction ...................................................................................................................................... 1 State and Local Sales and Use Taxes ............................................................................................... 2

Components of the Sales and Use Tax ...................................................................................... 2 Tax Base .............................................................................................................................. 2 Tax Rate............................................................................................................................... 4

State Reliance on Sales Taxes .................................................................................................... 7 Description of the SSUTA ............................................................................................................... 9

State Level Administration ...................................................................................................... 10 Single Tax Agency Filing .................................................................................................. 10 Vendor Compensation ....................................................................................................... 10

Uniform Tax Base .................................................................................................................... 11 Simplified Tax Rates ............................................................................................................... 11 Standard Rate Sourcing Rules for Cross-Jurisdictional Sales ................................................. 11 SSUTA Stakeholders ............................................................................................................... 12

Congressional and State Legislative Activity ................................................................................ 12 Legislation in the 113th Congress ............................................................................................ 13 Legislation in the 112th Congress ............................................................................................ 14 Amazon Laws .......................................................................................................................... 16

Economic Issues ............................................................................................................................ 16 Efficiency ................................................................................................................................ 17 Equity ...................................................................................................................................... 18 Differential Effect Among States ............................................................................................. 18 Revenue Loss Estimates .......................................................................................................... 18

Tables Table 1. State and Local Sales Taxes as Percentage of Total Personal Income, 2010 ..................... 3 Table 2. SSUTA Status and State and Local Sales Tax Rates .......................................................... 5 Table 3. State and Local Government Sales Tax Reliance ............................................................... 8

Contacts Author Contact Information........................................................................................................... 19


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Introduction State governments rely on general sales and use taxes for just under one-third (31.7%) of their total tax revenue—approximately $223 billion in FY2010. Local governments derive 11.0% of their tax revenue—approximately $62 billion in FY2010—from general sales and use taxes. Both state and local sales taxes are usually collected by vendors at the point of transaction and levied as a percentage of a product’s retail price. Alternatively, use taxes, levied at the same rate, are often not collected by the vendor if the vendor does not have nexus (loosely defined as a physical presence) in the consumer’s state. Consumers are required to remit use taxes to their taxing jurisdiction for the use of the product purchased. Compliance with this requirement, however, is quite low.

State and local governments are concerned that the expansion of e-commerce, which was estimated to reach approximately $3.9 trillion in 2012, is gradually eroding their tax base.1 This concern arises in part because the U.S. Supreme Court ruled out-of-state vendors are not required to collect sales taxes for states in which they (the vendors) do not have nexus. In hopes of stemming the potential loss of tax revenue, several states are participating in an initiative to simplify and coordinate their tax codes—called the Streamlined Sales and Use Tax Agreement (SSUTA). The member states hope that Congress could be persuaded to allow them to require out-of-state vendors to collect taxes from resident customers.

Congress has a role in this issue because interstate commerce, in most cases, falls under the Commerce Clause of the Constitution. Congress may be asked to consider taking an active role in the debate. In the 113th Congress, S. 743, approved by the Senate on May 6, and S. 336 (Senator Enzi and others) and their House counterpart H.R. 684 (Representative Womack and others) would grant SSUTA member states and non-member states that meet less rigorous simplifications standards the authority to compel out-of-state vendors with greater than $1 million in remote sales to collect sales and use taxes.

Previously, in the 112th Congress, S. 1452 and H.R. 2701 (Senator Durbin and Representative Conyers) would have granted SSUTA member states the authority to compel out-of-state vendors in other member states to collect sales and use taxes. H.R. 3179 (Representative Womack) would have also granted states the authority to compel out-of-state vendors to collect use taxes provided selected simplification efforts were implemented. S. 1832 (Senator Enzi and others including Senator Durbin) would have granted SSUTA member states and non-member states that met less rigorous simplifications standards the authority to compel out-of-state vendors to collect sales and use taxes.

A more passive approach by Congress could involve states implementing the SSUTA without congressional approval. State enforcement of remote collection would likely face legal challenges, and the outcome of these legal challenges is uncertain.2 This report intends to clarify

1 Donald Bruce, William F. Fox, LeAnn Luna, “State and Local Government Sales Tax Revenue Losses From Electronic Commerce,” State Tax Notes, 52(7):537-558, May 18, 2009, p. 7. Version available at University of Tennessee Center for Business and Economic Research, http://cber.bus.utk.edu/ecomm.htm. 2 For more on the legal aspects, see CRS Report R42629, “Amazon Laws” and Taxation of Internet Sales: Constitutional Analysis, by Erika K. Lunder and Carol A. Pettit.


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significant issues in the remote sales tax collection debate, beginning with a description of state and local sales and use taxes.

The impact of congressional action (or inaction) on the remote collection issue will vary significantly by state. For this reason, the report includes a state-by-state analysis of the sales tax.

State and Local Sales and Use Taxes In 1932, Mississippi was the first state to impose a general state sales tax. During the remainder of the 1930s, an era characterized by declining revenue from corporate and individual income taxes, 23 other states followed suit and implemented a general sales tax. At the time, the sales tax was relatively easy to administer and raised a significant amount of revenue despite a relatively low rate. Given the relative success of the sales tax in raising revenue, 45 states and the District of Columbia added the sales tax to their tax infrastructure by the late 1960s. The last of the 45 states to enact a general sales and use tax was Vermont in 1969.

Components of the Sales and Use Tax The revenue generated by a sales and use tax, assuming a given level of compliance, depends on the base of the tax and the tax rate. States often have similar consumption items included in their tax base, but they are far from uniform. Tax rates can also vary considerably, depending on the state’s reliance on other revenue sources. The SSUTA is intended to provide uniform definitions across states for items included in the base and the applicable tax rates. Following is an analysis of the variation of these components across the states.

Tax Base

The sales tax is perhaps better identified as a transaction tax on the transfer of tangible personal property, as expenditures on most services are typically excluded from the state sales tax base. In addition, in most states (34) and the District of Columbia, groceries are also exempt from state and local sales taxes or taxed at a lower rate.3

Table 1 presents the most recently available data on state and local tax revenue and an estimate of each state’s sales tax base. The sales tax revenue includes collections from individuals as well as businesses. The separate estimate of the sales tax base as a share of income is a rough approximation of the state sales tax base.4 A higher percentage likely indicates (1) a greater number of items and services subject to the sales and (2) greater compliance. In the case of Hawaii, where over 100% of personal income is includable in the tax base, the percentage likely measures some degree of pyramiding of the sales tax. Pyramiding occurs when a business pays sales tax on a good then collects more sales tax when the good is sold. Pyramiding is common in

3 Federation of Tax Administrators, State Sales Tax Rates and Food and Drug Exemptions, January 1, 2011, available at http://www.taxadmin.org/fta/rate/sales.pdf. In three additional states, groceries are subject to local sales taxes only. 4 A common identity in economics is income = consumption + saving. The sales tax is a tax on consumption. The data in the table are from Mikesell, John, “Retail Sales Taxes, 1995-98: An Era Ends,” State Tax Notes, February 21, 2000, p. 594. Data are for the 1998 tax year, the latest year for which estimates of sales tax base were made.


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many other states, but is difficult to quantify. In total, roughly half of personal income is spent on items subject to the sales taxes.

Table 1. State and Local Sales Taxes as Percentage of Total Personal Income, 2010 (amounts in thousands of dollars)

State

Total State and Local

Sales Taxes FY2010

State Sales Taxes FY2010

Local Sales Taxes

FY2010 State Personal Income 2010

Sales Tax

Base as Share

of Incomea

United States 284,910,393 222,553,989 62,356,404 12,308,496,000 49.5%

Alabama 3,882,543 2,097,434 1,785,109 161,314,102 43.2%

Alaska 341,663 - 341,663 31,243,303 —

Arizona 6,615,284 4,409,603 2,205,681 216,589,552 47.3%

Arkansas 3,532,870 2,615,290 917,580 94,581,100 63.2%

California 39,850,091 31,197,154 8,652,937 1,564,209,194 39.4%

Colorado 4,994,405 2,050,445 2,943,960 212,545,078 44.6%

Connecticut 3,145,579 3,145,579 - 198,177,832 40.9%

Delaware - - - 35,474,593 —

Dist. of Columbia 860,466 - 860,466 43,082,099 N/A

Florida 19,761,509 18,537,000 1,224,509 722,368,152 55.7%

Georgia 8,336,127 4,864,691 3,471,436 335,370,808 51.7%

Hawaii 2,316,434 2,316,434 - 55,832,057 101.3%

Idaho 1,126,671 1,126,671 - 49,577,319 50.4%

Illinois 8,534,641 6,859,971 1,674,670 539,680,018 31.8%

Indiana 5,941,044 5,941,044 - 220,865,747 44.2%

Iowa 2,739,005 2,121,842 617,163 115,547,890 44.5%

Kansas 2,901,419 2,150,270 751,149 110,205,217 50.2%

Kentucky 2,794,057 2,794,057 - 141,302,143 46.1%

Louisiana 6,137,674 2,579,946 3,557,728 168,704,348 63.6%

Maine 989,645 989,645 - 48,620,161 48.4%

Maryland 3,753,778 3,753,778 - 281,304,904 34.7%

Massachusetts 4,625,682 4,625,682 - 335,264,289 29.3%

Michigan 9,259,016 9,259,016 - 339,043,905 50.1%

Minnesota 4,534,795 4,426,608 108,187 225,853,125 43.5%

Mississippi 2,849,099 2,849,099 - 91,600,117 55.6%

Missouri 4,806,990 2,919,117 1,887,873 218,278,293 46.8%

Montana - - - 34,093,509 —

Nebraska 1,599,859 1,306,702 293,157 72,189,707 44.4%


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State

Total State and Local

Sales Taxes FY2010

State Sales Taxes FY2010

Local Sales Taxes

FY2010 State Personal Income 2010

Sales Tax

Base as Share

of Incomea

Nevada 2,839,702 2,559,489 280,213 96,751,471 57.0%

New Hampshireb - - - 57,897,613 —

New Jersey 7,898,165 7,898,165 - 443,741,546 28.8%

New Mexico 2,543,026 1,718,795 824,231 68,050,198 89.3%

New York 22,181,742 10,568,466 11,613,276 952,673,131 34.4%

North Carolina 7,952,641 5,856,993 2,095,648 330,825,526 44.9%

North Dakota 715,074 603,740 111,334 28,646,144 52.9%

Ohio 8,917,507 7,253,496 1,664,011 414,567,053 39.1%

Oklahoma 3,600,653 1,968,309 1,632,344 133,616,459 67.4%

Oregon - - - 137,820,653 —

Pennsylvania 8,614,718 8,029,797 584,921 514,351,774 32.6%

Rhode Island 798,481 798,481 - 44,207,139 28.2%

South Carolina 3,150,871 2,833,839 317,032 149,283,181 53.1%

South Dakota 1,024,680 742,363 282,317 32,302,753 68.8%

Tennesseeb 8,029,211 6,130,877 1,898,334 223,165,735 52.3%

Texas 25,091,099 19,663,374 5,427,725 965,236,295 48.5%

Utah 2,208,549 1,638,906 569,643 89,152,008 60.7%

Vermont 320,646 311,140 9,506 24,870,824 40.3%

Virginia 4,564,997 3,543,210 1,021,787 354,127,225 42.3%

Washington 11,868,138 9,607,285 2,260,853 283,367,864 48.0%

West Virginia 1,156,513 1,156,513 - 58,979,760 48.5%

Wisconsin 4,237,296 3,944,260 293,036 216,338,590 46.3%

Wyoming 966,337 789,413 176,924 25,604,496 75.1%

Source: U.S. Bureau of Census, State and Local Government Finances by Level of Government and by State: 2009-10, available at http://www.census.gov/govs/estimate/.

Notes: States in italics are states without a broad-based income tax.

a. Mikesell, John, “Retail Sales Taxes, 1995-98: An Era Ends,” State Tax Notes, February 21, 2000, p. 594. Data are for the 1998 tax year, the latest year for which estimates of sales tax base were made.

b. New Hampshire and Tennessee levy a tax on income from dividends and interest.

Tax Rate

The second component of a sales tax is the tax rate applied to the base. In 34 states, local governments piggy-back a local sales tax (which often varies among localities within the state) on the state sales tax; 11 states and the District of Columbia levy a single rate (see Table 2), with no local taxes. Some states in the group of 34 may collect a uniform local tax along with the state tax


FGV DIREITO RIO 37



and send the local revenue share back to the localities. This structure would look like a single rate to the consumer because vendors typically do not differentiate between the state and local share. For example, vendors in Virginia levy a 5.0% sales tax on purchases and remit the entire amount to the state. The state then returns what would have been raised by a 1.0% tax back to the local jurisdiction where the tax was collected. The state of Virginia keeps the remaining 4.0%.

As of March 1, 2013, California had the highest state sales tax rate of 7.5%. Indiana, Mississippi, New Jersey, Rhode Island, and Tennessee had state sales tax rate of 7.0%. The state rate is only part of the total rate; as noted earlier, most states also levy a local sales tax. As of January 1, 2012, Arizona had the highest potential combined state and local rate of 13.7%, with Alabama second at 12.0%.

Residents in high sales tax rate jurisdictions could benefit more from Internet purchases (and tax evasion) relative to those in low tax rate states. Recognizing this potential revenue loss, many high-rate states have stepped up efforts to inform consumers of their responsibility to pay use taxes on Internet and mail-order catalog purchases. As suggested earlier, states with high rates—and whose residents have a greater incentive to evade taxes—are exposed to greater potential revenue losses from the growth of Internet commerce. Because of the greater potential losses, these states are more likely to support reforms that help maintain their sales and use tax revenue base.

The tax base and tax rate determine how much revenue is generated by the sales tax for each jurisdiction. The share lost to non-compliance arising from e-commerce, however, varies considerably by state. Part of the variance can be attributed to the two components of the overall compliance: sales tax collected by vendors and use tax remitted by purchasers. Researchers on e-commerce estimated relatively high vendor compliance though considerably lower purchaser compliance.5

Table 2 also lists each state’s current status with the SSUTA. The “member” states (22) have all enacted laws that fully comply with the SSUTA. A second group of states (2) are considered “associate” states and not full members because relatively small technical changes are needed in state tax laws to be in full compliance with SSUTA. A third group of states (18) are participating in the streamlining effort but have not made the necessary uniformity changes in state sales tax law to be considered for member or associate status.

Table 2. SSUTA Status and State and Local Sales Tax Rates

State SSUTA Statusa

State Tax Rateb

Top Local Rateb

Maximum Combined Rank

United States Average — 5.576% 3.472% 9.048% —

Alabama Advisory 4.000% 8.000% 12.000% 2

Alaska No Sales Tax - 7.500% 7.500% 28

Arizona Advisory 6.600% 7.100% 13.700% 1

Arkansas Member 6.000% 5.500% 11.500% 4

5 Bruce, Donald, William F. Fox, LeAnn Luna, “State and Local Government Sales Tax Revenue Losses From Electronic Commerce,” State Tax Notes, 52(7):537-558, May 18, 2009. Version available at University of Tennessee Center for Business and Economic Research, http://cber.bus.utk.edu/ecomm.htm.


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State SSUTA Statusa

State Tax Rateb

Top Local Rateb


California Advisory 7.500% 2.500% 10.000% 11

Colorado Non-Participant

2.900% 7.000% 9.900% 12

Connecticut Advisory 6.350% — 6.350% 38

Delaware No Sales Tax — — 0.000% 48

District of Columbia Advisory — 6.000% 6.000% 40

Florida Advisory 6.000% 1.500% 7.500% 28

Georgia Member 4.000% 4.000% 8.000% 20

Hawaii Advisory 4.000% 0.500% 4.500% 47

Idaho Not Advisory 6.000% 3.000% 9.000% 15

Illinois Advisory 6.250% 4.250% 10.500% 10

Indiana Member 7.000% — 7.000% 32

Iowa Member 6.000% 2.000% 8.000% 20

Kansas Member 6.300% 5.000% 11.300% 5

Kentucky Member 6.000% — 6.000% 40

Louisiana Advisory 4.000% 6.750% 10.750% 9

Maine Advisory 5.000% — 5.000% 46

Maryland Advisory 6.000% — 6.000% 40

Massachusetts Advisory 6.250% — 6.250% 39

Michigan Member 6.000% — 6.000% 40

Minnesota Member 6.875% 1.000% 7.875% 25

Mississippi Advisory 7.000% 0.250% 7.250% 31

Missouri Advisory 4.225% 6.625% 10.850% 7

Montana No Sales Tax — — 0.000% 48

Nebraska Member 5.500% 2.000% 7.500% 28

Nevada Member 6.850% 1.250% 8.100% 19

New Hampshire No Sales Tax — — 0.000% 48

New Jersey Member 7.000% — 7.000% 32

New Mexico Advisory 5.125% 6.625% 11.750% 3

New York Advisory 4.000% 5.000% 9.000% 15

North Carolina Member 4.750% 3.000% 7.750% 26

North Dakota Member 5.000% 3.000% 8.000% 20

Ohio Associate 5.500% 2.250% 7.750% 26

Oklahoma Member 4.500% 6.350% 10.850% 8

Oregon No Sales Tax — — 0.000% 48

Pennsylvania Not Advisory 6.000% 2.000% 8.000% 20

Rhode Island Member 7.000% 0.000% 7.000% 32


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State SSUTA Statusa

State Tax Rateb

Top Local Rateb


South Carolina Advisory 6.000% 3.000% 9.000% 15

South Dakota Member 4.000% 2.000% 6.000% 40

Tennessee Associate 7.000% 2.750% 9.750% 13

Texas Advisory 6.250% 2.000% 8.250% 18

Utah Member 4.700% 6.250% 10.950% 6

Vermont Member 6.000% 1.000% 7.000% 35

Virginia Advisory 4.000% 1.500% 5.500% 45

Washington Member 6.500% 3.000% 9.500% 14

West Virginia Member 6.000% 1.000% 7.000% 35

Wisconsin Member 5.000% 1.500% 6.500% 37

Wyoming Member 4.000% 4.000% 8.000% 20

Source: State and local sales tax rate data are from the Sales Tax Institute at http://www.salestaxinstitute.com/resources/rates. The highest combined rate and accompanying rank is a CRS calculation.

Notes: “Member” means full participant in SSUTA; “Associate” generally means technical changes need in state tax laws for state full conformity; “Advisory” means not conforming to SSTUA; “Not Advisory” means part of the project, but not advising decisions; and “Non-participating” means state is not working with other states toward conformity.

a. Status is as of October 1, 2012.

b. State and local sales tax rate data are as of March 1, 2013.

State Reliance on Sales Taxes In addition to a sales tax, most states levy income taxes and almost every local jurisdiction (and some states) also levies a property tax. Table 3 presents the relative reliance of each state and local government combined on the three principal revenue sources: sales taxes, income taxes, and property taxes. Reliance is measured as a percentage of total taxes collected. Other taxes include selective sales taxes such as motor fuels taxes, alcoholic beverages taxes, tobacco product taxes, and corporate income taxes.

The U.S. average reliance is greatest for the property tax at 34.8%, and the sales tax and individual income tax accounted for 22.4% and 20.5%, respectively, of tax revenue in FY2010. The top three states in sales tax reliance were Washington, Tennessee, and South Dakota. These three states do not levy a broad based income tax, thus increasing their reliance on sales taxes.6

6 New Hampshire and Tennessee levy a tax on income from dividends and interest.


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Table 3. State and Local Government Sales Tax Reliance (in $ ‘000s, FY2010)

State Total Taxes

Sales Tax

Reliance Rank

General Sales Tax

Income Tax

Property Tax

Other Taxes

United States 1,269,649,543 284,910,393 260,338,250 441,660,815 282,740,085

Alabama 13,284,897 12 3,882,543 2,697,108 2,573,428 4,131,818

Alaska 6,167,527 47 341,663 0 1,317,853 4,508,011

Arizona 19,633,649 8 6,615,284 2,416,324 7,316,264 3,285,777

Arkansas 9,493,633 6 3,532,870 2,091,082 1,738,781 2,130,900

California 172,629,716 26 39,850,091 45,646,436 53,876,296 33,256,893

Colorado 20,497,014 23 4,994,405 4,089,948 8,019,521 3,393,140

Connecticut 21,413,689 42 3,145,579 5,768,846 9,001,234 3,498,030

Delaware 3,580,274 48 0 907,253 664,882 2,008,139

District of Columbia 5,029,797 35 860,466 1,107,139 1,859,126 1,203,066

Florida 65,838,383 11 19,761,509 0 28,251,984 17,824,890

Georgia 30,113,398 16 8,336,127 7,016,412 10,594,706 4,166,153

Hawaii 6,599,420 7 2,316,434 1,527,790 1,393,152 1,362,044

Idaho 4,340,363 18 1,126,671 1,068,754 1,308,409 836,529

Illinois 53,701,623 40 8,534,641 8,510,000 23,425,825 13,231,157

Indiana 23,334,191 20 5,941,044 5,425,994 7,653,414 4,313,739

Iowa 11,948,911 27 2,739,005 2,746,549 4,159,182 2,304,175

Kansas 11,414,648 21 2,901,419 2,691,205 3,929,862 1,892,162

Kentucky 13,768,834 31 2,794,057 4,189,709 2,963,564 3,821,504

Louisiana 16,152,067 5 6,137,674 2,286,500 3,381,489 4,346,404

Maine 5,838,327 36 989,645 1,303,370 2,373,101 1,172,211

Maryland 28,066,144 45 3,753,778 10,002,501 8,445,689 5,864,176

Massachusetts 33,475,380 44 4,625,682 10,128,035 12,982,914 5,738,749

Michigan 35,705,634 19 9,259,016 5,870,687 14,371,732 6,204,199

Minnesota 24,362,347 32 4,534,795 6,458,111 7,476,494 5,892,947

Mississippi 8,971,307 9 2,849,099 1,352,481 2,529,961 2,239,766

Missouri 18,969,733 22 4,806,990 4,613,765 5,736,335 3,812,643

Montana 3,218,860 48 0 714,814 1,279,819 1,224,227

Nebraska 7,369,089 28 1,599,859 1,514,831 2,709,053 1,545,346

Nevada 10,135,060 14 2,839,702 0 3,495,439 3,799,919

New Hampshire 5,019,682 48 0 82,365 3,242,905 1,694,412

New Jersey 51,098,729 41 7,898,165 10,322,943 24,745,242 8,132,379

New Mexico 6,548,124 4 2,543,026 956,600 1,298,616 1,749,882


FGV DIREITO RIO 41



State Total Taxes

Sales Tax

Reliance Rank

General Sales Tax

Income Tax

Property Tax

Other Taxes

New York 136,237,399 39 22,181,742 42,493,349 44,121,475 27,440,833

North Carolina 32,708,343 24 7,952,641 9,133,689 8,571,123 7,050,890

North Dakota 3,478,468 29 715,074 303,764 688,072 1,771,558

Ohio 43,406,989 30 8,917,507 12,035,853 13,035,328 9,418,301

Oklahoma 11,399,353 10 3,600,653 2,224,783 2,399,565 3,174,352

Oregon 13,125,008 48 0 4,946,443 4,940,894 3,237,671

Pennsylvania 52,706,081 38 8,614,718 13,370,580 16,004,243 14,716,540

Rhode Island 4,811,083 37 798,481 909,674 2,193,277 909,651

South Carolina 13,160,047 25 3,150,871 2,673,000 4,716,783 2,619,393

South Dakota 2,583,836 3 1,024,680 0 926,987 632,169

Tennessee 18,243,787 2 8,029,211 172,459 5,031,001 5,011,116

Texas 86,502,344 13 25,091,099 0 39,091,931 22,319,314

Utah 8,321,478 17 2,208,549 2,104,641 2,300,229 1,708,059

Vermont 2,953,897 46 320,646 489,107 1,354,320 789,824

Virginia 31,176,036 43 4,564,997 8,659,470 11,241,150 6,710,419

Washington 26,773,232 1 11,868,138 0 8,425,315 6,479,779

West Virginia 6,471,136 33 1,156,513 1,521,895 1,379,079 2,413,649

Wisconsin 24,390,866 34 4,237,296 5,791,991 9,643,592 4,717,987

Wyoming 3,479,712 15 966,337 0 1,480,183 1,033,192

Source: CRS calculations based on U.S. Bureau of Census, State and Local Government Finances by Level of Government and by State: 2009-10, available at http://www.census.gov/govs/estimate/.

Note: New Hampshire and Tennessee levy a tax on income from dividends and interest.

Description of the SSUTA The entity that drafted the original Streamline Sales and Use Tax Agreement (SSUTA), the Streamlined Sales and Use Tax Project (SSTP), was created in 2000 by 43 states and the District of Columbia. These states and the District of Columbia wanted to simplify and better synchronize individual state sales and use tax laws. Its stated goal was to create a simplified sales tax system so all types of vendors—from traditional retailers to those conducting trade over the Internet—could easily collect and remit sales taxes. The member states believe that a simplified, relatively uniform tax code across states would make it easier for remote vendors to collect sales taxes on goods sold to out-of-state customers. The SSTP was dissolved once the SSUTA became effective on October 1, 2005. The latest amendments to the SSUTA were approved May 24, 2012.7

7 For the latest update, see http://www.streamlinedsalestax.org.


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The SSUTA agreement explicitly identifies 10 points of focus.8 Uniformity and simplification are the primary themes with state level administration of the sales and use tax a critical element in achieving the “streamlining” goal. The 10 points of focus can be condensed into four general requirements for simplification: (1) state level administration, (2) uniform tax base, (3) simplified tax rates, and (4) uniform sales sourcing rules. Each is discussed in more detail in the following sections.

State Level Administration Administration of the sales tax for multistate businesses is complicated because state sales tax laws are not uniform.9 Currently, multistate businesses file sales tax returns for each jurisdiction in which they are required to remit sales taxes. These state sales and use tax compliance rules are far from uniform, which increases compliance costs and the accompanying economic inefficiencies.

Single Tax Agency Filing

Under SSUTA, sales taxes would be remitted to a single state agency and businesses will no longer file tax returns with each state (and sometimes local jurisdiction) where they conduct business. States would bear some of the administrative cost of the technology employed to implement the new system.

Vendor Compensation

States also would incur some additional administrative costs through vendor collection incentives. Many state and local governments currently compensate vendors for collection under a variety of rules and rates. Sixteen states and the District of Columbia, however, do not offer vendor compensation, and several others have caps on the total amount of compensation. Total vendor compensation would be somewhat standardized under SSUTA, establishing three uniform brackets with rates set by each member state. SSUTA would require that rates decline as a business’s tax collection volume increases. Total compensation for vendors in member states that require tax reporting by local jurisdiction is at least 0.75% of state and local sales and use tax collections. Total compensation for vendors in member states that do not require tax reporting by local jurisdiction is a minimum of 0.5% of sales and use tax collections.

As of this writing, 20 states were in full compliance with the terms of the SSUTA and are identified as “members.” Another four states are “associate members.” Only the member states will have taxes collected by remote vendors. Table 2 lists the status of SSUTA adoption in each state.

8 SSUTA, Section 102: Fundamental Purpose, p. 7. 9 For a discussion of the theoretical deficiencies U.S. sales and use tax administration, see Walter Hellerstein and Charles E. McLure Jr., “Sales Taxation of Electronic Commerce: What John Due Knew All Along,” State Tax Notes, January 1, 2001, pp. 41-46.


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Uniform Tax Base As noted earlier, each state has established rules for what to include in the sales tax base, and definitions of these items are not uniform across states. The SSUTA includes a section requiring that within each state, all jurisdictions use the same tax base.10 Thus, if the state excludes groceries from the sales tax, all local governments within the state must also exclude groceries. This seemingly straightforward requirement can become complicated. For example, as noted above, groceries are exempt from taxation in most states, whereas candy is taxable in several states. A common definition of candy (or food) must be agreed upon to implement a streamlined sales tax regime. Under SSUTA,

“Candy” means a preparation of sugar, honey, or other natural or artificial sweeteners in combination with chocolate, fruits, nuts or other ingredients or flavorings in the form of bars, drops, or pieces. “Candy” shall not include any preparation containing flour and shall require no refrigeration.

Each state would retain the choice over whether the item is taxable (in the base) and the rate that applies to the product.

Simplified Tax Rates In many states, local jurisdictions tax goods at different rates. This complication is mostly remedied under the SSUTA, as each state would be permitted only one state tax rate (with an exception for a second state rate on food and drugs). Each state can add one additional local jurisdiction rate, based on ZIP code. The member state must maintain a catalogue of rates for all ZIP codes. For ZIP codes with multiple rates, an average rate for that ZIP code would apply.

Standard Rate Sourcing Rules for Cross-Jurisdictional Sales For sales within a member state between local jurisdictions, the vendor would collect the sales tax at the rate applicable for the vendor location. This is identified as “origin” sourcing. For sales into a member state from an out-of-state vendor, the vendor levies a tax at the agreed upon statewide rate applicable in the destination state. This is identified as “destination” sourcing and is the general rule under the SSUTA.

There is some debate about the “sourcing” aspect of the SSUTA. The single statewide rate, which is set by each member state, would be a combined state and local rate. If the combined statewide rate is the state rate plus an average of local rates, it is possible that some consumers will pay a higher combined tax rate than is required. It has been proposed that the member states would be required to include a provision in the implementing legislation that would allow consumers that “overpay” to receive a credit for overpayments.

10See Streamlined Sales Tax Project, SSUTA, p. 13.


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SSUTA Stakeholders The SSUTA enjoys the support of the National Governors Association (NGA). The NGA has endorsed the SSUTA with hopes that the agreement will address the Supreme Court’s concerns about the burden on interstate commerce of collecting remote taxes. The association believes that requiring remote vendors to collect sales and use taxes under a new, simplified system will survive legal challenges. The official statement of the NGA position on the efforts to streamline state and local taxes begins with the following:

The National Governors Association supports state efforts to pursue, through negotiations, the courts, and federal legislation, provisions that would require remote, out-of-state vendors to collect sales and use taxes from their customers. Such action is necessary to restore fairness between local retail store purchases and remote sellers and to provide a means for the states to collect taxes that are owed under existing law. The rapid growth of the Internet and electronic commerce underscores the importance of maintaining equitable treatment among all sellers.11

The NGA support is shared by other state and local government organizations, including the National Conference of State Legislatures (NCSL), the Federation of Tax Administrators (FTA), and the Multistate Tax Commission (MTC).

Support also comes from large retailers who must collect sales taxes and believe the current system provides an unfair advantage to Internet retailers who do not collect such taxes. Many large brick-and-mortar companies with a strong Internet presence generally comply with guidelines like those under SSUTA and generally collect taxes on remote sales. Several retailers, however, are taking the middle ground in this debate. They understand the states’ desire to more efficiently collect sales tax revenue in a fair manner, but they ask for greater simplification and increased vendor compensation from the states for collecting state sales taxes.

Opponents of SSUTA legislation include state and local governments who feel the administrative obstacles to streamlined sales taxes are too costly to overcome and may actually exceed the potential revenue gain. These governments suggest that increased compliance with use tax laws may better be achieved through elevated consumer awareness and more enforcement activities. In addition, some business groups maintain that the collection requirement, even with streamlining, would still be too burdensome.

Also opposing SSUTA legislation are several anti-tax groups who see the SSUTA as a new tax burden rather than a simplification of the current tax system. Anti-tax groups also argue that states compete to attract businesses and customers through lower tax rates and that this competition is good for consumers.

Congressional and State Legislative Activity Remote seller collection legislation at the federal level includes bills requiring SSUTA adoption and bills that are not conditioned on SSUTA approval. State efforts have taken two tracks: 11 National Governor’s Association, Policy Position EDC-10: Streamlining State Sales Tax Systems, February 28, 2011, effective through Winter Meetings 2013, available at http://www.nga.org/portal/site/nga/menuitem.b14a675ba7f89cf9e8ebb856a11010a0.


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adopting SSUTA type simplification and/or implementing so-called Amazon laws. Following is a brief discussion of this activity.

Legislation in the 113th Congress In the 113th Congress, S. 336, S. 743, and their House counterpart, H.R. 684, would grant states the authority to require remote vendors to collect sales and use taxes if the state were members of SSUTA or if they adopted minimum simplification requirements. In addition to U.S. states and the District of Columbia, the legislation provides that “states” include the Commonwealth of Puerto Rico, Guam, American Samoa, the United States Virgin Islands, the Commonwealth of the Northern Mariana Islands, and any other territory or possession of the United States.”12The legislation would require that non-SSUTA-compliant states would need to meet the following simplification standards:

• specify the tax or taxes to which the simplification applies;

• specify the products and services otherwise subject to the tax that would be exempt;

• provide a single entity in the state responsible for all state and local tax administration, return processing, and remote audits sourced to the state;

• provide a single audit and tax return for all state and local taxing jurisdictions;

• provide a uniform sales and use tax base for all state and local taxing jurisdictions within a state;

• provide a taxability “matrix” of all goods and services along with any exemptions; and

• provide free software to remote vendors that files returns and is automatically updated.

The legislation includes a small seller exception that would exempt firms with less than $1 million in annual “remote” sales from the collection requirement.

Vendors in states without a sales tax would still be responsible for collection of sales and use taxes on shipments to customers in states with a sales tax. This component of the legislation has been a point of contention for the five states without a state-wide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. Businesses above the $1 million threshold in annual remote sales would be responsible for the collection and remittance of sales and use taxes. However, for larger retailers with over $1 million in remote sales, it would seem likely that many have filed returns in states in which they have a physical presence.13

12 S. 743, Section 4(8). 13 For the complete report, see http://www.census.gov/econ/estats/2010/2010reportfinal.pdf


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Legislation in the 112th Congress In the 112th Congress, S. 1452 and H.R. 2701 would have granted SSUTA member states the authority to compel out-of-state vendors in member states to collect sales and use taxes.14 The legislation would have responded to the Supreme Court’s recommendation in Quill Corporation v. North Dakota that Congress act, under the Commerce Clause, to clarify state sales tax collection rules.15 More specifically, the legislation would have allowed states that have fully adopted the SSUTA to collect sales taxes from sufficiently large businesses, even if those businesses do not have a nexus in the state. A “sufficiently large business” was left to the governing board of the SSUTA to define.

Under S. 1452, Congress would have granted authority to states to compel out-of-state vendors to collect sales taxes, on the condition that 10 states comprising at least 20% of the total population of all states imposing a sales tax have implemented the SSUTA. The legislation also included additional requirements for administering the new sales tax system after the SSUTA adoption threshold has been achieved. The requirements included, but were not limited to,

• a centralized, one-stop multi-state registration system;

• uniform definitions of products and product-based exemptions;

• single tax rate per taxing jurisdiction with a single additional rate for food and drugs;

• single, state-level administration of sales and use taxes;

• uniform rules for sourcing (i.e., the tax rate imposed is based on the origin or destination of the product);

• uniform procedures for certification of tax information service providers;

• uniform rules for filing returns and performing audits; and

• reasonable compensation for sellers collecting and remitting taxes.

The SSUTA generally includes these provisions, though some modifications to the SSUTA or the legislation would have been necessary for enactment.

Under the SSUTA, member states request that remote sellers voluntarily collect sales taxes on items purchased by customers outside their home state. Vendors in participating states who voluntarily collect the sales tax would be offered amnesty for previously uncollected taxes. Participating states have agreed to share the administrative burden of collecting taxes to ease tax collection for sellers. The states’ obligations under the SSUTA include the following requirements.

Business-to-business transactions are often exempt from the retail sales tax, particularly in cases where the purchaser is using the good as an input to production. These transactions are exempt

14 S. 1832 would also grant SSUTA member states the authority to compel out-of-state vendors in member states to collect sales and use taxes, but, importantly would also provide for an alternative for non-member states. S. 1832 is explained in more detail in the next section. 15 For more on the legal aspects of Internet sales taxation, see CRS Report R42629, “Amazon Laws” and Taxation of Internet Sales: Constitutional Analysis, by Erika K. Lunder and Carol A. Pettit.


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because including the transactions could lead to the “pyramiding” of the sales tax. For example, if a coffee shop were to pay a retail sales tax on the purchase of coffee, and then impose a retail sales tax on coffee brewed for the final consumer, the total sales tax paid for the cup of coffee would likely exceed the statutory rate. Products that a business purchases for resale are typically not assessed a retail sales tax for a similar reason. If a coffee shop buys beans only for resale, levying a sales tax on the wholesale purchase of the beans and then on the retail sale would more than double the statutory rate. The tax treatment of business purchases is not uniform across states. According to some estimates, approximately 18% of business purchases are taxable depending on the state.

Many individuals and organizations are also exempt from state sales taxes. Entities wishing to claim the sales tax exemption are often issued a certificate indicating their tax-free status and are required to present this certification at the point of transaction. Non-profit organizations, such as those whose mission is religious, charitable, educational, or promoting public health, often hold sales tax-exempt status.

The SSUTA would establish a system in which states would use common definitions for goods and services. Once a uniform definition is established, states would then indicate whether the good or service is taxable. In addition, states would identify which entities would be exempt from paying sales taxes (e.g., non-profit or religious organizations).

H.R. 3179, the Market Place Equity Act of 2011, introduced by Representative Womack, and S. 1832 (Senator Enzi) would have attempted to achieve the same policy objective without a formal multistate compact like SSUTA. Instead, H.R. 3179 would have authorized states to compel out-of-state vendors to collect sales and use taxes if the following requirements were satisfied:

• the state creates a remote seller sales and use tax return and requires filing no more frequently than in-state vendors;

• the state maintains a uniform tax base across the state; and

• the state uses one of three structures for remote sales tax collection: (1) a single state and local “blended” rate, (2) a single maximum state rate exclusive of any additional local rates, or (3) the destination rate which would be the actual rate of the customer’s jurisdiction.

In addition, a final condition required that the rates determined in (1) and (2) above cannot exceed the average rate applicable to in-state vendors. For purposes of (3), the state must provide vendors access to a tax rate database for all jurisdictions. Remote vendors with total United States remote sales under $1 million or remote vendors with less than $100,000 in a given state, are exempt from collection responsibility.

Like H.R. 3179, S. 1832 would have allowed remote collection authority for non-SSUTA states if minimum simplification requirements are achieved. Following is a brief summary of key simplification requirements for Congress to grant collection authority under S. 1832:

• provide a single state-level agency to administer and audit sales tax returns;

• provide a single sales and use tax return for vendors;

• provide a uniform sales tax base for all jurisdictions within the state;


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• set tax rates at the combined state and local sales tax rate where the goods or taxable services are delivered (the destination rate); and

• provide remote vendors with “adequate” software for determining the appropriate destination rate.

S. 1832 would have established a small seller exception for vendors with less than $500,000 in U.S. Internet sales. The legislation also included a provision to limit the collections authority to just sales tax and not the imposition or application of other taxes such as franchise, income, and occupation taxes.

Amazon Laws16 Some states have begun to enact what are called “Amazon Laws.” The “Amazon” modifier refers to the large Internet retailer that is located in Washington State. Amazon collects sales taxes only in the states where they claim their presence legally requires collection. In addition to Washington State, Amazon reportedly collects sales taxes in these additional states: Kansas, Kentucky, New York, and North Dakota.17 At issue are affiliate agreements between Amazon and retailers that provide an Internet portal to Amazon. Typically, the affiliates are compensated for transactions that result from the so-called “click through” to Amazon.

New York State, the first to enact a so-called Amazon Law in 2008, claimed that the affiliate relationship constituted physical presence for Amazon.18 Along with the physical presence established by the affiliate relationship came responsibility for collecting sales taxes on products sold to New York residents by Amazon. Several legal challenges to these so-called Amazon laws have been presented; a thorough legal analysis of these challenges extends beyond the scope of this report. Some proponents of the SSUTA see the growth of Amazon Laws as possibly complicating simplification efforts. Recently, Amazon has indicated support for congressionally approved collection authority as provided for in the legislation described in this report, with some modifications.19

Economic Issues During the debate about so-called “streamlining” legislation, there are several economic issues Congress may consider: (1) How will the SSUTA influence the economic efficiency and equity of

16 For a legal analysis of so-called Amazon laws, see CRS Report R42629, “Amazon Laws” and Taxation of Internet Sales: Constitutional Analysis, by Erika K. Lunder and Carol A. Pettit. 17 The American Independent Business Alliance, an advocacy group supporting the collection of sales taxes on Amazon sales, identified these states. The information is available at http://www.amiba.net/resources/news-archive/amazon-nexus-subsidiaries. 18 Other states with an “Amazon Law” include Illinois, Rhode Island, and North Carolina. For more see Steele, Thomas H., Andres Vallejo, and Kirsten Wolff, “No Solicitations: The ‘Amazon’ Laws And the Perils of Affiliate Advertising,” State Tax Notes, March 28, 2011, pp. 939- 944. 19See the testimony of Paul Misener, Vice President of World-Wide Public Policy, Amazon.com, Inc. before the U.S. Congress, House Committee on the Judiciary, Constitutional Limitations on States’ Authority to Collect Sales Taxes in E-Commerce, 112th Cong., 1st sess., November 30, 2011. And, the following hearing also includes relevant testimony: House Committee on the Judiciary, Hearing on H.R. 3179, the “Marketplace Equity Act of 2011”, 112th Cong., 2nd sess., July 24, 2012.


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state tax systems? (2) What will be the impact of changes in the treatment of Internet transactions on states that are more reliant on the sales tax? (3) What will the potential revenue loss be, absent changes in the treatment of Internet transactions? A summary of these issues follows.

Efficiency A commonly held view among economists is that a “good” tax (or more precisely, an efficient tax) minimizes distortions in consumer behavior. Broadly speaking, economists maintain that individuals should make the same choices before and after a tax is imposed. The greater the distortions in behavior caused by a tax, the greater the economic welfare loss. A sales tax levied on all consumer expenditures equally would satisfy this definition of efficiency. As noted earlier, however, under the current state sales tax system, all consumption expenditures are not treated equally. The growth of tax-free Internet transactions, both business-to-business and business-to-consumer, will likely amplify the efficiency losses from altered consumer behavior.

An alternative theory concerning economic efficiency in sales taxation is referred to as “optimal commodity taxation.” Under an optimal commodity tax, the tax rate is based on (or determined by) what is termed the price elasticity of demand for the product (sometimes called the “Ramsey Rule”). Products that are price inelastic, meaning quantity demanded is unresponsive to changes in price, should be levied a higher rate of tax. In contrast, products that are price elastic should have a lower rate of tax. If products purchased over the Internet are relatively more price elastic, then the lower tax rate created by effectively tax-free Internet transactions may improve economic efficiency as behavioral changes are reduced. However, the price elasticity of products available over the Internet is difficult to measure, and the efficiency gain, if any, is suspected to be small.

An additional economic inefficiency arises if vendors change location to avoid collecting sales taxes. The location change would likely result in higher transportation costs. In the long run, it is conceivable that the higher transportation costs would erode the advantage of evading the sales tax.

For example, consider a Virginia consumer who wants to buy a set of woodworking chisels. The local Virginia hardware store sells the set for $50 (including profit). An Internet-savvy hardware store in Georgia is willing to sell the same chisel set for $52 inclusive of profit and shipping costs. So, before taxes, the local retailer could offer the chisels at a lower price. The marginal customer, who is indifferent between the two retailers before taxes (even though the Internet is more expensive, it is more convenient), is therefore just as likely to buy from the Internet retailer as from the local retailer.

Virginia imposes a state and local sales tax of 5.0%, thus yielding a final sales price to the consumer of $52.50. Given the higher relative price inclusive of the tax, the marginal consumer, along with many other consumers, would likely switch to buying chisels from the Georgia-based Internet retailer (assuming these consumers do not feel compelled to pay the required Virginia use tax on the Internet purchase). The diversion from retail to the Internet in response to the non-collection of the use tax represents a loss in economic efficiency. The additional $2 in production costs ($52 less $50) represents the efficiency loss to society from evading the use tax.

Note that in the absence of sales and use taxes, the Internet vendor in the above example may yield to market forces and close up shop. However, if the Internet vendor continues to operate even without the tax advantage, it could be the case that consumers are willing to pay higher


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prices for the convenience of Internet shopping. If this were true, then the higher “production costs” for Internet vendors would not necessarily result in an efficiency loss.

Equity The sales tax is often criticized as a regressive tax—a tax that disproportionately burdens the poor. Assuming Internet shoppers are relatively better off and do not remit use taxes as prescribed by state law, they can avoid paying tax on a larger portion of their consumption expenditures than those without Internet access at home or work. Consumers without ready Internet access are not afforded the same opportunity to “evade” the sales and use tax. In this way, electronic commerce may arguably exacerbate the regressiveness of the sales tax, at least in the short run. As computers and access to the Internet become more readily available, the potential inequity arising from this aspect of the “digital divide” could diminish.

Equity issues also arise with respect to businesses. Currently, local retailers are required to collect sales taxes for the state at the point of sale. Internet retailers, in contrast, are not faced with that administrative burden. Thus, two otherwise equal retailers face different state and local tax burdens. In relatively high tax rate states, this disparity may be significant. As noted earlier, consumers in these high tax rate states have a greater incentive to purchase from out-of-state vendors, exacerbating the tax burden differential.

Differential Effect Among States The growth of Internet-based commerce will have the greatest effect on the states most reliant on the sales and use tax. In addition to having more revenue at risk, high reliance states also face greater efficiency losses because of their generally higher state tax rates. As noted above, higher rates drive a larger wedge between the retail price inclusive of the sales tax and the Internet price and thus exacerbate the efficiency loss from the sales tax. States with low rates (and less reliance) would tend to have a smaller wedge between the two modes of transaction. States with both a high rate and high reliance would tend to recognize the greatest revenue loss from a ban on the taxation of Internet transactions.

Revenue Loss Estimates Researchers estimated in April 2009 that total state and local revenue loss from “new e-commerce” in 2012 would be approximately $11.4 billion.20 “New e-commerce” is the lost revenue from states not collecting the use tax on remote Internet transactions. This estimate excluded purchases made over the telephone or through catalogs that would have occurred anyway. California was projected to lose $1.9 billion; Texas, $870.4 million; and New York, $865.5 million.

20 Bruce, Donald, William F. Fox, and LeAnn Luna, “State and Local Government Sales Tax Revenue Losses from Electronic Commerce,” State Tax Notes, 52(7):537-558, May 18, 2009. Version available at University of Tennessee Center for Business and Economic Research, http://cber.bus.utk.edu/ecomm.htm.


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Author Contact Information Steven Maguire Specialist in Public Finance [email protected], 7-7841


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http://marketplacefairness.org/bill-text/

113th Congress 1st Session

S.336

February 14, 2013 - In The Senate Of The United States

Mr. ENZI (for himself, Mr. ALEXANDER, Mr. BLUNT, Mr. BOOZMAN, Mr. CARDIN, Mr CARPER, Mr. CORKER, Ms. COLLINS, Mr. COWAN, Mr. DURBIN, Ms. FEINSTEIN, Mr. FRANKEN, Mr. GRAHAM, Mr. HARKIN, Ms. HEITKAMP, Ms. HIRONO, Mr. JOHNSON of South Dakota, Mr. KING, Ms. KLOBUCHAR, Ms. LANDRIEU, Mr. LEVIN, Mr. MANCHIN, Mr. MURPHY, Mr. PRYOR, Mr. REED, Mr. ROCKEFELLER, Mr. UDALL of Colorado, Mr. WARNER, Ms. WARREN, and Mr. WHITEHOUSE) introduced the following bill; which was read twice and referred to the Committee on Finance.

S.743

April 17, 2013 - In The Senate Of The United States

Mr. ENZI (for himself, Mr. ALEXANDER, Mr. BLUNT, Mr. BOOZMAN, Mr. CARDIN, Mr CARPER, Mr. CORKER, Ms. COLLINS, Mr. COWAN, Mr. DURBIN, Ms. FEINSTEIN, Mr. FRANKEN, Mr. GRAHAM, Mr. HARKIN, Ms. HEITKAMP, Ms. HIRONO, Mr. JOHNSON of South Dakota, Mr. KING, Ms. KLOBUCHAR, Ms. LANDRIEU, Mr. LEVIN, Mr. MANCHIN, Mr. MURPHY, Mr. PRYOR, Mr. REED, Mr. ROCKEFELLER, Mr. UDALL of Colorado, Mr. WARNER, Ms. WARREN, and Mr. WHITEHOUSE)

H.R.684

February 14, 2013 - In The House of Representatives Of The United States

Mr. WOMACK (for himself, Mr. AMODEI, Mr. BACHUS, Mr. BARLETTA, Mr. BARTON, Mr. CAPUANO, Ms. CHU, Mr. CICILLINE, Mr. COHEN, Mr. CONAWAY, Mr. CONYERS, Mr. COOPER, Mr. CRAWFORD, Mr. CRENSHAW, Mr. CUMMINGS, Ms. DELAURO, Ms. DELBENE, Mr. DENT, Mr. DEUTCH, Mr. DIAZ-BALART, Ms. DUCKWORTH, Mr. DUNCAN, Mr. ELLISON, Ms. ELLMERS, Mr. FOSTER, Mr. GIBSON, Mr. GRIFFIN, Mr. GRIFFITH, Mr. GRIJALVA, Mr. GRIMM, Mr. HORSFORD, Mr. HUFFMAN, Ms. JOHNSON of Texas, Mr. JOHNSON of Georgia, Mr. JOYCE, Mr. KILMER, Mr. LANGEVIN, Mr. LARSON of Connecticut, Mr. LARSON of Washington, Mr. LOWENTHAL, Ms. MCCOLLUM, Ms. NOEM, Ms. NORTON, Ms. PINGREE, Mr. POCAN, Mr. POE, Mr. QUIGLEY, Mr. RIGELL, Mr. ROSS, Mr. RUSH, Ms. LINDA SANCHEZ, Ms. LORETTA SANCHEZ, Ms. SCHAKOWSKY, Mr. SCHOCK, Ms. SCHWARTZ, Mr. SCOTT of Georgia, Mr. SCOTT of Virginia, Ms. SINEMA, Mr. SMITH, Ms. SPEIER, Mr. STIVERS, Ms. TSONGAS, Mr. VAN HOLLEN, Mr. VEASEY, Mr. WELCH, Ms. WILSON, AND Mr. YOUNG) introduced the following bill; which was read twice and referred to the Committee on The Judiciary. 4/8/2013: Referred to the Subcommittee on Regulatory Reform, Commercial And Antitrust Law.


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introduced the following bill; which was read twice and placed on the Senate Legislative Calendar under General Orders. Calendar No. 41. 4/22/2013: Cloture on the motion to proceed to measure invoked in Senate by Yea-Nay Vote 74 - 20, Record Vote Number 107. 4/24/2013: Motion to proceed to consideration of measure agreed to in Senate by Yea-Nay Vote 74 - 23, Record Vote Number 110. 4/25/2013: Cloture on measure invoked in Senate by Yea-Nay Vote. 63 - 30, Record Vote Number 111. Passed Senate with an amendment by Yea-Nay Vote. 69 - 27. Record Vote Number: 113.

May 20, 2013 - In The House of Representatives

Referred to the House Committee on the Judiciary.

A Bill (as ammended and passed by the Senate May 6, 2013)

To restore States' sovereign rights to enforce State and local sales and use tax laws, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE. This Act may be cited as the "Marketplace Fairness Act of 2013".

SECTION 2. AUTHORIZATION TO REQUIRE COLLECTION OF SALES AND USE TAXES.

a. STREAMLINED SALES AND USE TAX AGREEMENT.-Each Member State under the Streamlined Sales and Use Tax Agreement is authorized to require all sellers not qualifying for the small seller exception described in subsection (c) to collect and remit sales and use taxes with respect to remote sales sourced to that Member State pursuant to the provisions of the Streamlined Sales and Use Tax Agreement, but only if any changes to the Streamlined Sales and Use Tax Agreement made after the date of the enactment of this Act are not in conflict with the minimum simplification requirements in subsection (b)(2). A State may exercise authority under this Act beginning 180 days after the State publishes notice of the State’s intent to exercise the authority under this Act, but


FGV DIREITO RIO 54

no earlier than the first day of the calendar quarter that is at least 180 days after the date of the enactment of this Act.

b. ALTERNATIVE.-A State that is not a Member State under the Streamlined Sales and Use Tax Agreement is authorized notwithstanding any other provision of law to require all sellers not qualifying for the small seller exception described in subsection (c) to collect and remit sales and use taxes with respect to remote sales sourced to that State, but only if the State adopts and implements the minimum simplification requirements in paragraph (2). Such authority shall commence beginning no earlier than the first day of the calendar quarter that is at least 6 months after the date that the State—

1. enacts legislation to exercise the authority granted by this Act- A. specifying the tax or taxes to which such authority and the

minimum simplification requirements in paragraph (2) shall apply; and

B. specifying the products and services otherwise subject to the tax or taxes identified by the State under subparagraph (A) to which the authority of this Act shall not apply; and

2. implements each of the following minimum simplification requirements: A. Provide

i. a single entity within the State responsible for all State and local sales and use tax administration, return processing, and audits for remote sales sourced to the State;

ii. a single audit of a remote seller for all State and local taxing jurisdictions within that State; and

iii. a single sales and use tax return to be used by remote sellers to be filed with the single entity responsible for tax administration.

A State may not require a remote seller to file sales and use tax returns any more frequently than returns are required for nonremote sellers or impose requirements on remote sellers that the State does not impose on nonremote sellers with respect to the collection of sales and use taxes under this Act. No local jurisdiction may require a remote seller to submit a sales and use tax return or to collect sales and use taxes other than as provided by this paragraph.

B. Provide a uniform sales and use tax base among the State and the local taxing jurisdictions within the State pursuant to paragraph(1).

C. Source all remote sales in compliance with the sourcing definition set forth in section 4(7).

D. Provide i. information indicating the taxability of products and

services along with any product and service exemptions from sales and use tax in the State and a rates and boundary database;

ii. software free of charge for remote sellers that calculates sales and use taxes due on each transaction at the time the


FGV DIREITO RIO 55

transaction is completed, that files sales and use tax returns, and that is updated to reflect rate changes as described subparagraph (H); and

iii. certification procedures for persons to be approved as certified software providers.

For purposes of clause (iii), the software provided by certified software providers shall be capable of calculating and filing sales and use taxes in all States qualified under this Act.

E. Relieve remote sellers from liability to the State or locality for the incorrect collection, remittance, or noncollection of sales and use taxes, including any penalties or interest, if the liability is the result of an error or omission made by a certified software provider.

F. Relieve certified software providers from liability to the State or locality for the incorrect collection, remittance, or noncollection of sales and use taxes, including any penalties or interest, if the liability is the result of misleading or inaccurate information provided by a remote seller.

G. Relieve remote sellers and certified software providers from liability to the State or locality for incorrect collection, remittance, or noncollection of sales and use taxes, including any penalties or interest, if the liability is the result of incorrect information or software provided by the State.

H. Provide remote sellers and certified software providers with 90 days notice of a rate change by the State or any locality in the State and update the information described in subparagraph (D)(i) accordingly and relieve any remote seller or certified software provider from liability for collecting sales and use taxes at the immediately preceding effective rate during the 90-day notice period if the required notice is not provided.

c. SMALL SELLER EXCEPTION.-A State is authorized to require a remote seller to collect sales and use taxes under this Act only if the remote seller has gross annual receipts in total remote sales in the United States in the preceding calendar year exceeding $1,000,000. For purposes of determining whether the threshold in this subsection is met, the gross annual receipts from remote sales of 2 or more persons shall be aggregated if—

1. such persons are related to the remote seller within the meaning of subsections (b) and (c) of section 267 or section 707(b)(1) of the Internal Revenue Code of 1986; or

2. such persons have 1 or more ownership relationships and such relationships were designed with a principal purpose of avoiding the application of these rules.

SECTION 3. LIMITATIONS.

a. IN GENERAL.-Nothing in this Act shall be construed as 1. subjecting a seller or any other person to franchise, income, occupation,

or any other type of taxes, other than sales and use taxes;


FGV DIREITO RIO 56

2. affecting the application of such taxes; or 3. enlarging or reducing State authority to impose such taxes.

b. NO EFFECT ON NEXUS.-This Act shall not be construed to create any nexus or alter the standards for determining nexus between a person and a State or locality.

c. NO EFFECT ON SELLER CHOICE.—Nothing in this Act shall be construed to deny the ability of a remote seller to deploy and utilize a certified software provider of the seller’s choice.

d. LICENSING AND REGULATORY REQUIREMENTS.Nothing in this Act shall be construed as permitting or prohibiting a State from

1. licensing or regulating any person; 2. requiring any person to qualify to transact intrastate business; 3. subjecting any person to State or local taxes not related to the sale of

products or services; or 4. exercising authority over matters of interstate commerce.

e. NO NEW TAXES.-Nothing in this Act shall be construed as encouraging a State to impose sales and use taxes on any products or services not subject to taxation prior to the date of the enactment of this Act.

f. NO EFFECT ON INTRASTATE SALES.-The provisions of this Act shall apply only to remote sales and shall not apply to intrastate sales or intrastate sourcing rules. States granted authority under section 2(a) shall comply with all intrastate provisions of the Streamlined Sales and Use Tax Agreement.

g. NO EFFECT ON MOBILE TELECOMMUNICATIONS 14 SOURCING ACT.- Nothing in this Act shall be construed as altering in any manner or preempting the Mobile Telecommunications Sourcing Act (4 U.S.C. 116-126).

SECTION 4. DEFINITIONS AND SPECIAL RULES. In this Act:

1. CERTIFIED SOFTWARE PROVIDER.-The term "certified software provider" means a person that

A. provides software to remote sellers to facilitate State and local sales and use tax compliance pursuant to section 2(b)(2)(D)(ii); and

B. is certified by a State to so provide such software 2. LOCALITY; Local.-The terms "locality" and "local" refer to any political

subdivision of a State. 3. MEMBER STATE.-The term "Member State"-

A. means a Member State as that term is used under the Streamlined Sales and Use Tax Agreement as in effect on the date of the enactment of this Act; and

B. does not include any associate member under the Streamlined Sales and Use Tax Agreement.

4. PERSON.-The term "person" means an individual, trust, estate, fiduciary, partnership, corporation, limited liability company, or other legal entity, and a State or local government.

5. REMOTE SALE.-The term "remote sale" means a sale into a State, as determined under the sourcing rules under paragraph (7), in which the seller would not legally be required to pay, collect, or remit State or local sales and use taxes unless provided by this Act.


FGV DIREITO RIO 57

6. REMOTE SELLER.-The term "remote seller" means a person that makes remote sales in the State.

7. SOURCED.-For purposes of a State granted authority under section 2(b), the location to which a remote sale is sourced refers to the location where the item sold is received by the purchaser, based on the location indicated by instructions for delivery that the purchaser furnishes to the seller. When no delivery location is specified, the remote sale is sourced to the customer's address that is either known to the seller or, if not known, obtained by the seller during the consummation of the transaction, including the address of the customer's payment instrument if no other address is available. If an address is unknown and a billing address cannot be obtained, the remote sale is sourced to the address of the seller from which the remote sale was made. A State granted authority under section 2(a) shall comply with the sourcing provisions of the Streamlined Sales and Use Tax Agreement.

8. STATE.-The term "State" means each of the several States, the District of Columbia, the Commonwealth of Puerto Rico, Guam, American Samoa, the United States Virgin Islands, the Commonwealth of the Northern Mariana Islands, and any other territory or possession of the United States, and any tribal organization (as defined in section 4 of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450b)).

9. STREAMLINED SALES AND USE TAX AGREEMENT.-The term "Streamlined Sales and Use rrax Agreement" means the multi-State agreement with that title adopted on November 12, 2002, as in effect on the date of the enactment of this Act and as further amended from time to time.

SECTION 5. SEVERABILITY. If any provision of this Act or the application of such provision to any person or circumstance is held to be unconstitutional, the remainder of this Act and the application of the provisions of such to any person or circumstance shall not be affected thereby.

SECTION 6. PREEMPTION. Except as otherwise provided in this Act, this Act shall not be construed to preempt or limit any power exercised or to be exercised by a State or local jurisdiction under the law of such State or local jurisdiction or under any other Federal law.


FGV DIREITO RIO 58

114th Congress 1st Session S. 698

March 10, 2015 - In The Senate Of The United States

Mr. ENZI (for himself, Mr. ALEXANDER, Ms. BALDWIN, Mr. BOOZMAN, Mr. BLUNT, Mr. CARDIN, Ms. COLLINS, Mr. CORKER, Mr. DONNELLY, Mr. DURBIN, Mrs. FEINSTEIN, Mr. FRANKEN, Mr. GRAHAM, Ms. HEITKAMP, Mr. KAINE, Mr. KING, Ms. KLOBUCHAR, Mr. MANCHIN, Mr. REED, Mr. WARNER, Ms. WARREN, and Mr. WHITEHOUSE) introduced the following bill; which was read twice and referred to the Committee on Finance.

A Bill To restore States' sovereign rights to enforce State and local sales and use tax laws, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE. This Act may be cited as the "Marketplace Fairness Act of 2015".

SECTION 2. AUTHORIZATION TO REQUIRE COLLECTION OF SALES AND USE TAXES.

a. STREAMLINED SALES AND USE TAX AGREEMENT.-Each Member State under the Streamlined Sales and Use Tax Agreement is authorized to require all sellers not qualifying for the small seller exception described in subsection (c) to collect and remit sales and use taxes with respect to remote sales sourced to that Member State pursuant to the provisions of the Streamlined Sales and Use Tax Agreement, but only if any changes to the Streamlined Sales and Use Tax Agreement made after the date of the enactment of this Act are not in conflict with the minimum simplification requirements in subsection (b)(2). Subject to section 3(h), a State may exercise authority under this Act beginning 180 days after the State publishes notice of the State’s intent to exercise the authority under this Act, but no earlier than the first day of the calendar quarter that is at least 180 days after the date of the enactment of this Act.

b. ALTERNATIVE.-A State that is not a Member State under the Streamlined Sales and Use Tax Agreement is authorized notwithstanding any other provision of law to require all sellers not qualifying for the small seller exception described in subsection (c) to collect and remit sales and use taxes with respect to remote sales sourced to that State, but only if the State adopts and implements


FGV DIREITO RIO 59

the minimum simplification requirements in paragraph (2). Subject to section 3(h), such authority shall commence beginning no earlier than the first day of the calendar quarter that is at least 6 months after the date that the State—

1. enacts legislation to exercise the authority granted by this Act- A. specifying the tax or taxes to which such authority and the

minimum simplification requirements in paragraph (2) shall apply; and

B. specifying the products and services otherwise subject to the tax or taxes identified by the State under subparagraph (A) to which the authority of this Act shall not apply; and

2. implements each of the following minimum simplification requirements: A. Provide

i. a single entity within the State responsible for all State and local sales and use tax administration, return processing, and audits for remote sales sourced to the State;

ii. a single audit of a remote seller for all State and local taxing jurisdictions within that State; and

iii. a single sales and use tax return to be used by remote sellers to be filed with the single entity responsible for tax administration.

A State may not require a remote seller to file sales and use tax returns any more frequently than returns are required for nonremote sellers or impose requirements on remote sellers that the State does not impose on nonremote sellers with respect to the collection of sales and use taxes under this Act. No local jurisdiction may require a remote seller to submit a sales and use tax return or to collect sales and use taxes other than as provided by this paragraph.

B. Provide a uniform sales and use tax base among the State and the local taxing jurisdictions within the State pursuant to paragraph(1).

C. Source all remote sales in compliance with the sourcing definition set forth in section 4(7).

D. Provide i. information indicating the taxability of products and

services along with any product and service exemptions from sales and use tax in the State and a rates and boundary database;

ii. software free of charge for remote sellers that calculates sales and use taxes due on each transaction at the time the transaction is completed, that files sales and use tax returns, and that is updated to reflect rate changes as described subparagraph (H); and

iii. certification procedures for persons to be approved as certified software providers.


FGV DIREITO RIO 60

For purposes of clause (iii), the software provided by certified software providers shall be capable of calculating and filing sales and use taxes in all States qualified under this Act.

E. Relieve remote sellers from liability to the State or locality for the incorrect collection, remittance, or noncollection of sales and use taxes, including any penalties or interest, if the liability is the result of an error or omission made by a certified software provider.

F. Relieve certified software providers from liability to the State or locality for the incorrect collection, remittance, or noncollection of sales and use taxes, including any penalties or interest, if the liability is the result of misleading or inaccurate information provided by a remote seller.

G. Relieve remote sellers and certified software providers from liability to the State or locality for incorrect collection, remittance, or noncollection of sales and use taxes, including any penalties or interest, if the liability is the result of incorrect information or software provided by the State.

H. Provide remote sellers and certified software providers with 90 days notice of a rate change by the State or any locality in the State and update the information described in subparagraph (D)(i) accordingly and relieve any remote seller or certified software provider from liability for collecting sales and use taxes at the immediately preceding effective rate during the 90-day notice period if the required notice is not provided.

c. SMALL SELLER EXCEPTION.-A State is authorized to require a remote seller to collect sales and use taxes under this Act only if the remote seller has gross annual receipts in total remote sales in the United States in the preceding calendar year exceeding $1,000,000. For purposes of determining whether the threshold in this subsection is met, the gross annual receipts from remote sales of 2 or more persons shall be aggregated if—

1. such persons are related to the remote seller within the meaning of subsections (b) and (c) of section 267 or section 707(b)(1) of the Internal Revenue Code of 1986; or

2. such persons have 1 or more ownership relationships and such relationships were designed with a principal purpose of avoiding the application of these rules.

SECTION 3. LIMITATIONS.

a. IN GENERAL.-Nothing in this Act shall be construed as 1. subjecting a seller or any other person to franchise, income, occupation,

or any other type of taxes, other than sales and use taxes; 2. affecting the application of such taxes; or 3. enlarging or reducing State authority to impose such taxes.

b. NO EFFECT ON NEXUS.-This Act shall not be construed to create any nexus or alter the standards for determining nexus between a person and a State or locality.


FGV DIREITO RIO 61

c. NO EFFECT ON SELLER CHOICE.—Nothing in this Act shall be construed to deny the ability of a remote seller to deploy and utilize a certified software provider of the seller’s choice.

d. LICENSING AND REGULATORY REQUIREMENTS.Nothing in this Act shall be construed as permitting or prohibiting a State from

1. licensing or regulating any person; 2. requiring any person to qualify to transact intrastate business; 3. subjecting any person to State or local taxes not related to the sale of

products or services; or 4. exercising authority over matters of interstate commerce.

e. NO NEW TAXES.-Nothing in this Act shall be construed as encouraging a State to impose sales and use taxes on any products or services not subject to taxation prior to the date of the enactment of this Act.

f. NO EFFECT ON INTRASTATE SALES.-The provisions of this Act shall apply only to remote sales and shall not apply to intrastate sales or intrastate sourcing rules. States granted authority under section 2(a) shall comply with all intrastate provisions of the Streamlined Sales and Use Tax Agreement.

g. NO EFFECT ON MOBILE TELECOMMUNICATIONS 14 SOURCING ACT.-Nothing in this Act shall be construed as altering in any manner or preempting the Mobile Telecommunications Sourcing Act (4 U.S.C. 116-126).

h. LIMITATION ON INITIAL COLLECTION OF SALES AND USE TAXES FROM REMOTE SALES-A State may not begin to exercise the authority under this Act—

1. before the date that is 1 year after the date of the enactment of this Act; and

2. during the period beginning October 1 and ending on December 31 of the first calendar year beginning after the date of the enactment of this Act.

SECTION 4. DEFINITIONS AND SPECIAL RULES. In this Act:

1. CERTIFIED SOFTWARE PROVIDER.-The term "certified software provider" means a person that

A. provides software to remote sellers to facilitate State and local sales and use tax compliance pursuant to section 2(b)(2)(D)(ii); and

B. is certified by a State to so provide such software 2. LOCALITY; Local.-The terms "locality" and "local" refer to any political

subdivision of a State. 3. MEMBER STATE.-The term "Member State"-

A. means a Member State as that term is used under the Streamlined Sales and Use Tax Agreement as in effect on the date of the enactment of this Act; and

B. does not include any associate member under the Streamlined Sales and Use Tax Agreement.

4. PERSON.-The term "person" means an individual, trust, estate, fiduciary, partnership, corporation, limited liability company, or other legal entity, and a State or local government.

5. REMOTE SALE.-The term "remote sale" means a sale into a State, as determined under the sourcing rules under paragraph (7), in which the seller


FGV DIREITO RIO 62

would not legally be required to pay, collect, or remit State or local sales and use taxes unless provided by this Act.

6. REMOTE SELLER.-The term "remote seller" means a person that makes remote sales in the State.

7. SOURCED.-For purposes of a State granted authority under section 2(b), the location to which a remote sale is sourced refers to the location where the item sold is received by the purchaser, based on the location indicated by instructions for delivery that the purchaser furnishes to the seller. When no delivery location is specified, the remote sale is sourced to the customer's address that is either known to the seller or, if not known, obtained by the seller during the consummation of the transaction, including the address of the customer's payment instrument if no other address is available. If an address is unknown and a billing address cannot be obtained, the remote sale is sourced to the address of the seller from which the remote sale was made. A State granted authority under section 2(a) shall comply with the sourcing provisions of the Streamlined Sales and Use Tax Agreement.

8. STATE.-The term "State" means each of the several States, the District of Columbia, the Commonwealth of Puerto Rico, Guam, American Samoa, the United States Virgin Islands, the Commonwealth of the Northern Mariana Islands, and any other territory or possession of the United States, and any tribal organization (as defined in section 4 of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450b)).

9. STREAMLINED SALES AND USE TAX AGREEMENT.-The term "Streamlined Sales and Use rrax Agreement" means the multi-State agreement with that title adopted on November 12, 2002, as in effect on the date of the enactment of this Act and as further amended from time to time.

SECTION 5. SEVERABILITY. If any provision of this Act or the application of such provision to any person or circumstance is held to be unconstitutional, the remainder of this Act and the application of the provisions of such to any person or circumstance shall not be affected thereby.

SECTION 6. PREEMPTION. Except as otherwise provided in this Act, this Act shall not be construed to preempt or limit any power exercised or to be exercised by a State or local jurisdiction under the law of such State or local jurisdiction or under any other Federal law.


FGV DIREITO RIO 63

ICSC 2015 National Efairness Poll Results

SUMMARY In September 2015, the International Council of Shopping Centers (ICSC) commissioned ORC International to conduct a national telephone poll (Telephone CARAVAN®) of over 1,000 Americans to gauge their awareness of and attitudes towards the “efairness issue,” which concerns the collection and remittance of sales tax for online purchases. This is the fourth such annual poll. The poll found that, as in prior years, an overwhelming majority of Americans support federal legislation that would shift the responsibility to collect and remit sales taxes on Internet purchases from the individual to the online vendor. The results show that Americans are becoming more and more aware that uncollected sales taxes are owed to state and local governments, but believe that it would be far easier for the sellers to collect those sales taxes at the point-of-purchase rather than for individual consumers to maintain their own records and pay the use tax directly to the state when they file their income tax returns. Moreover, the poll found that the current system that requires brick-and-mortar retailers to collect sales taxes and allows online-only sellers not to do so is seen as inherently unfair—essentially providing a significant competitive advantage to the online-only sellers over local businesses. This is important because the poll also found three-quarters of registered voters recognize that local retail is the cornerstone of their communities and essential in maintaining healthy and vibrant economies. KEY FINDINGS

Seven out of every 10 registered voters support federal efairness legislation that requires online-only sellers to collect sales tax at the point-of-purchase.

62% of registered voters are aware that uncollected sales and use taxes from online purchases are owed when filing income taxes.

816 of the 1,008 individuals surveyed (81%) felt that it would be easier for online-only sellers to collect owed sales taxes at the point-of-purchase versus the current system of self-reporting, which has a remittance rate of less than 2%.

58% of registered voters would NOT change the way they shop online as a result of federal efairness legislation.

Nine out of every 10 Americans recognize the vital importance of local retailers to their community’s economic health and prosperity.

Over half (53%) of the surveyed population believes that the current uneven playing field is inherently unfair and gives online-only sellers a clear competitive advantage.


FGV DIREITO RIO 64

DETAILED FINDINGS

Support for Federal Efairness Legislation Since 2013, the percentage of individuals who support federal efairness legislation that requires online-only sellers to collect and remit sales taxes on behalf of the consumer has increased from 64% to 70%. While the levels of support differ by demographic group, there appears to be a historic difference between males and females on this issue. Females tend to be far more accepting of proposed efairness legislation than their male counterparts—although the gap is closing (see Figure 1). With respect to age, there is a clear difference between 18-34 years-olds and those 65 years and older. As seen in Figure 2, in general, as age increases the propensity to support proposed efairness legislation falls. What is notable is that, over the last two years, the percentage of 18-34 year-olds who support a legislative fix has grown faster than the 65+ age group—although both groups have grown.

Figure 1: Support for Proposed Legislation by Gender

Figure 2: Support for Proposed Legislation by Age Awareness of Current Sales Tax Obligations As noted above, the awareness of this issue among registered voters has increased by 3% since last year. The most significant trends within demographic groups appear to relate to income, household size and education levels. As one might expect, as income rises, the poll found that those making $100,000 or more per year were 11 percent more aware of the current legal obligation to self-report uncollected sales taxes on their income tax returns than those making less than $35k per year (66% versus 55%). Households with three or more individuals were 13 percent

52%

56%

60%

64%

68%

72%

Male Female

2013 2015

25%

35%

45%

55%

65%

75%

85%

18-34 35-44 45-54 55-64 65+

2013 2015


FGV DIREITO RIO 65

more “aware” than 1-person households (66% versus 53%). College graduates were 10 percent more “aware” than those with a high school diploma or less (67% versus 57%). Ease of Paying Sales Taxes on Online Purchases at the Point-of-Purchase Public sentiment concerning the most appropriate means of collecting taxes on online purchases has also evolved. In 2013, 78 percent

of those surveyed felt that it would be easier for online-only-sellers to collect the taxes owed at the point-of-purchase. By 2015, this number has grown to 81%. Among the demographic groups, age appears to be the most significant factor of differentiation. In 2015, 85 percent of 18-34 year-olds think that it would be easier/more convenient/more efficient to have online-only sellers collect and remit sales taxes on their behalf. This is 10 percent higher than for those 65 years and older. However, the older generation is coming around to this notion of simplicity. As shown in Figure 3, over the course

of the last two years, while the youngest two age groups have held steady, the oldest group has increased from 67 percent to 75 percent in favor of paying the sales taxes due at the point-of-purchase. Effect of Federal Efairness Legislation on Shopping Habits

The survey also revealed that, if and when online-only sellers begin to collect sales taxes

on all purchases, the expected impact on the levels of online shopping will be less than it was in 2013. In this year’s poll, three (3) percent more respondents said that federal efairness legislation would have NO effect on their online buying habits compared to two years ago. Across demographic groups, the most significant trend is that, as income increases, the willingness to change online shopping behavior decreases significantly. In 2014 and 2015, those making more than $100,000 per year were, on average, 25 percent more likely to report that ubiquitous online sales tax collection would have no impact on their online shopping behavior (see Figure 4). The same trend holds for household sizes and education—as they rise, online

Figure 3: Support Paying Taxes Owed at Point-of-Purchase

64%

68%

72%

76%

80%

84%

88%

18-34 35-44 45-54 55-64 65+

2013 2015

Figure 4: Would NOT Change Online Shopping Behavior

42%

48%

54%

60%

66%

72%

78%

LT $35K $35-50K $50-75K $75-100K GT $100K

2014 2015


FGV DIREITO RIO 66

shopping behavior is increasingly maintained. This is likely due to their close correlation with income levels. Importance of Local Retailers Of the 1,008 individuals surveyed, 933 (93%) answered that they feel that local retail is “important” to their community’s economic health. Among registered voters, 74 percent indicated that they view local retail as “very important”—a 2 percent increase since 2014. Across demographic groups, there appears to relative homogeneity with respect to the view that local retailers are important to regional economic activity. Understanding of Competitive Implications Among registered voters, 53 percent believe that the current system where brick-and-mortar retailers are forced to collect and remit sales taxes and others are not, online-only sellers have a clear competitive advantage. Within the demographic groups, the level of education attainment appears to have the greatest variation across groups. In this case, more highly educated individuals understand the implications of an uneven playing field to a greater degree than their less-educated counterparts (see Figure 5).

Figure 5: Online-Only Seller Competitive Advantage

40%

45%

50%

55%

60%

65%

High School Some College College Graduate

2015


FGV DIREITO RIO 67

Unclassified SG/EC(98)14/FINAL

Organisation de Coopération et de Développement Economiques OLIS : 18-Dec-1998Organisation for Economic Co-operation and Development Dist. : 22-Dec-1998__________________________________________________________________________________________

Or. Eng.DIRECTORATE FOR SCIENCE, TECHNOLOGY AND INDUSTRYSTEERING COMMITTE FOR THE PREPARATION OF THE OTTAWAMINISTERIAL CONFERENCE "A BORDERLESS WORLD: REALISINGTHE POTENTIAL OF GLOBAL ELECTRONIC COMMERCE"

OECD MINISTERIAL CONFERENCE"A BORDERLESS WORLD: REALISING THE POTENTIALOF GLOBAL ELECTRONIC COMMERCE"

OTTAWA, 7-9 OCTOBER 1998

CONFERENCE CONCLUSIONS

73015

Document complet disponible sur OLIS dans son format d’origineComplete document available on OLIS in its original format

Unclassified

SG/EC

(98)14/FINA

LO

r. Eng.


FGV DIREITO RIO 68

SG/EC(98)14/FINAL

2

FOREWORD

This document contains the Conclusions of the Ottawa Ministerial Conference, held on 7-9 October 1998.Attached as Annexes are the three Ministerial Declarations adopted at the Conference: on Protection ofPrivacy on Global Networks [DSTI/ICCP/REG(98)10/REV2], Consumer Protection in the Context ofElectronic Commerce [DSTI/CP(98)12/REV2], and Authentication for Electronic Commerce[DSTI/ICCP/REG(98)9/REV4]. At its 934th Session, on 19 October 1998, the Council adopted aResolution integrating these three Declarations into the instruments of the Organisation.

The texts of these three Declarations have been made available on general distribution with the codes/FINAL.

Copyright OECD, 1998

Applications for permission to reproduce or translate all or part of this material should be made to:

Head of Publications Service, OECD, 2 rue André-Pascal, 75775 Paris Cedex 16, France.


FGV DIREITO RIO 69

SG/EC(98)14/FINAL

3

TABLE OF CONTENTS

CONFERENCE CONCLUSIONS................................................................................................................. 4

ANNEX 1 MINISTERIAL DECLARATION ON THE PROTECTION OF PRIVACY ON GLOBALNETWORKS................................................................................................................................................ 13

ANNEX 2 MINISTERIAL DECLARATION ON CONSUMER PROTECTION IN THE CONTEXT OFELECTRONIC COMMERCE...................................................................................................................... 16

ANNEX 3 MINISTERIAL DECLARATION ON AUTHENTICATION FOR ELECTRONICCOMMERCE ............................................................................................................................................... 18


FGV DIREITO RIO 70

SG/EC(98)14/FINAL

4

OECD MINISTERIAL CONFERENCE“A BORDERLESS WORLD: REALISING THE POTENTIAL

OF GLOBAL ELECTRONIC COMMERCE”OTTAWA, 7 - 9 OCTOBER 1998

CONFERENCE CONCLUSIONS

On 7-9 October 1998, OECD Ministers, observers from non-OECD countries, heads ofinternational organisations, business leaders, and representatives of labour, consumer, and social interestsmet in Ottawa to articulate their plans to promote the development of global electronic commerce. ThisOECD Ministerial Conference, hosted by the Government of Canada and chaired by the Honourable JohnManley, Canada’s Minister of Industry, represents an important step in ongoing efforts in the evolutiontoward realising a global electronic commerce agenda.

The Ottawa Conference broke new ground for the OECD on a number of fronts. For the firsttime, at a Ministerial event, OECD countries sought the active participation of international organisations,business, labour, consumer and public interest groups in an open and transparent effort to addressimportant elements of global electronic commerce. Also for the first time at an OECD Ministerialconference, an industry-led showcase demonstrated practical applications aimed at addressing keyconcerns debated during the Conference.

Electronic commerce is by definition global. Whether the action is domestic or regional, privateor public sector - all electronic commerce policies and activities will have limited impact unless theyfacilitate a global approach. In convening the conference in Ottawa, OECD governments recognised theimportance of collaboration among governments, and with business, labour and consumers in thedevelopment and use of electronic commerce, and the need for co-operative approaches to its applicationacross sectors and national borders. To this end, OECD Ministers, the Business and Industry AdvisoryCommittee to the OECD (BIAC), the Trade Union Advisory Committee to the OECD (TUAC), and otherprivate sector participants concluded that:

− electronic commerce offers a radically new way of conducting commercial transactions, andis potentially a key engine to increase economic growth, and enhance development aroundthe world;

− co-operation amongst all players (governments, consumers, business, labour, and publicinstitutions), as well as social dialogue, must be encouraged in policy making to facilitate thedevelopment of global electronic commerce in all countries and international fora, and thattheir actions should strive to be internationally compatible whenever possible;


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− governments should promote a pro-competitive environment to allow electronic commerce toflourish, work to reduce and eliminate unnecessary barriers to trade, and act where necessaryto ensure adequate protection of key public interest objectives in the digital world just as theydo in the physical world;

− government intervention, when required, should be proportionate , transparent, consistent andpredictable, as well as technologically neutral;

− governments should recognise the importance of continued co-operation among business instandards setting, and in enhancing interoperability, within an international, voluntary andconsensus-based environment;

− business should continue to play a key role in developing and implementing solutions to anumber of the issues essential for the development of electronic commerce, recognising andtaking into account fundamental public interests, economic and social goals, and workingclosely with governments and other players;

Following an exchange of views, the Conference participants identified elements toward ashared vision for global electronic commerce. In this context, participants discussed priorities forbusiness, labour and public interests, the recommendations taken by Ministers for future work andpriorities for the OECD, and the important work underway in international bodies.

A shared vision for global electronic commerce

The Conference participants reaffirmed that the rapid development and spread of globalelectronic commerce will require a broad, collaborative approach by governments, the private sector, andinternational organisations to ensure a stable and predictable environment which facilitates its growth andmaximises its social and economic potential across all economies and societies. In this regard,participants concurred that addressing issues within the following four themes was important infacilitating global electronic commerce.

1. Building trust for users and consumers

Users must gain confidence in the digital marketplace. National regulatory frameworks andsafeguards that provide such confidence in the physical marketplace must be adjusted, where necessary, tohelp ensure continued confidence in the digital marketplace. In this context, governments havefundamental responsibilities. At the same time much is expected from and dependent on private sectorinitiatives. Participants highlighted the important areas where actions to promote the growth and use ofelectronic commerce were important: creating and implementing trustworthy technologies and policies;developing, where appropriate, underlying regulations; and, developing codes of practices, standards,industry and institutional arrangements, and technology tools, necessary for “self-regulation”, effectiveuser protection and consumer empowerment in different environments.


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2. Establishing ground rules for the digital marketplace

As governments, industry and consumers venture onto this new platform, they are looking toensure that effective protection is provided in the digital marketplace, and that unnecessary barriers toelectronic commerce are addressed. Legal frameworks should be established only where necessary,should promote a competitive environment and should be clear, consistent and predictable.

3. Enhancing the information infrastructure for electronic commerce

The growth of electronic commerce relies on universal and affordable access to the informationinfrastructure. Effective competition in telecommunications markets can ensure a sustained, long-termtrend towards lower costs, increased quality and, thus, expanded access to information infrastructures andservices. Participants of the Conference recognised the importance of adequately addressing the Year2000 problem.

4. Maximising the benefits

The transition to a digital economy is an important part of the broader move towards a globalinformation society. The full economic and social potential of electronic commerce will only be realisedthrough its widespread use by businesses, consumers, and public institutions. Government as a modeluser of commercial technologies can be an important driver in the creation of an electronic market. Thesuccessful modernisation and adaptation of organisations, and the skills and knowledge of citizens isimportant in stimulating the use of electronic commerce. Its growth also relies on a highly skilled andmotivated workforce. It is necessary to have a clear understanding of the social and economic impacts,including the impact on growth, productivity, and employment, and the needs of business, including smalland medium enterprises, organisations and consumers in both developing and developed countries.

Implementing the vision

Three key documents outlining ongoing and future activities on electronic commerce(documents attached) were tabled at the Conference:

− the OECD Action Plan for Electronic Commerce that outlines activities andrecommendations for future work;

− the Report on International and Regional Bodies: Activities and Initiatives in ElectronicCommerce that outlines current and possible work by these organisations;

− the Global Action Plan for Electronic Commerce prepared by Business withRecommendations to Governments that outlines current initiatives by business and theirviews on key issues.

Conference participants welcomed these important efforts towards global collaboration anddeveloping more compatible approaches for electronic commerce in the private sector, international andregional organisations, and the OECD.


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Conference participants reaffirmed the role of governments in creating an environment forglobal electronic commerce in which the ground rules are appropriate, clear and predictable, and whereco-operation among all players is facilitated globally. They noted as well the responsibilities ofgovernments toward meeting the public interest. Conference participants noted the Agreement byMinisters included below.

The Work of the OECD -- Agreement by OECD Ministers

“OECD Ministers reaffirmed the importance of the work of the OECD in contributing to theglobal development of electronic commerce, recommended the future work outlined in the “OECD ActionPlan for Electronic Commerce”, and urged the Secretary General and the OECD Council to give theAction Plan high priority in the OECD work programme, taking into account the capabilities of itssubsidiary bodies and the level of available resources. Ministers attached particular importance toOECD work in addressing issues in the areas of taxation, privacy, consumer protection, authentication,access to infrastructures, and the socio-economic impact of electronic commerce, while noting work inother areas in the OECD Action Plan. Ministers noted the background reports on “The Role ofTelecommunication and Information Infrastructures in Advancing Electronic Commerce”, “TheEconomic and Social Impact of Electronic Commerce: Preliminary Findings and Research Agenda”, and“The Year 2000 Problem: Impacts and Actions”. Ministers also urged the OECD to ensure that its workis carried out, to the extent possible, in co-ordination with other international organisations, business,NGOs, and is distributed as widely as possible to the global community.

“OECD Ministers affirmed their intention to work together, and in partnership with businessand social organisations to build trust in the digital marketplace, clarify rules, enhance infrastructureaccess by implementing a liberalised and competitive telecommunications marketplace, and maximisebenefits for all citizens. To this end they:

− Adopted a Declaration on Protection of Privacy on Global Networks (annexed) thatreaffirms their commitment to effective protection of privacy on global networks, affirmstheir determination to take necessary steps to this end, and recognises the need to co-operatewith industry and business, and, consistent with the terms of the Declaration, agreed that theOECD should provide practical guidance on the implementation of the OECD privacyguidelines based on national experiences and examples.

− Adopted a Declaration on Consumer Protection in the Context of Electronic Commerce(annexed) that recognises the need for governments, business, consumers and theirrepresentatives to continue to work together to ensure that consumers are afforded atransparent and effective level of protection; and urge the OECD to complete its ongoingwork to draft effective “Guidelines for Consumer Protection in the Context of ElectronicCommerce” within 1999.

− Adopted a Declaration on Authentication for Electronic Commerce (annexed) thatrecognises the importance of authentication for electronic commerce and outlines a numberof actions to promote the development and use of authentication technologies andmechanisms, including continuing work at the international level, together with business,industry and user representatives.


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− Welcomed the report “Electronic Commerce: Taxation Framework Conditions” which setsout the taxation principles that should apply to electronic commerce and outlines the agreedconditions for a taxation framework, and endorsed the proposals on how to take forward thework contained within it.

“Ministers recognised the importance of consumer and investor confidence in electroniccommerce to ensure its future growth. They noted the intention of business leaders, and the variousindustry groups to develop self-regulatory frameworks for electronic commerce. Ministers underlinedthat, where self-regulatory mechanisms were used, they should be transparent, non-discriminatory andopen to all market players and encouraged business to move rapidly to meet public expectations in thoseareas”.

Activities and Initiatives of International Organisations

Many international organisations and regional bodies are engaged in work which directly andindirectly impacts on the growth of electronic commerce. This work includes technical standards that arevoluntary and consensus based, trade liberalisation, technical assistance, policy implementation andmonitoring, and review and analysis.

The Report on International and Regional Bodies: Activities and Initiatives in ElectronicCommerce, was based on inputs provided by a wide range of international and regional organisationsunder their own responsibility, and represents a first-time compilation of the accomplishments, andongoing and proposed work of these bodies. The Conference welcomed this initiative in inter-organisational co-operation, and greatly appreciated the efforts undertaken to create this comprehensiveoverview of electronic commerce activities.

Conference participants acknowledged the leading role of the private sector in stimulating thegrowth of global electronic commerce through investment and dynamic innovation of products andservices, and the partnership necessary between governments and the private sector in assuring consumerconfidence and acceptance. In this context, Conference participants noted the priorities for the businesssector included below.

Priorities for the Business Sector

"A Coalition of international business organisations was co-ordinated by the Business andIndustry Advisory Committee to the OECD (BIAC) and included the Global Information InfrastructureCommission (GIIC), International Chamber of Commerce (ICC), International Telecommunications UsersGroup (INTUG), World Information Technology and Services Alliance (WITSA), in co-operation with theInternet Law and Policy Forum (ILPF). The Coalition, supported by a range of other international,regional or issue-specific business organisations, provided the Conference with “A Global Action Planfor Electronic Commerce prepared by Business with Recommendations for Government”. This actionplan asserts, inter alia, that:

• the development of electronic commerce should be led primarily by the private sector inresponse to market forces and that governments should recognise and reinforce this role;

• business will continue to develop self-regulation and technological innovation to foster theempowerment of users, in accordance with law where applicable;


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• there are appropriate roles for both government and business;

• policies that enable electronic commerce and the convergence of the telecommunications,information technology and multimedia industries should be pursued in an open andcompetitive environment.

“Business is enhancing the protection of privacy through self-regulation, voluntary codes, modelcontract provisions and by providing commercially-available technologies which enable a high level ofprivacy protection tailored to user needs and preferences. It continues to develop, based on globalmarketplace experience, fair information practices that are consistent with the 1980 OECD PrivacyGuidelines, and is assisting users in developing the necessary skills to protect themselves and to exercisechoice in an online environment.

“Business is enhancing sophisticated tools designed to protect and empower consumers withoutgovernment over-regulation, and is participating with government and other interested parties ininternational discussions to develop approaches for consumer protection.

“With respect to authentication for electronic commerce, business is working to ensure technicalinteroperability, to promote the legal acceptability of certificates and electronic signatures nationally andinternationally and to help develop, with governments within UNCITRAL, appropriate legal frameworksrequired to assure predictability and certainty.

“On taxation, business continues to work with OECD to ensure that neutrality is the guidingprinciple, and that taxes are not imposed in a discriminatory manner.

“To support these initiatives, business is:

• developing transparent procedures for the protection of personal information;

• developing, based on global marketplace experience, guidelines and commercial standardsfor Internet access providers and Web-site operators; setting up appropriate internationalself-regulatory enforcement mechanisms for violations of best practice rules for interactiveadvertising and market research;

• continuing to develop internationally accepted standards and codes of practice, and centralrepositories of pertinent information for businesses (e.g., certification practice statements);and

• working through their governments and with the WTO to promote the scheduling ofmeaningful commitments for telecommunications liberalisation by all Member states.”

Conference participants acknowledged that a full range of social interests must be included andengaged in efforts to facilitate the growth of global electronic commerce. The participation ofrepresentatives of labour, consumer and other non-governmental groups in the Conference recognises theimportance of electronic commerce in social, civic and community development. In this context,Conference participants noted the views on social perspectives put forward by trade unions, consumerorganisations and non-governmental groups included below.


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Social perspectives

"The Trade Union Advisory Committee (TUAC) and representatives of public interest groupsmet in a parallel session at the Conference to discuss the social perspectives. The Conference providedan important recognition and appreciation of the role, place and participation of public interest groups inthe ongoing international discussion and negotiations with regard to electronic commerce. The TUACdiscussion paper “Electronic Commerce Developments and Challenges”, and the letter by public interestgroup representatives to the Ministers of the OECD and other countries attending the Ottawa MinisterialConference (which is recognised as a Conference document and available from the OECD) set forth theirviews.

The representatives of trade unions, consumer organisations and other non-governmental groupsparticipating in the Conference, co-ordinated by the Trade Union Advisory Committee (TUAC),recognised the importance of electronic commerce to social, civic and community development as well asits vital contribution to economic and social change. Therefore they called upon governments andbusiness to include a full range of social interests in efforts to promote the diffusion of electroniccommerce.

“During their session, representatives of trade unions, consumer organisations and other non-governmental groups outlined several areas of current and future work which they considered as critical toachieve the full social and economic potential of electronic commerce.

“Improving Access, Skills and Digital Literacy -- The extent and intensity of use oftelecommunications networks is a primary determinant of the deployment of electronic commerce and theongoing formation of an information society. Therefore, the representatives of trade unions and consumerorganisations stressed the need to enhance digital literacy, education and training by efforts ofgovernments and industry. Moreover, they pointed out that affordable access to digital networks is crucialto distributing the advantages of electronic commerce broadly within economy and society and thusavoiding information "haves" and "have nots".

“Privacy, Trust and Content -- In order to ensure broad acceptance of the digital marketplacerepresentatives of trade unions and other social interest groups considered it vitally important that existingconcerns in the areas of privacy of consumer and employees, consumer protection (security of payment,reliability of business, getting redress etc.) and the distribution of offensive and harmful content aresufficiently resolved. They expressed their support for efforts to minimise the collection of personal dataand to maximise the protection of individual privacy. Furthermore, they called on governments, businessand NGO's to work together in strengthening the framework needed for effective protection of consumersand personal privacy, based on frameworks of legal regulation, codes of conduct and supportingtechnology applications.

“Social Impact, Costs and Benefits -- Electronic commerce will lead to a spatial extension ofmarkets and to a foundation of new businesses. During this process, a number of new and skilled jobs willbe created. But at the same time, changes will see the elimination of jobs, too. Therefore, electroniccommerce will have a pervasive impact on business, on the economy and on the society. To cope with thesocial impacts, to avoid or to reduce risks and to ensure a broad distribution of benefits in favour of socialequity and the quality of life, the representatives of trade unions and consumer organisations stressed theneed to consider the broad interrelation between society and technology.


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“Weaving Electronic Commerce into Organisational Structures -- The application oftelecommunications networks and information technology at the firm level is a powerful tool forincreasing productivity and competitiveness. To capture those gains however, the representatives of thetrade unions called for an integrated approach, combining the introduction of new technology and a re-organisation of work as outlined by OECD reports on Technology, Productivity and Jobs. Moreover, theyconsidered the participation of employees in the process of broadening team-work, flattening hierarchiesand skill development as a crucial prerequisite to maximise the potential of electronic commerce.

“Combining Flexibility and Security -- Information technology and telecommunicationsnetworks are providing a flexibility of time and place of work that offers new opportunities for businessand employees. At the same time, these new options present challenges for the systems of social securityand industrial relations, its actors as well as for the legal and policy frameworks in which they operate. Toensure that the costs and benefits of flexibility are fairly distributed, participants of the labour and NGOsession recognised the need to update regulatory systems so that they encompass new forms of work andcontribute to social cohesion.

“According to the participating representatives of trade unions and consumer organisations, atruly "global" electronic commerce implies an international framework of co-operation which maximisesthe opportunity of benefit for all segments of society and avoids the risk of a downward adjustment insocial welfare, working conditions and standards of living. In this regard, conference participantsrepresenting trade unions and consumer organisations and NGO's welcomed the work done to examine theeconomic and social effects of electronic commerce and of information technology in general. Theyconsider the need for further work to broaden and to intensify the promotion of investigations of impactson employment, the workplace, and quality of life a priority.

“The participants of the conference, representing trade unions, consumer organisations andNGO's see a continuing need for the involvement of public interest groups in the future evolution ofelectronic commerce. They consider it as a necessary complement to the legislative and policyresponsibilities of governments and the role of the business community in generating innovation,investment and employment. They are prepared to work in partnership with governments and business toensure a socially acceptable transformation towards a digital economy. In their view, the Ottawaconference provides an important step towards a continuing dialogue between non-governmentalorganisations and social interests, business and government and would seek to repeat and build on thisfoundation in the future development of the information society.”

Next steps -- Realising the potential

This Conference, building on the OECD Turku Conference and other regional and internationalconferences, constitutes an important landmark in realising the potential of electronic commerce, inpromoting global co-operation, and in setting the stage for the further development of the global theinformation society. Conference participants recognised the need for all to act collaboratively in the fastchanging global environment in the context of the Conference themes: to build trust for users andconsumers, establish ground rules for the digital marketplace, enhance the information infrastructure forelectronic commerce, and maximise the benefits of global electronic commerce for all.

The Ottawa Conference is a milestone in the evolution towards global electronic commerce andidentifies potential future work. The Conference furthered the process in creating greater globalunderstanding about electronic commerce which will help promote greater international policycompatibility to allow all economies to maximise the opportunities provided by new digital platforms.


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The OECD and private sector Action Plans, and the Report on international and regional bodies, indicatedhow the different players involved intend to contribute to future global co-operation in electroniccommerce.

Conference participants emphasised the need for sustained and effective co-operation andregular exchanges of information between and among governments, different industry sectors, the privatesector, consumer and public interests and international bodies.

To this end, conference delegates urged the OECD, in addition to its ongoing work and ActionPlan, to:

− Apply its research and statistical expertise to analyse and measure the economic and socialimpact of global electronic commerce.

− Report regularly to the global community on progress made nationally and internationally inmaking global electronic commerce a reality by addressing the key policy issues implicit inthe Conference themes: “Building Trust for Users and Consumers”; “Establishing GroundRules for the Digital marketplace”; “Enhancing the Information Infrastructure”; and“Maximising the Benefits”.

− Work with other international organisations, regional bodies, and the private sector, andNon-OECD countries to encourage collaboration and co-ordination within and among asmany fora as possible to advance global electronic commerce.


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ANNEX 1

DECLARATION ON THE PROTECTION OF PRIVACY ON GLOBAL NETWORKS

made by OECD Ministers at the Conference“A Borderless World: Realising the Potential of Global Electronic Commerce”

7-9 October 1998, Ottawa, Canada

The Governments of OECD Member Countries*:

Considering that the development and diffusion of digital computer and network technologies on a globalscale offer social and economic benefits by encouraging information exchange, increasing consumerchoice, and fostering market expansion and product innovation;

Considering that global network technologies facilitate the expansion of electronic commerce, andaccelerate the growth of transborder electronic communications and transactions among governments,businesses, and users and consumers;

Considering that personal data should be collected and handled with due respect for privacy;

Considering that digital computer and network technologies enhance traditional methods for processingpersonal data, increase the ability to collect, gather and link large quantities of data, and to produceaugmented information and consumer profiles;

Considering that digital computer and network technologies can also be used to educate users andconsumers about online privacy issues and to assist them to maintain their anonymity in appropriatecircumstances or to exercise choice with respect to the uses made of personal data;

Considering that in order to increase confidence in global networks, users and consumers need assurancesabout the fair collection and handling of their personal data, including data about their online activitiesand transactions;

Considering that it is necessary to ensure the effective and widespread protection of privacy by businesseswhich collect or handle personal data in order to increase user and consumer confidence in globalnetworks;

Considering that transparent rules and regulations governing the protection of privacy and personal dataand their effective implementation on information networks are key elements to increasing confidence inglobal networks;

* including the European Communities.


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Considering that different effective approaches to privacy protection developed by Member countries,including the adoption and implementation of laws or industry self-regulation, can work together toachieve effective privacy protection on global networks;

Considering the need for global co-operation and the necessity of industry and business taking a key role,in co-operation with consumers and governments, to provide effective implementation of privacyprinciples on global networks;

Considering that the technology-neutral principles of the 1980 OECD Privacy Guidelines continue torepresent international consensus and guidance concerning the collection and handling of personal data inany medium, and provide a foundation for privacy protection on global networks;

REAFFIRM the objectives set forth in:

The Recommendation Concerning Guidelines Governing the Protection of Privacy and Transborder Flowsof Personal Data, adopted by the Council of the OECD on 23rd September 1980 (OECD PrivacyGuidelines);

The Declaration on Transborder Data Flows, adopted by the Governments of OECD Member countries on11th April 1985; and

The Recommendation concerning Guidelines for Cryptography Policy, adopted by the Council of theOECD on 27th March 1997.

DECLARE THAT:

They will reaffirm their commitment to the protection of privacy on global networks in order to ensure therespect of important rights, build confidence in global networks, and to prevent unnecessary restrictionson transborder flows of personal data;

They will work to build bridges between the different approaches adopted by Member countries to ensureprivacy protection on global networks based on the OECD Guidelines;

They will take the necessary steps, within the framework of their respective laws and practices, to ensurethat the OECD Privacy Guidelines are effectively implemented in relation to global networks, and inparticular:

encourage the adoption of privacy policies, whether implemented by legal, self-regulatory,administrative or technological means;

encourage the online notification of privacy policies to users;

ensure that effective enforcement mechanisms are available both to address non-compliance withprivacy principles and policies and to ensure access to redress;

promote user education and awareness about online privacy issues and the means at their disposalfor protecting privacy on global networks;

encourage the use of privacy-enhancing technologies; and

encourage the use of contractual solutions and the development of model contractual solutions foronline transborder data flows;


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They agree to review progress made in furtherance of the objectives of this Declaration within a period oftwo years, and to assess the need for further action to ensure the protection of personal data on globalnetworks in pursuit of these objectives.

FURTHER DECLARE THAT THE OECD SHOULD:

Support Member countries in exchanging information about effective methods to protect privacy onglobal networks, and to report on their efforts and experience in achieving the objectives of thisDeclaration;

Examine specific issues raised by the implementation of the OECD Privacy Guidelines in relation toglobal networks and, after collection and distribution of examples of experiences on implementation of theGuidelines, provide practical guidance to Member countries on the implementation of the Guidelines inonline environments, taking into account the different approaches to privacy protection adopted byMember countries and drawing on the experiences of Member countries and the private sector;

Co-operate with industry and business as they work to provide privacy protection on global networks, aswell as with relevant regional and international organisations;

Periodically review the main developments and issues in the field of privacy protection with respect to theobjectives of this Declaration;

Take into account, inter alia, in its future work, the issues and suggested activities discussed in theBackground Report accompanying this Declaration.

INVITE:

Non-member countries to take account of this Declaration;

Relevant international organisations to take this Declaration into consideration as they develop or reviseinternational conventions, guidelines, codes of practice, model contractual clauses, technologies andinteroperable platforms for protection of privacy on global networks;

Industry and business to take account of the objectives of this Declaration and to work with governmentsto further them by implementing programmes for the protection of privacy on global networks.


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ANNEX 2

DECLARATION ON CONSUMER PROTECTIONIN THE CONTEXT OF ELECTRONIC COMMERCE



The Governments of OECD Member Countries*:

CONSIDERING:

that both the volume and value of consumer transactions on the global network are increasingexponentially;

that global networks offer consumers substantial benefits, including convenience and access to a widerange of goods, services and information;

that the potential benefits will not be realised if consumer confidence in commerce conducted over globalnetworks is eroded by the presence of fraudulent, misleading and unfair commercial conduct; thatconfidence in commercial activities conducted over global networks will be fostered by transparent andeffective consumer protection mechanisms and is essential to encourage consumer participation in theelectronic marketplace; and

that global co-operation among governments, businesses, consumers, and their representatives, is anecessary prerequisite to achieving effective and predictable consumer protection in the context ofelectronic commerce.

RECOGNISING:

the need for government, business, consumers and their representatives to continue to work together onthe development of a framework for global electronic commerce that includes effective protection forconsumers; and

the continuing dialogue within the OECD among governments, businesses, consumers, and theirrepresentatives, to examine consumer-related issues, and, in particular, the ongoing work of theorganisation, through its Consumer Policy Committee, to develop guidelines for consumer protection inthe context of electronic commerce.



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DECLARE THEIR DETERMINATION TO ensure that consumers who participate in electroniccommerce are afforded a transparent and effective level of protection for electronic transactions by:

reviewing and adapting laws and practices, if necessary, to address the special circumstances ofelectronic commerce;

supporting and encouraging the development of effective market-driven self-regulatorymechanisms that include input from consumer representatives, and contain specific, substantiverules for dispute resolution and compliance mechanisms;

encouraging the development of technology also as a tool to protect consumers;

taking steps to educate users, fostering informed decision-making by consumers participating inelectronic commerce, and increasing business awareness of the consumer protection frameworkthat applies to their online activities; and

increasing awareness among judicial and law enforcement officials of the need for effectiveinternational co-operation to protect consumers and combat cross-border fraudulent, misleadingand unfair commercial conduct.

FURTHERMORE, THEY AFFIRM THEIR DETERMINATION:

to develop effective guidelines whose purpose is to enhance consumer confidence in electronic commercetransactions while encouraging the development of the global marketplace; and

to urge the OECD to complete its work to draft guidelines within 1999, more specifically as pertains toconsumer protection issues including, for example, full and fair disclosure of essential information,advertising, complaint handling, dispute resolution, redress as well as other relevant issues in consumerprotection.


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ANNEX 3

DECLARATION ON AUTHENTICATION FOR ELECTRONIC COMMERCE



The Governments of OECD Member countries*:

CONSIDERING:

the significant social and economic benefits offered by information and communication technologies andelectronic commerce;

the leading role of industry in developing information and communication technologies and electroniccommerce;

the need for government and industry to foster user confidence to facilitate the growth of global electroniccommerce;

the rapid development of authentication technologies and mechanisms, and their importance in the contextof global information and communication technologies and electronic commerce; and

the potential impact that diverse national solutions for electronic authentication could have on thedevelopment of global electronic commerce.

RECOGNISING:

that work is underway at the international level to facilitate transborder electronic transactions and the useof authentication technologies and mechanisms to foster the growth of global electronic commerce;

that transacting parties may select appropriate mechanisms which meet their needs for authentication inconducting electronic commerce, including particular authentication technologies, contractualarrangements and other means of validating electronic transactions, and that they can use judicial andother means of dispute resolution to prove the validity of those transactions;

that governments can play a role in promoting electronic commerce as a user of information andcommunication technologies, products and services, including electronic authentication mechanisms;



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that technology or media specific rules for recording, storing or transmitting information (for example,certain paper-based requirements) could impede the development of electronic commerce and the use ofelectronic authentication mechanisms;

that, where appropriate, market-driven, rather than government imposed, standards and codes of practicecan provide a useful tool for developing user confidence in global electronic commerce; and

the continuing dialogue within the OECD -- involving governments, business and industry, and userrepresentatives -- to discuss the technologies and diverse models for authentication to facilitate globalelectronic commerce which are currently in use or emerging in Member countries, and in particular theongoing work of the Organisation through its Information, Computer and Communications Policy (ICCP)Committee, to facilitate information exchange by compiling an inventory of approaches to authenticationand certification and convening joint OECD-private sector workshops in the year ahead.

DECLARE THEIR DETERMINATION TO:

take a non-discriminatory approach to electronic authentication from other countries;

encourage efforts to develop authentication technologies and mechanisms, and facilitate the use of thosetechnologies and mechanisms for electronic commerce;

amend, where appropriate, technology or media specific requirements in current laws or policies that mayimpede the use of information and communication technologies and electronic authenticationmechanisms, giving favourable consideration to the relevant provisions of the Model Law on ElectronicCommerce adopted by the United Nations Commission on International Trade Law (UNCITRAL) in1996;

proceed with the application of electronic authentication technologies to enhance the delivery ofgovernment services and programmes to the public; and continue work at the international level, togetherwith business, industry and user representatives, concerning authentication technologies and mechanismsto facilitate global electronic commerce.


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DIRECTIVA 2002/38/CE DO CONSELHOde 7 de Maio de 2002

que altera, a título tanto definitivo como temporário, a Directiva 77/388/CEE no que se refere aoregime do imposto sobre o valor acrescentado aplicável aos serviços de radiodifusão e televisão e a

determinados serviços prestados por via electrónica

O CONSELHO DA UNIÃO EUROPEIA,

Tendo em conta o Tratado que institui a Comunidade Europeiae, nomeadamente, o seu artigo 93.o,

Tendo em conta a proposta da Comissão (1),

Tendo em conta o parecer do Parlamento Europeu (2),

Tendo em conta o parecer do Comité Económico e Social (3),

Considerando o seguinte:

(1) As normas actuais do imposto sobre o valor acrescen-tado (IVA) aplicáveis aos serviços de radiodifusão e tele-visão e aos serviços prestados por via electrónica nostermos do artigo 9.o da sexta Directiva 77/388/CEE doConselho, de 17 de Maio de 1977, relativa à harmoni-zação das legislações dos Estados-Membros respeitantesaos impostos sobre o volume de negócios — sistemacomum do imposto sobre o valor acrescentado: matériacolectável uniforme (4), são inadequadas para a tribu-tação de tais serviços quando consumidos na Comuni-dade, bem como para a prevenção de distorções daconcorrência neste domínio.

(2) A fim de garantir o bom funcionamento do mercadointerno, convém eliminar tais distorções e introduzirnovas regras harmonizadas para este tipo de actividade.Em especial, devem adoptar-se medidas destinadas aassegurar a tributação na Comunidade dos serviços emquestão quando prestados a título oneroso e consumidospor clientes estabelecidos na Comunidade, bem como asua não tributação no caso de serem consumidos fora daComunidade.

(3) Para tal, os serviços de radiodifusão e televisão e osserviços prestados por via electrónica a partir de paísesterceiros a pessoas estabelecidas na Comunidade ou apartir da Comunidade a destinatários estabelecidos empaíses terceiros devem ser tributados no lugar do desti-natário de tais serviços.

(4) A fim de definir os serviços prestados por via electró-nica, deverão ser incluídos exemplos de tais serviçosnum anexo da directiva.

(5) Para facilitar o cumprimento das obrigações fiscais pelosoperadores que prestam serviços electrónicos, que não seencontram estabelecidos nem são obrigados a identifi-

carem-se para efeitos fiscais na Comunidade, deverá sercriado um regime especial. Ao aplicar este regime, qual-quer operador que preste tais serviços por via electrónicaa não sujeitos passivos na Comunidade pode, se não seencontrar já identificado para efeitos fiscais na Comuni-dade, optar pela identificação num único Estado--Membro.

(6) O operador não estabelecido que pretenda beneficiar doregime especial deverá cumprir os requisitos neleprevistos e as disposições pertinentes em vigor noEstado-Membro onde os serviços são prestados.

(7) O Estado-Membro de identificação deverá, sob certascondições, estar apto a excluir um operador não estabe-lecido do regime especial.

(8) Se o operador não estabelecido optar pelo regime espe-cial, o IVA a montante que tenha pago relativo a bens eserviços por ele utilizados para efeitos das suas activi-dades tributadas ao abrigo do regime especial deverá serreembolsado pelo Estado-Membro em que o IVA amontante foi pago, em conformidade com o disposto nadécima terceira Directiva 86/560/CEE do Conselho, de17 de Novembro de 1986, relativa à harmonização daslegislações dos Estados-Membros respeitantes aosimpostos sobre o volume de negócios-modalidades dereembolso do imposto sobre o valor acrescentado aossujeitos passivos não estabelecidos no território daComunidade (5). As restrições opcionais de reembolsoprevistas nos n.os 2 ou 3 do artigo 2.o, ou no n.o 2 doartigo 4.o da referida directiva não deverão ser aplicadas.

(9) Os Estados-Membros deverão autorizar e poderãomesmo obrigar, segundo modalidades por eles determi-nadas, a transmissão de certas declarações fiscais por viaelectrónica.

(10) As disposições relativas à introdução de declaraçõesfiscais por via electrónica devem ser aprovadas comcarácter permanente. Todas as outras disposiçõesdeverão ser aplicadas temporariamente durante trêsanos, período prorrogável por razões de ordem prática,devendo porém ser impreterivelmente reexaminadas,com base na experiência adquirida, no prazo de trêsanos a contar de 1 de Julho de 2003.

(11) A Directiva 77/388/CEE deve, por conseguinte, ser alte-rada em conformidade,

(1) JO C 337 E de 28.11.2000, p. 65.(2) JO C 232 de 17.8.2001, p. 202.(3) JO C 116 de 20.4.2001, p. 59.(4) JO L 145 de 13.6.1977, p. 1. Directiva com a última redacção que

lhe foi dada pela Directiva 2001/115/CE (JO L 15 de 17.1.2002,p. 24). (5) JO L 326 de 21.11.1986, p. 40.


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ADOPTOU A PRESENTE DIRECTIVA:

Artigo 1.o

A Directiva 77/388/CEE é alterada, a título temporário, doseguinte modo:

1. No artigo 9.o:

a) Na alínea e) do n.o 2, o último ponto final é substituídopor vírgula e são acrescentados os seguintes travessões:

«— serviços de radiodifusão e televisão,

— serviços prestados por via electrónica, nomeada-mente os descritos no anexo L.»;

b) No n.o 2, é aditada a seguinte alínea:

«f) Por lugar das prestações de serviços referidas noúltimo travessão da alínea e), caso esses serviçossejam prestados a não sujeitos passivos que estejamestabelecidos, tenham o seu domicílio ou a sua resi-dência habitual num Estado-Membro, por um sujeitopassivo que tenha a sede da sua actividade económicaou um estabelecimento estável a partir do qual oserviço é prestado fora da Comunidade ou, na faltade sede ou de estabelecimento estável, tenha o seudomicílio ou a sua residência habitual fora da Comu-nidade, entende-se o lugar onde o não sujeito passivoesteja estabelecido, tenha o seu domicílio ou a suaresidência habitual.»;

c) No n.o 3, o proémio passa a ter a seguinte redacção:

«3. A fim de evitar casos de dupla tributação, de nãotributação ou de distorções de concorrência, os Estados--Membros podem considerar, no que diz respeito àsprestações de serviços referidas na alínea e) do n.o 2, comexcepção dos serviços referidos no último travessãoquando prestados a não sujeitos passivos, e também noque respeita à locação de meios de transporte:»;

d) O n.o 4 passa a ter a seguinte redacção:

«4. Os Estados-Membros devem aplicar a alínea b) don.o 3 aos serviços de telecomunicações, de radiodifusão ede televisão referidos na alínea e) do n.o 2, caso o serviçoseja prestado a não sujeitos passivos que estejam estabe-lecidos, tenham o seu domicílio ou a sua residênciahabitual num Estado-Membro, por um sujeito passivoque tenha a sede da sua actividade económica ou umestabelecimento estável a partir do qual o serviço é pres-tado fora da Comunidade ou, na falta de sede ou deestabelecimento estável, tenha o seu domicílio ou a suaresidência habitual fora da Comunidade.».

2. À alínea a) do n.o 3 do artigo 12.o, é aditado o seguinteparágrafo:

«O terceiro parágrafo não se aplica aos serviços referidos noartigo 9.o, n.o 2, alínea e), último travessão.».

3. É aditado o seguinte artigo:

«Artigo 26.oC

Regime especial para sujeitos passivos não estabele-cidos que prestam serviços electrónicos a não sujeitospassivos

A. Def in ições

Para efeitos do presente artigo, e sem prejuízo de outrasdisposições comunitárias, entende-se por:

a) “Sujeito passivo não estabelecido”, um sujeito passivoque não tenha a sede da sua actividade económica nemum estabelecimento estável no território da Comunidadee que não tenha de estar de outra forma identificadopara efeitos fiscais nos termos do artigo 22.o;

b) “Serviços electrónicos” e serviços prestados por via elec-trónica, os serviços referidos no artigo 9.o, n.o 2, alíneae), último travessão;

c) “Estado-Membro de identificação”, o Estado-Membro queo sujeito passivo não estabelecido decide contactar paradeclarar o início da sua actividade como sujeito passivodentro do território da Comunidade, em conformidadecom o disposto no presente artigo;

d) “Estado-Membro de consumo”, o Estado-Membro emque se considera ser efectuada a prestação dos serviçoselectrónicos, de acordo com a alínea f) do n.o 2 do artigo9.o;

e) “Declaração de imposto sobre o valor acrescentado”, adeclaração que contém as informações necessárias paradeterminar o montante do imposto devido em cadaEstado-Membro.

B . Regime especia l para os serv iços prestadospor via e lectrónica

1. Os Estados-Membros devem autorizar os sujeitospassivos não estabelecidos que prestem serviços electrónicosa não sujeitos passivos estabelecidos num Estado-Membroou que aí tenham o seu domicílio ou a sua residênciahabitual, a optar por um regime especial em conformidadecom as disposições que se seguem. O regime especial éaplicável a todas essas prestações dentro da Comunidade.

2. O sujeito passivo não estabelecido deve declarar aoEstado-Membro de identificação o início, a cessação ou aalteração da sua actividade como sujeito passivo na medidaem que deixe de ter direito ao regime especial. Essa decla-ração deve ser feita por via electrónica.

As informações fornecidas pelo sujeito passivo não estabele-cido ao Estado-Membro de identificação quando se iniciamas suas actividades tributáveis devem incluir os seguinteselementos de identificação: nome, endereço postal, ende-reços electrónicos, incluindo os sítios web, número decontribuinte nacional, se o tiver, e uma declaração de que osujeito não está identificado para efeitos de IVA na Comuni-dade. O sujeito passivo não estabelecido deve notificar oEstado-Membro de identificação de quaisquer alterações dasinformações apresentadas.

3. O Estado-Membro de identificação deve atribuir aosujeito passivo não estabelecido um número individual deidentificação. Com base nas informações utilizadas para areferida identificação, os Estados-Membros de consumopodem manter os seus próprios sistemas de identificação.

O Estado-Membro de identificação deve notificar por viaelectrónica o sujeito passivo não estabelecido do número deidentificação que lhe foi atribuído.

4. O Estado-Membro de identificação deve excluir osujeito passivo não estabelecido do registo de identificaçãose:


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a) Este notificar que deixou de prestar serviços electrónicos;

b) Puder depreender, de outra forma, que as suas activi-dades tributáveis cessaram;

c) Tiver deixado de preencher os requisitos necessários parapoder optar pelo regime especial; ou

d) De modo continuado, não cumprir as regras relativas aoregime especial.

5. O sujeito passivo não estabelecido deve apresentar aoEstado-Membro de identificação, por via electrónica, umadeclaração de imposto sobre o valor acrescentado relativa acada trimestre civil, quer tenha sido prestado ou não umserviço electrónico. A declaração deve ser apresentada noprazo de 20 dias após o final do período abrangido peladeclaração.

A declaração de imposto sobre o valor acrescentado devemencionar o número de identificação e, para cada Estado--Membro de consumo em que é devido o imposto, o valortotal, com exclusão do IVA, das prestações de serviçoselectrónicos para o período abrangido pela declaração e omontante total do imposto correspondente. Devem serigualmente indicadas as taxas aplicáveis e o montante totaldo imposto.

6. A declaração de imposto sobre o valor acrescentadodeve ser efectuada em euros. Os Estados-Membros que nãotiverem adoptado o euro podem exigir que a declaração deimposto seja feita nas respectivas moedas nacionais. Se asprestações tiverem sido efectuadas noutras divisas, ao preen-cher a declaração, deve ser aplicada a taxa de câmbio válidapara a última data do período abrangido pela declaração. Ocâmbio deve ser efectuado de acordo com as taxas decâmbio desse dia publicadas pelo Banco Central Europeuou, caso não haja publicação nesse dia, do dia de publicaçãoseguinte.

7. O sujeito passivo não estabelecido deve pagar o IVAno momento da apresentação da declaração. O pagamentodeve ser efectuado mediante depósito numa conta bancáriadenominada em euros, indicada pelo Estado-Membro deidentificação. Os Estados-Membros que não tiverem adop-tado o euro podem exigir que o pagamento seja feito parauma conta bancária denominada na moeda respectiva.

8. Sem prejuízo do n.o 1 do artigo 1.o da Directiva86/560/CEE, o sujeito passivo não estabelecido que optepor este regime especial, em vez de efectuar deduções aoabrigo do n.o 2 do artigo 17.o da presente directiva, recebeum reembolso de acordo com a Directiva 86/560/CEE. Osn.os 2 e 3 do artigo 2.o e o n.o 2 do artigo 4.o da Directiva86/560/CEE não são aplicáveis ao reembolso relacionadocom os serviços electrónicos abrangidos por este regimeespecial.

9. O sujeito passivo não estabelecido deve conservar osregistos das operações abrangidas por este regime especialcom o nível de detalhe suficiente para permitir à adminis-tração fiscal do Estado-Membro de consumo determinar quea declaração de imposto sobre o valor acrescentado referidano n.o 5 está correcta. Estes registos devem ser disponibili-zados electronicamente, a pedido, ao Estado-Membro deidentificação e ao Estado-Membro de consumo. Estes

registos devem ser mantidos por um período de 10 anosapós o final do ano em que a operação foi efectuada.

10. A alínea b) do n.o 2 do artigo 21.o não é aplicável aum sujeito passivo não estabelecido que tenha optado poreste regime especial.».

Artigo 2.o

O artigo 22.o, que consta do artigo 28.oH da Directiva 77//388/CEE, é alterado da seguinte forma:

1. No n.o 1, a alínea a) passa a ter a seguinte redacção:

«a) Os sujeitos passivos devem declarar o início, a alteraçãoe a cessação da sua actividade na qualidade de sujeitospassivos. Os Estados-Membros autorizam e podemmesmo obrigar, segundo modalidades por eles determi-nadas, o sujeito passivo a efectuar essas declarações porvia electrónica.».


«a) Os sujeitos passivos devem entregar uma declaraçãonum prazo a fixar pelos Estados-Membros. Esse prazonão pode exceder em mais de dois meses o termo decada período fiscal. Este período é fixado pelos Estados--Membros em um, dois ou três meses. No entanto, osEstados-Membros podem fixar períodos diferentes,desde que não excedam um ano. Os Estados-Membrosdevem autorizar, segundo modalidades por eles determi-nadas, o sujeito passivo a efectuar essas declarações porvia electrónica e podem também exigir que sejam utili-zados meios electrónicos.».


«a) Os Estados-Membros podem exigir a apresentação pelosujeito passivo de uma declaração na qual constemtodos os dados referidos no n.o 4, relativamente à totali-dade das operações efectuadas no ano anterior. Estadeclaração deve incluir todos os elementos necessáriospara efeitos de regularizações eventuais. Os Estados--Membros devem autorizar, segundo modalidades poreles determinadas, o sujeito passivo a efectuar essasdeclarações por via electrónica e podem também exigirque sejam utilizados meios electrónicos.».

4. Na alínea b) do n.o 6, o segundo parágrafo passa a ter aseguinte redacção:

«A declaração recapitulativa deve ser elaborada para cadatrimestre civil dentro de um prazo e de acordo com normasa determinar pelos Estados-Membros, que devem tomar asmedidas necessárias para assegurar que as disposições rela-tivas à cooperação administrativa no domínio da tributaçãoindirecta são cumpridas em todos os casos. Os Estados--Membros devem autorizar, segundo modalidades por elesdeterminadas, o sujeito passivo a fazer essas declarações porvia electrónica e podem também exigir que sejam utilizadosmeios electrónicos.».

Artigo 3.o

1. Os Estados-Membros devem pôr em vigor as disposiçõeslegislativas, regulamentares e administrativas necessárias paradar cumprimento à presente directiva em 1 de Julho de 2003 einformar imediatamente a Comissão desse facto.


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Quando os Estados-Membros aprovarem essas disposições,estas devem incluir uma referência à presente directiva ou seracompanhadas dessa referência aquando da sua publicaçãooficial. As modalidades dessa referência serão aprovadas pelosEstados-Membros.

2. Os Estados-Membros devem comunicar à Comissão otexto das disposições de direito interno que aprovarem nasmatérias reguladas pela presente directiva.

Artigo 4.o

O artigo 1.o é aplicável durante um período de três anos acontar de 1 de Julho de 2003.

Artigo 5.o

O Conselho, com base num relatório da Comissão, deve reexa-minar as disposições do artigo 1.o da presente directiva antes de30 de Junho de 2006 e aprovar, deliberando nos termos doartigo 93.o do Tratado, disposições relativas a um mecanismoelectrónico apropriado, não discriminatório, para aplicar,declarar, cobrar e repartir as receitas fiscais ligadas aos serviços

prestados por via electrónica tributados no lugar de consumo,ou prorrogar, se tal se afigurar necessário por razões de ordemprática, deliberando por unanimidade com base numa propostada Comissão, o período a que se refere o artigo 4.o

Artigo 6.o

A presente directiva entra em vigor no dia da sua publicaçãono Jornal Oficial das Comunidades Europeias.

Artigo 7.o

Os Estados-Membros são os destinatários da presente directiva.

Feito em Bruxelas, em 7 de Maio de 2002.

Pelo Conselho

O Presidente

R. DE RATO Y FIGAREDO

ANEXO

«ANEXO L

LISTA EXEMPLIFICATIVA DOS SERVIÇOS PRESTADOS POR VIA ELECTRÓNICA, A QUE SE REFERE AALÍNEA E) DO N.O 2 DO ARTIGO 9.O

1. Fornecimento de sítios informáticos, domiciliação de páginas web, manutenção à distância de programas e equipa-mentos.

2. Fornecimento de programas e respectiva actualização.

3. Fornecimento de imagens, textos e informações, e disponibilização de bases de dados.

4. Fornecimento de música, filmes e jogos, incluindo jogos de azar e a dinheiro, e de emissões ou manifestações políticas,culturais, artísticas, desportivas, científicas ou de lazer.

5. Prestação de serviços de ensino à distância.

Quando um prestador de serviços e o seu cliente comunicam por correio electrónico, esse facto não significa só por si queo serviço prestado é um serviço electrónico na acepção do artigo 9.o, n.o 2, alínea e), último travessão.».


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MPRAMunich Personal RePEc Archive

Internet and taxation in European Union

Luigi Bernardi

University of Pavia

21. June 2015

Online at http://mpra.ub.uni-muenchen.de/65638/MPRA Paper No. 65638, posted 17. July 2015 15:16 UTC


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Internet and taxation in the European Union: A primer

By

Luigi Bernardi

Abstract The purpose of this paper is to offer a primer on certain important features and issues concerning Internet and taxation in the European Union. After a general introduction concerning the origins of the matter, the paper discusses why a tax on the huge profits made by the big US digital MNEs in Europe was not substantially reflected in the tax policy of EU members, notwithstanding the large tax gap among EU countries resulting from the shift in profits by the (US digital) MNE towards lower or no taxation countries. Then the main directives on Internet and taxation introduced by the EU (and also by the OECD) since the late 1990s are discussed: the EU especially focusses on establishing the due place of taxation on electronic commerce, while the OECD (more recently together with the G20) has placed the emphasis on regulating Transfer Prices and contrasting Base Erosion and Profits’ Shifting (BEPS).

JEL codes: H20, H24, H25, H 26.

Keywords: Web Tax; E-commerce; Profits shifting, Europe; OECD

Department of Law - University of Pavia-Italy

June 2015


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1. Introduction*

Since its beginnings during the 1980s, Internet has grown exponentially in terms of the number of accesses, the amount of information transmitted and the application made possible (for all: Bidgoll 2004 and OECD, 2013). As the dimension of the web and of the traffic became remarkable, the question arose whether a specific tax (additional or substitutive of the existing levies) should be imposed on this new potential tax handle made up by Internet transactions (and eventually with which features). We are not going to examine this general, widely-debated issue here (see for all, Gooldsbee and Zittrain, 1999, and, for a historical perspective, Mc Lure, 1996-97), but we shall offer a few examples of the proposals which have been made regarding the possible taxation of Internet use: taxing access to the Internet, applying a rate similar to that levied on telecommunications services, and levying franchise taxes like those applied to cable television. The most innovative proposal, however, was to tax Internet traffic, i.e. the quantity of bits transmitted and/or received (Bit Tax). It was claimed that the Bit Tax might replace VAT on all information and communication services, with a transmission-based service, whereby the tax is levied as a proportion of the information or communications transmitted. It was suggested that the amount of Bits/Bytes could be a better indicator of the entity of a transmission than time or distance is. Moreover, the Bit Tax might play the field between individuals and/or firms which make different use of electronic transmission systems, thus contributing towards equity in an information-based society. This proposal has been widely debated1. Despite its fashionable nature, the Bit Tax has not been widely adopted.

The Internet and taxation debate then shifted from proposals for new taxes to the challenges that Internet raises for existing taxation systems, a debate held during the final decade of the last century. Especially at OECD level, some basic principles were established for e-commerce taxation: neutrality (equitable, non-distorting taxation in terms of the various forms of traditional trade and e-commerce); efficiency (minimizing compliance costs); certainty and simplicity2. Particular attention was paid to the principle of neutrality i.e. that Internet service providers and governments should treat all data on the Internet equally, and thus should not differentiate charges depending on the type of user, the content, site, platform, application, type of attached equipment, or mode of communication. Subsequently, at the end of the 1990s the basic foundations of Internet taxation were established in the EU and also in the USA3.In the EU, the main levy on e-commerce was the existing form of VAT, although as we shall see, several adjustments to such were needed and subsequently made.

*luigi [email protected]. Thanks are due to R. Puglisi and S. Scabrosetti, for careful reading and helpful comments. 1 For a strong supporting argument with reference to the EU, see Soete, 1996, whose arguments have been criticized, nevertheless, in http://www.telelavoro. rassegna.it/bittax/bittax2.htm). For a theoretical assessment of the political pros and cons of the Bit Tax, see J. MacKie-Mason, S. Shenker and H.L. Varian (1996) and, once again, Soete (1999). 2These rules were established at the Ottawa OECD Ministerial Conference of October 1998. (OECD, 1998). 3A basic step in US Internet legislation was taken with the introduction of the 1998 Internet Freedom Act (IFA), which regulated the power to tax Internet transactions at Federal and State levels. Broadly speaking, the IFA states that no tax may be imposed at the level of federal Government, while the States are banned from charging Internet providers direct tax and discriminatory sales taxes. The IFA, variously emended, is still in force. See, for all, Gordon-Murmane. 2000.


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The purpose of this paper is to offer a primer on Internet and taxation in the European Union, and as such it covers their main features, issues and development over the intervening period. We will not be analyzing such issues in any great depth4, but shall be remaining at a more general level5. Thus the following section is devoted to EU member countries’ measures to tax US digital Multinational Enterprises (MNEs from now on) on their European profits. Section 3 considers EU regulations on e-commerce (with the focus on the place of taxation in cross-borders transactions), while section 4 the OECD/G20 action plan to combat “Base Erosion and Profits Shifting (BEPS)”, started in 2013. Section 5 concludes.

2. Collecting more revenues from digital US MNEs operating also in the European Internet market

It is commonly agreed (also see below) that in EU countries there is widespread unease due to the fact that American digital MNE giants shift profits made in Europe to other lower taxation or tax-free jurisdictions. Therefore it has been suggested that Europe should introduce taxation on these profits. However, until now very few European countries have tried to introduce such a tax (or other levies with the same aim): just France, Germany, Italy, Hungary, Spain, and the United Kingdom. Moreover, in more than one of the aforesaid countries, the tax on MNEs’ local profits (“Profit shifting tax-PST” from now on) has merely been proposed, without any effective implementation, or was repealed shortly after its introduction. The expected EU directives on this specific question of Internet and taxation have not been forthcoming. This limited diffusion of the tax is often attributed to lobbying by US MNEs and by Internet users. However, it should also be pointed out that the pros (increased tax revenue, the combating of international fiscal evasion, the elimination of the distortion penalizing national companies), are counterbalanced by a series of significant cons (reduced freedom of public disclosure, unpopularity, technical difficulties, the disincentive to use Internet, conflict with EU legislation, complications in the VAT system).

Of the aforesaid countries, the case of Italy may be taken as a good example. The draft version of the Italian PST was first introduced in the Government’s 2014 budget plan (“Legge di stabilità 2014”) at the end of 2013, and consists of three principal provisions6. Firstly, in order to sell goods and services in Italy, foreign companies must possess an Italian VAT number7 and must collect VAT on their sales in Italy. Secondly, e-commerce payments must be made by means of ‘traceable’ items (such as bank transfers, credit card transactions or checks), and never in cash. Thirdly, the Revenue Agency may assess companies’ profits on the basis of ad hoc criteria and not only on accounting records (Chiusi, 2013).The bill was passed by Parliament (with the requirement of a VAT number restricted to the selling of advertising); however, it only remained in force a few months, and then it was repealed by Prime Minister Renzi’s new cabinet (Viviani, 2014a). The Italian VAT number requirement was eliminated for all companies and services, and the matter was 4A discussion of many of these issues at the turn of the century is contained in McLure, 2002. 5Moreover, we shall not discuss the question of the abuse of dominant position, which the EU has charged Google & Co. with, because strictly speaking it is not a tax-related issue (De Biase, L., 2015). 6No serious attempt has been made to forecast the possible yield of PTS. Rough calculations range from €10-20 million to one billion, depending on the specific country, the bases and the rates adopted. The most common estimates are of about €200 million for a “normal” country. See below for estimates of the tax gap caused by the tax-elusive behavior of US digital MNEs. 7L’Agenzia Italiana delle entrate (The Italian Revenue Agency) (2013) drafted a simplified procedure for the assignment of an Italian VAT number to non-Italian companies.


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deferred to future EU regulation (Iozzia, 2015). On the other hand, the provision concerning payment methods remained on stand-by, within the framework of a planned tax reform bill, which is currently being examined by Parliament. Just one year later, the bill rejected a year before was substantially resubmitted as part of the 2015 draft budget; however, it was once again rejected (Pennisi, 2014). The reasons for this double rejection are, broadly speaking, the aforementioned cons of the PST; however, the main reason given was the desire not to run counter to the EU’s thinking and rules (freedom of circulation of services and freedom of establishment; coordination with existing VAT, requiring just one VAT number; the uniformity of taxation within the internal market; the risk of disapplication by the Court and of an infringement procedure (Mameli 2013, Gambaro & Puglisi 2013, and Nieddu 2014)8. The deferment to the EU of any adoption of the PST and of its design -especially with regard to rates - was also justified by the aforesaid rumors and official statements concerning the forthcoming adoption of an EU PST, which has not been introduced so far, however (Robinson, 2015)9.

As already seen, a series of other European countries besides Italy have attempted introducing a PSTand/or other levies on US digital MNEs operating in Europe, with various degrees of success. Hereafter we shortly report the main cases in question.

France, considering that American companies dominate its digital economy, is going to address what the French see as tax avoidance by Internet companies like Google, Amazon and Facebook. A new levy has been proposed consisting in an Internet tax on the collection of personal data. This is part of the Hollande Government’s plan, which includes various other measures10. The French government is also encouraging agreements between Google and French online publishers who ask the search engines to pay them for creating links to their contents (Pfanner, 2013 for all).

In Germany, Amazon.com Inc. paid income tax of just 3 million euro in 2012, after the group had realized sales to German customers of $8.7 billion via its Luxembourg units. The consequent massive tax avoidance saw the issue placed at the top of the political agenda in 2013 (Bergin, 2013). Moreover, the German Parliament has passed a controversial law forcing search engines to pay publishers royalties for providing extracts from their articles (Mayer, 2013; Puglisi 2014). This “ancillary copyright” however may reduce the number of Internet accesses and thus the divulgation of news from the original publisher.

Mass protests forced the Hungarian Government to abandon a tax on Internet data traffic. The draft law aimed to levy a fee on each gigabyte of Internet data transferred. Protesters not only opposed the financial burden in question, but also feared that the law would restrict free access to information. The levy was set at 150 florins (£0.40; €0.50; $0.60) per gigabyte of data traffic. Following the protests, government decided to cap the tax at 700 florins per month for individuals and 5,000 florins for companies. However, this did not placate the protesters (BBC News Europe, 2014, for all).

Spain passed a law that taxes any site with links to articles published by members of Spain's Newspaper Association. It came into effect on January 1st, 2015. The law has been nicknamed the "Google Tax" because it specifically targets Google News, as well as other news aggregation systems. The law says that editors have an "inalienable right" to tax any site that links to their news 8In support of an Italian PST, see on the contrary Pezzi, 2013, for all. 9However, the introduction of a European PST was not contemplated in the EU Commission’s 2015 action plan. See below (EU Commission, 2015). 10 France and Luxembourg also introduced a rduced VAT rate for e-books. The measure was rejected by the European Court, on the grounds that reduced VAT rates may be imposed on goods but not on services (Bronzo, 2015).


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(see, for all, Donero, 2014). However, the law has been subjected to the same criticisms already witnessed in the German case. Finally, the British Government has drafted a bill designed to combat tax avoidance by MNEs which make profits in the UK but pay taxes in the country of residence of the parent company. This tax (already called the “Google Tax” by the media) has been in force since April 2015. It entails a levy of 25% on the profits produced by a branch within the UK, regardless of where the head office of the company is located. This rate is higher than 21% the rate charged on the profits made by national companies (British Government, HMT, 2013). 3. E-commerce: the EU’s directives mainly concerning the place of taxation11

It is clear to see that the EU’s legislation on Internet and taxation was, and is, mainly focused on the question of VAT, and in particular (albeit not only) aims to determine the due place of taxation in the case of cross-border e-commerce transactions, in order to avoid double taxation or no taxation at all, together with compliance with the principle of neutrality (the same tax rate within a country regardless of where the suppliers are located, and also in regard to traditional commerce).The foundations of a comprehensive EU regulation on e-commerce taxation may be found (Basu, 2007) in a report published in 1998 (EU Commission, 1998). The Report underlines that the rules contained in article 9 of the Sixth Directive regarding the place of e-commerce taxation “are based on a number of different criteria” and in particular “do not always ensure taxation at the place of consumption”. The Report then states that new rules are needed “in an attempt to ensure (…) that services are taxed in EC where they are enjoyed or used”. A caveat is however introduced, by remarking that “there is little evidence that effective control is capable of being exercised over the supplies to private individuals”.

A further basic step towards the modification of the current tax system (substantially VAT) to make it better applicable to radio and television broadcasting services and other electronically supplied services, was taken by the fundamental 2002 Directive (EU Council, 2002). This was conceived as an adjustment of the 1977 sixth Directive to e-commerce, and through a series of amendments it was the basis for subsequent EU directives in the field. The main points of such directives are summarized below (EU Commission, 2014a). The 2002 Directive first qualifies direct e-commerce as an exchange of services, and locates the places of taxation for intra EU cross-border deals in the destination countries for business-to-business (B2B) transactions, and in the countries where the suppliers have a VAT number for those sales to non-taxable persons (B2C)12. Furthermore, in the constant pursuit of tax neutrality, the 2002 Directive, by removing a significant competitive handicap for EU suppliers, also establishes that EU suppliers are no longer obliged to levy VAT when selling in markets outside the EU, as had previously been the case. Another existing competitive distortion was eliminated by the Directive, when it required non-EU suppliers to charge VAT as EU suppliers when providing electronic

11It is interesting to recall that in August 1996, the EU Commission produced the paper “The BIT TAX: The case for further research” (EU Commission, 1996). One of the many recommendations of that paper was that the European Commission should undertake research to find out whether a Bit Tax can actually contribute towards a more equitable distribution of the benefits of the Information Society among winners and losers. 12The difference between the two regimes may be justified as a consequence of the effectiveness of controls in the two cases, as we have seen above.


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services to EU non-taxable persons. There is no doubt that these new rules created a more competitive and tax-neutral environment in EU e-commerce, also in regard to non-EU countries. Finally, it established that non-EU operators may benefit from simplified registration and reporting procedures, allowing them to deal with a single European revenue agency of their own choice. The process of updating the 2002 Directive started with the Council Directive 2006/58/EC (EU Council, 2006) which extended the period of application of the 2002 Directive to 31 December 2008. Moreover, in 2008 the 2008/8/EC Directive (EU Council Directive, 2008) further extended application of the 2002-2006 Directive to the end of 2009, whilst awaiting a final, stable EU regulation of the matter, as proposed by the EU Commission. Two important changes have been made to this set of rules in the intervening years. Firstly, the 2002-2008 Directive was made permanent on January 1, 2010. Furthermore, the process suggested by the 1998 Report (see above) has reached a crucial point. As of January 1, 2015, VAT on telecommunications, radio and television broadcasting and electronic services provided by a supplier established within the Community, to non-taxable persons also established within the Community, shall be charged in the Member State where the customer belongs13, regardless of whether the customer is a business or a private consumer, and regardless of whether the supplier is based within or outside the EU (EU Commission, 2015a). Innovations in the legislative system have been accompanied by the continuous updating of administrative procedures, the most important of which being a 2008 Regulation (EU Council Regulation, 2008) specifically aimed at extra-EU suppliers and concerning their VAT registration. Table 1 below reports the main changes made from 2014 to 2015 regarding the most important situations of internal and cross border e-commerce, in terms of the place of taxation for sales to final consumers14.

HERE TABLE 1

The EU’s extended concern for the place of (VAT) taxation of e-commerce was welcome, according to the prevailing views regarding, among other things, the neutrality principle. In particular, the OECD stated that “The EU became the first significant tax jurisdiction in the world to develop and implement a simplified framework for consumption taxes on e-services in accordance with the principles agreed within the framework of the Organization for Economic Co-operation and Development (OECD). The OECD principles on the taxation of e-commerce were agreed at a 1998 conference in Ottawa. These principles establish that the rules for consumption taxes (such as VAT) should result in taxation in the jurisdiction where consumption takes place (the consumer belongs). The OECD also\agreed that a simplified online registration scheme, as now adopted by the Council, is the only viable option today for applying taxes to e-commerce sales by non-resident traders.” (OECD, 2002 from EU Commission, IP/02/673).

Some criticisms were also received, however. First of all, the new European regulations of EU taxes on e-commerce have raised a large number of complaints from SMEs and Startups, due to the heavy administrative burden of such taxes which require knowledge of the VAT number of all

13 For a business (taxable person) either the country where it is registered or the country where it has fixed premises receiving the service. For a consumer (non-taxable person) the country where he/she is registered, has a permanent address or usually lives. 14More details are reported in EU Commission 2015a.


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the countries where sales are made15. Subsequently, as a consequence, provisions were made enough so that it was sufficient to register in one single country and to use this number for sales in any EU country to which the EU service provider opts also to report and manage its EU VAT liability16. Moreover, it has been claimed that the new rules mimic the introduction of a PST (e.g. Viviani, 2014b). Finally, it has been submitted that many aspects of the new rules could be improved (Bosi e Guerra, 2014), including the non-coordination of traditional and e-commerce taxation rates, and the difficulty of discovering whether a buyer is a taxable person or not.

Finally, we should also point out that on June 06, 2015, the EU Commission (EU Commission, 2015b) submitted a proposal to the European Council, in which it suggested that a Digital Single Market -DSM- be adopted in order to improve various aspects of the functioning of Internet operations in the EU area. This strategy would be built on three pillars:

1. Access: better access to digital goods and services for consumers and businesses across Europe;

2. Environment: creating the right conditions and a level playing field in which digital networks and innovative services can flourish;

3. Economy & Society: maximizing the growth potential of the digital economy.

However, none of the 16 proposals set out directly concerns Internet and taxation, with the exception of certain measures designed to simplify VAT in intra-state Internet transactions.

4. Transfer prices, base erosion and profit shifting: the main OECD/G20 guidelines

The regulation of Internet and taxation in EU countries depends also on the guidelines set out by the OECD, which has recently assumed a prominent role in this field. In particular the OECD (Article 9 of the OECD Model Tax Convention) has suggested a rule17 designed to address the mismatching of Transfer Prices (TPS) applied by corporations, in order to concentrate taxable income in the country where taxation is lower or non-existent. The rule18 states that transactions among corporations’ branches should be evaluated according to the so-called Arm’s Length Principle (ALP), i.e. TPS should be set at the level they would be in transactions among independent parties19. The OECD’s detailed guidelines (OECD, 2010) recognize that the ALP is more difficult to apply in the case of interest, royalties and other immaterial services20; however they do not make an explicit reference to the digital economy. These references may be found at length in an OECD report from 2005 (OECD, 2005) explicitly devoted to TPS and profit shifting. The starting point is that “The increased speed and

15At http://www.retailresearch.org/eurovat.php one can find an updated list of VAT rates in EU countries, together with a short presentation of the 2015 reform also in comparison with the US sales tax. 16It is the so-called VAT mini One Stop Shop (MOSS). As an example, see the case of Italy in Agenzia delle entrate, 2013. It should be noted, however, that the service provider must take account of the applicable VAT rates in the country of the buyer, for the purposes of reporting and paying the VAT due. 17The rule has been adopted by about 60 countries. 18 A series of OECD papers on TPS may also be found at: http://www.oecd.org/ctp/transfer-pricing.19 Consequently, the ALP reflects the price of a transaction in a freely competitive market. 20 For items other than goods, there are rarely identical items, and instead of ALP certain other rules must be applied to determine the proper value of TPS.


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mobility of business activities and cross-border transactions resulting from Internet usage has particular implications for applying transfer pricing methods and for taxing business profits” and -particularly- for adopting the ALP principle. Four cases of intragroup transactions are discussed: automated electronic intra-group transactions; online auctions for customer-to-customer (C2C) and business-to-business (B2B) sales; subsidiary-to-parent web hosting arrangements; and computerized transactions for airline reservations. The general conclusion is that “it would not be appropriate to embark fundamental changes to current rules at this stage, i.e. based on the assumption that there is no evidence for base erosion ■ […] there does not seem to be actual evidence that the communications efficiencies of the Internet have caused any significant decrease to the tax revenues of capital importing countries.”

This conclusion changed during the following years. In short, at present the OECD points out that digital business models have seen an exponential growth since 2005, especially for consumer retail business (B2C), and recent empirical studies seem to prove that base erosion at present is a genuine reality. The classical means of tax planning would be particularly effective in the digitalized economy, especially given that the organizational architecture is flexible compared to traditional businesses, comprising as it does the entire chain of value-creation and given the importance of mobile factors21. Thus the OECD (2013) concludes that “enormous amounts are received and invested by recognized tax havens and low taxation countries, such as Ireland, Netherlands and Luxembourg”.Given this situation, it is highly probable that “Base Erosion and Profit Shifting - BEPS” takes place, and it poses a threat in terms of tax sovereignty and tax revenue”22. To avoid this exit23, together with the G20, the OECD launched a program in 2013 (OECD/G20, 2014a), designed to counter BEPS24 in member countries. An Action Plan was established setting out 1525 critical aspects of the elusion of international tax rules, to be addressed by the end of 2015. A first set of deliverables (7/15) was contained in a 2014 report (OECD/G20, 2014b), while the institutional operation of the plan was evaluated at the Istanbul Meeting (02/2015) (OECD/G20, 2015). A specific report (OECD/G20, 2014c), and the BEPS Action Plan no. 1. address the tax challenges raised by the digital economy as possible source of BEPS The analysis starts by outlining the developments, the present main features and the prospects of the Digital Economy, by emphasizing the fact that it is impossible to ring-fence it for tax purposes. According to the OECD/G20, the digital economy does not generate specific BEPS issues; however, some of its key features increase BEPS risks in terms of both direct and indirect taxation. These BEPS risks should then be addressed in other Actions constituting the BEPS Project. Particular attention should be given to: the artificial avoidance of permanent establishment status; the importance of intangibles

21 With regard to the previously- mentioned difficulty in locating the place of taxation, the OECD is in favour of the destination principle; however, as we have seen, it may be difficult to identify the place of the final consumer. 22For example, with regard to a couple of European countries (the UK and Germany), estimates of total tax losses due to BEPS during the first years of the new century, amounted to £ 12bn in the United Kingdom K and € 90bn in Germany. 23Germany and the United Kingdom adopted a common stance to the strengthening of the taxation of e-commerce, by claiming that "International tax standards have had difficulty keeping up with multinational businesses which are able to shift the taxation of their profits away from the jurisdictions where they are being generate" (Yahoo News, 2012). 24To discover the presence and relevance of BEPS, a set of quantitative indicators has been produced. For example, (indicator 6) a high concentration of royalty payments regarding R&D expenditures is considered a sign of a possible process of profit shifting through intangibles (e.g. OECD, 2015). 25Ranging from transfer prices to harmful tax practices and to tax Treaties.


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and their impact on transfer prices; the possible need to adapt Controlled Foreign Company-CFC rules to the digital economy; the opportunities for tax planning by businesses engaged in VAT-exempt activities.

Given the measures suggested by the OECD and adopted by member countries, it seems that the main US digital MNEs are trying to conclude a series of agreements with the National European Revenue Agencies concerning a reasonable level of taxation in EU countries (e.g. in general: Rotondo, 2015; for the case of Italy:Tremolada, 2015, Bellinazzo, 2015)26.

5. Conclusions The aim of this paper is to give an overall first-hand picture of some features and issues characterizing the Internet and taxation, with reference to EU countries. The first issue we considered stems from the fact that the giant digital (US) MNEs make a great amount of profits in Europe (and in other non-US countries) and then shift such profits to lower or zero taxation countries, thus avoiding the payment of taxes in those countries where the services are supplied. To eradicate, or at least to curb, this phenomenon, it has been suggested that a tax on the profits of US MNEs in the destination countries be introduced. This proposal has not proven very successful in the EU, as only a handful of countries have tried to introduce such a tax, and in some cases (e.g. Italy and Hungary) the tax was repealed just a short time after its adoption. The reasons are set out here; the most important of them seems to be the lobbying actions of the digital MNEs (and of Internet users), and the possible contrast with the free movement of goods and services within the EU. We then considered the EU’s actions aimed at regulating the e-commerce market, in particular in terms of the establishment of the place of taxation, particularly with regard to cross-border transactions of the B2C (Business to Consumer) type. The EU has stated that according to the sixth directive, at the end of the 1990s the place of taxation for e-commerce”was based on a number of different criteria (…) and did not always ensure taxation at the place of consumption”for cross-border transactions (within or outside the EU). Starting with a Directive in 2002 (subsequently updated and extended) the field was gradually played. In particular, the destination principle has been in force since January 2015, also for B2C cross-border transactions, in line with OECD guidelines and with theoretical prescriptions. Finally, we outlined how the OECD’s stance on tax-avoidance by MNEs has changed during the course of the new century. A benevolent position (and an underestimation of the entity of profit shifting) gradually gave way to the opposite view. Specific guidelines for transfer pricing in the digital sector are not considered, although particular attention is given to the question of intangibles (considering also the recognized difficulty in taxing them). Moreover, in 2013 a broad project was adopted by the OECD and the G20: the so-called “BEPS (Base Erosion and Profits Shifting)” project, which consisted of 15 Action Plans to be put in place by the end of 2015. The first Action plan is devoted to the digital economy. It is believed that e-commerce does not result in specific BEPS per se; however it may increase the risk of BEPS in other sectors of the economy. To avoid

26US MNEs seem, however, more willing to agreements in the field of taxation on profits than in that of the abuse of dominant position.


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this, specific measures are suggested, in particular regarding the status of permanent establishment, intangibles and the effects of such on transfer prices, and also VAT-exempt activities.

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Table 1. EU VAT legislation before and after 1 January 2015.Sales to final consumers

Rules until 31/12/2014 - Telecommunications, broadcasting & electronic services

Service supplied by/to EU consumer in

EU country 1 EU consumer in

EU country 2 Non-EU

consumer

EU supplier in EU country 1

Taxable in EU country 1


No EU VAT




No EU VAT

Non-EU supplier Taxable in EU

country 1 Taxable in EU

country 2 No EU VAT

Rules from 2015 - Telecommunications, broadcasting & electronic services

Service supplied by/to EU consumer in

EU country 1 EU consumer in

EU country 2 Non-EU

consumer




No EU VAT




No EU VAT

Non-EU supplier Taxable in EU

country 1 Taxable in EU

country 2 No EU VAT

Source: EU Commission, 2015a


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Brasília a. 40 n. 160 out./dez. 2003 179

Ivan Lira de Carvalho

1. IntroduçãoA divisão da linha da história da huma-

nidade em idades (idade antiga, idade mé-dia, idade moderna e idade contemporânea)decerto terá que ser alterada, com o acrésci-mo de uma nova faixa, correspondente à in-serção da Internet nas relações sociais e ins-titucionais das pessoas, notadamente como boom dessa via de comunicação, operadanos últimos cinco anos do século vinte. Con-ceitos e condutas foram revistos, valores fo-ram totalmente reformulados, numa autên-tica revisão radical em costumes e práticas,inclusive no campo dos negócios.

Assim, pode ser dito que a Internet colo-cou de bruços, também, conceitos e práticasjurídicas, inclusive os pertinentes ao Direi-to Tributário. Sim, pois em razão da difu-

A tributação das operações realizadas pormeio eletrônico

Ivan Lira de Carvalho é Juiz Federal. Pro-fessor da UFRN. Doutorando em Direito(UFPE).

Sumário1. Introdução. 2. O comércio eletrônico como

objeto da tributação. 2.1. Princípios que devemorientar a tributação das operações realizadasvia Internet. 2.2. O conceito de comércio ele-trônico. 2.3. A expansão do comércio eletrôni-co e o seu posicionamento no contexto econô-mico no Brasil e no Mundo. 2.4. De como reagea tributação, diante do comércio eletrônico. 3.Provedor: insumo imprescindível para os ne-gócios do mundo web e as perspectivas da tri-butação sobre ele incidente. Natureza jurídicado serviço prestado, para fins de tributação. 4.Imunidade ou isenção tributária em relação àsoperações virtuais. 5. Conclusões.


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são, em escala crescente, do comércio eletrô-nico (popularizado pelo anglicismo e-com-merce) e da prestação de serviços on-line,adveio uma pletora de questionamentos acer-ca da possibilidade (ou não) de o Estadotributar ditas atividades. E é justamente so-bre alguns desses problemas que tratará opresente ensaio.

É de ser considerado, sob a lente dessarevolução, um ponto deveras sensível do sis-tema estatal, que é o chamado poder tribu-tário, cuja noção apresenta um profundo teordas manifestações próprias da soberania doEstado. E não se fala aqui de qualquer ma-nifestação, mas de uma das suas mais pre-claras e necessárias, pois é certo que o Es-tado moderno (isto é, o Estado capitalis-ta) deposita nesse poder sua principalfonte de manutenção, para a sua organi-zação e exercício das atividades públicasirrenunciáveis, resolvendo e executandofunções e serviços de ordem e de extensãovárias.

Esse poder tributário se encontra tradi-cionalmente ligado à noção de jurisdição epor sua vez esta última tem permanecidovinculada, também por tradição, à noção deterritório nacional. Entretanto, o comércioeletrônico, como tudo que transcorre via In-ternet, não tem necessária amarração a umterritório determinado, nem dá demasia-da atenção aos limites políticos e geográ-ficos demarcadores das fronteiras nacio-nais.

Assim, da mesma forma que a atividadeempresarial foi levada a adotar posturas econceitos diferentes nos seus ofícios, a par-tir da implementação do e-commerce, tambémo Estado deve estar alerta para as novas for-mas de exercício da sua potestade tribu-tária, sob pena de vê-la minguar sensivel-mente.

É, pois, um dos mais destacados objetosdeste estudo, a tentativa de levantar algunspontos acerca de como o Estado pode parti-cipar dessa nova realidade, qual seja a dasoperações realizadas via Internet, potenci-almente geradoras de tributos.

2. O comércio eletrônico comoobjeto da tributação

2.1. Princípios que devem orientar a tributaçãodas operações realizadas via Internet

Qualquer ramo do conhecimento cientí-fico, para garantir respeito e utilidade àssuas proposições, necessita ostentar uma ra-zoável coleção de princípios, base sobre aqual são desenvolvidas todas as atividadesde cunho investigativo do específico seg-mento. Acerca da força dos princípios, dizRonaldo POLETTI (1996, p. 285) que essessão “certos enunciados lógicos admitidoscomo condição ou base de validade das de-mais asserções que compõem dado campodo saber”.

Pois no ainda incipiente campo da tri-butação do comércio eletrônico, apresenta-se um rol de princípios, os quais sem dúvi-da hão que ser somados aos princípios ge-rais do Direito e mais especificamente aosprincípios do Direito Tributário, visando darcrédito e utilidade aos fins propostos poressa atividade arrecadadora estatal.

A sedimentação de uma razoável cartade princípios norteadores da tributação oraem estudo tem sido preocupação de entesestatais e de entidades não-governamentais,a exemplo do Center for Strategic & Internati-onal Studies (CSIS), tradicional instituiçãopública norte-americana, dedicada à pesqui-sa e à análise do impacto da tecnologia dainformação na sociedade e na estrutura doEstado, que no contexto do seu projeto Glo-bal Information Infrastructure Comisson (GIIC)publicou importante documento, sob o títu-lo E-commerce taxation principles: a GIIC pers-pective, analisando os postulados a seguirdestacados.

O primeiro deles, nominado nos circui-tos acadêmicos como princípio da neutrali-dade, indica que deve o Estado abster-se decriar novos impostos ou taxas exclusiva-mente para o comércio eletrônico. Em com-plemento, entende o CSIS, por meio do GIIC,que a necessária e imprescindível tributa-


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ção incidente sobre operações empresariaisrealizadas com o intermédio da Internet nãodeve ter por base o número de bits transmi-tidos ou descarregados (downloaded) (Cf.UNCITRAL model law on eletronic commer-ce with guide to enactment 1996, 2002).

Como uma espécie de sub-princípio oude postulado decorrente da neutralidade,Francisco A. LAGUNA (2001, p. 40) desta-ca a posição da Organização para a Coo-peração e Desenvolvimento Econômico(OCDE), segundo a qual o comércio eletrô-nico não deve ser submetido a impostosadicionais discriminatórios ou não equita-tivos, estabelecendo, assim, uma cláusulaimpeditiva de bi-tributação. Ainda sobre avedação de dupla tributação, é posição as-sumida pelo CSIS, no GIIC, de que esta deveser evitada, sob pena de se inibir o desen-volvimento do comércio eletrônico, deven-do ser eliminados os riscos de que o usuárioda Internet seja alvo de múltipla taxação, oque poderá ser feito se forem adotadas defi-nições, conceitos e termos consistentes.

Outro princípio é o da eficiência, segun-do o qual os custos administrativos para aimposição, a fiscalização e a arrecadaçãodos tributos incidentes sobre as operaçõeson-line devem ser pautados no mais baixonível possível, de sorte a não implicar umadesnecessária elevação dos custos para queas empresas cumpram regularmente a legis-lação tributária pertinente. Nessa linha deraciocínio, não devem os Estados lucubra-rem engenhosos artifícios de ampliar osseus recursos por meio do filão comércio ele-trônico, restando indene à tentação de criartributos específicos para o e-commerce. Se nãoatentarem para essas linhas de condutapolítica, os Estados poderão impor severosreveses ao desenvolvimento empresarial tec-nológico, afastando investidores e mutilan-do, na gênese, um florescente caminho decrescimento das atividades mercantis.

Na rota do princípio da eficiência estátambém o da flexibilidade. Assim, é precisoque os regimes fiscais sejam maleáveis eabertos às evoluções das regras de mercado

e do avanço da tecnologia, cumprindo o pa-pel extrafiscal de fomentar novos negócios.

Mais um princípio que se pode apontarno seio da tributação dos negócios eletrôni-cos é o da autonomia relativa desses tratosempresariais ou envolventes de empresas econsumidores. Com efeito, desde a consoli-dação da grande rede mundial de computa-dores, situada cronologicamente no Brasilem meados dos anos noventa, têm-se mani-festado infrutíferas as tentativas de regula-mentação oficial e hermética das relaçõessociais (aí incluídas as comerciais) trava-das via Internet. Essa constatação de sau-dável ultima ratio do Estado não pode seresquecida quando da análise da tributaçãodas operações realizadas por esse avança-do meio da tecnologia da informação. As-sim, é recomendável que os governos res-peitem a liberdade das empresas, dos usuá-rios e dos fornecedores, para que estes dis-cutam e regulem questões como segurança,privacidade, interoperabilidade e verifica-ção e autenticação das transações via Inter-net, somente intervindo em casos extremos,a exemplo da tipificação criminal de con-dutas absolutamente intoleráveis, inclusi-ve no meio administrativo e tributário. Éoportuna a advertência que não está sendoaqui feita uma apologia ao lassez-faire ou aoabsenteísmo desmesurado do Estado emmatéria de tributação. Estimula-se, é verda-de, a conjuminância dos primados da ne-cessidade e da moderação.

De acordo com o princípio da certeza, asregras tributárias incidentes sobre as ope-rações eletrônicas devem ser lavradas como máximo de clareza, de sorte a permitir queas pessoas (físicas ou coletivas) possam en-tender, sem desvios ou maiores dificulda-des, as obrigações às quais estão sujeitas,cumprindo-as com um baixo (ou inexisten-te) índice de inadimplência. Esse princípio,decorrente próximo do princípio da legalida-de tributária, tem gênese no Direito Penal,onde é estudado sob o nome jurídico de prin-cípio da lex certa ou princípio da determinaçãotaxativa, que já constava do rol de cláusulas


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garantistas integrantes do opúsculo Dos de-litos e das penas, do Marquês de Beccaria1.

Rotulado pelo binômio eficácia e juste-za, tem-se o princípio segundo o qual o efe-tivo empenho do Estado na cobrança de tri-butos deve ser voltado para a arrecadaçãode receitas necessárias e suficientes para ocusteio das atividades oficiais típicas, de-vendo ser residual a missão sancionadora eextrafiscal dos tributos, a exemplo de mul-tas ou outras penalidades por descumpri-mento das regras jurídicas pertinentes.

Também pode ser apontado como prin-cípio reitor da tributação em análise o cha-mado princípio geral da territorialidade, defi-nidor da competência de quem pode e devecobrar o tributo, pois, segundo o GIIC (UN-CITRAL..., 2002), é ele eficaz, seguro, sim-ples e neutro, devendo ser ressalvado, noentanto, que “é possível que o princípio datributação em razão do local de consumoseja mais difícil de ser implementado que oprincípio da tributação na origem do forne-cimento do bem ou serviço”.

Mesmo enfrentando discussão acercados conceitos escolhidos, o GIIC (UNCI-TRAL..., 2002) aponta como princípio oucritério inominado da tributação incidentesobre operações on-line o de que o forneci-mento e o comércio de produtos em formadigital “como livros, software, imagem,música ou informação devem ser tratadoscomo fornecimento de serviços, não comofornecimento de produtos ou coisas tangí-veis.”

2.2. O conceito de comércio eletrônico

Nesta quadra do trabalho, imperioso sefaz um esboço do que pode ser consideradocomércio eletrônico, para encarte no temade tributação das operações on-line. Seriaapenas uma operação de mercancia, estei-dada nas milenares regras de comércio, ape-nas realizada através da moderna via daInternet? Ou seria um novo paradigma ne-gocial, totalmente isolado das experiênciasanteriores? Haveria, em vez do radicalismodos extremos, uma posição terciária em que

fossem contemplados elementos das duasafirmativas antes esboçadas? Parece que aúltima indagação encontra resposta positi-va, máxime diante da constatação de que ouniverso negocial estudado labuta com ope-rações comerciais que prescindem de indi-cativo seguro do local de origem e do desti-no final do trato e das suas conseqüênciasjurídicas e materiais.

Assim, pode ser arriscado um conceitode comércio eletrônico como sendo o com-plexo de transações comerciais e financei-ras levadas a efeito por intermédio do pro-cessamento e da transmissão de informa-ções, aí incluídos textos, sons e imagens,sendo que essas informações podem consti-tuir, por si somente, o objeto primacial datransação ou apenas um acessório desta.

Inserido no campo das relações sociaisque são levadas a cabo através dos meiosinformáticos, o comércio eletrônico ganhoua rotulação universal de e-commerce e podeser dividido, para fins operacionais ou di-dáticos, em:

a) ajustes celebrados entre empresas, emoperações conhecidas pela sigla B2B (busi-ness-to-business), nos quais as empresas po-dem atuar como usuárias, é dizer, como ven-dedoras ou compradoras, ou como prove-doras de meios ou de serviços de Internetpara o comércio eletrônico, a exemplo dasempresas provedoras (America On Line,Terra etc.) ou das instituições financeiras;

b) vendas diretamente das empresas aosconsumidores, formando o B2C (business-to-consumers), em operação na qual as em-presas vendem os seus bens ou serviços di-retamente ao destinatário final, através deum site web.

Outra divisão possível trata o comércioeletrônico como direto ou indireto, nos ter-mos da opinião do professor italiano Cristi-ano GAMBARINI (2002), que pode assimser sintetizada:

a) comércio direto – é aquele em que opedido, o pagamento e o envio de bens in-tangíveis ou de serviços realiza-se integral-mente por meio da web, a exemplo do que


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ocorre com a venda dos softwares ou da pres-tação de consultoria;

b) comércio indireto – neste, apesar deos atos negociais serem celebrados com ointermédio da Internet, a distribuição ou aentrega dos bens ou serviços são ultimadaspor vias convencionais, a exemplo do meiopostal ou do transporte aéreo, ferroviário,rodoviário, náutico etc.

Assim, tem-se um retrato da relativa com-plexidade do tipo de comércio objeto destaanálise, que guarda forte identidade com asformas tradicionais de mercancia, a exem-plo das vendas telefônicas e daquelas reali-zadas com a utilização de catálogos de pro-dutos e preços.

2.3. A expansão do comércio eletrônico e o seuposicionamento no contexto econômico no

Brasil e no Mundo

A expansão dos negócios travados viaeletrônica é contemporânea da discutívelglobalização da economia. É possível queexista um forte elo entre esses dois fenôme-nos de mercancia e serviços, muito emboranão possa ser atribuída à Internet a exclusi-vidade dos efeitos deletérios da mundiali-zação da economia, posto que esta foi arca-bouçada por meio de um projeto político bemmais ambicioso, que tomou por base e porfinalidade a elegia à livre iniciativa (a dou-trina neoliberal), coincidente com a derro-cada do poderio da extinta União das Re-públicas Socialistas Soviéticas, no limiar dosanos noventa do século passado. Mas o ine-gável é que os novos paradigmas de traba-lho e de circulação de riquezas inseridos nasociedade hodierna pela Internet constitu-em excelente cartão de visitas para a doutri-na do novo liberalismo. Assim, por exem-plo, quando um operário especializado édespedido de uma indústria de mecânicafina, posto que o seu lugar foi ocupado porum robô, fica mais fácil para o setor de re-cursos humanos da fábrica animá-lo a esta-belecer o seu próprio negócio solitário deterceirização de serviços, a partir de um mi-crocomputador doméstico, o que não ocor-

ria nos anos sessenta ou setenta do séculovinte, época em que uma cruzada de pieda-de e de indignação universal encaminhariao novo desempregado para as ligas de pro-testo ou para a miséria, muitas vezes tempe-rada pelo alcoolismo ou pela criminalidadepatrimonial.

A constatação de que muitos tipos de ne-gócios firmados pela via eletrônica alimen-tam a doutrina neoliberal pode ser medidacom os números que organismos estatais ounão-governamentais apresentam acerca dovolume de transações levado a efeito por in-termédio do mencionado caminho. Só a tí-tulo de exemplo, são reproduzidos nestaquadra do ensaio informações divulgadasno site da Receita Federal2, para onde sãodirigidos os créditos e as responsabilidadespelos dados a seguir reproduzidos, regis-trando-se, por ser de justiça, a advertênciaali contida, de que a dinâmica “e a crescen-te importância do comércio eletrônico é bemdocumentada na imprensa internacional. Ovolume das operações, no entanto, carecede uma estimação precisa e confiável”. Eisa síntese:

• As previsões acerca do volume das ope-rações do comércio eletrônico por ano vari-am de vinte a cento e cinqüenta por cento.

• A maioria das empresas que realizampesquisas do tipo acima referidas tomampor base o tráfego na Internet e não as ven-das efetivamente efetuadas, sendo necessá-rio lembrar que a maioria dos acessos im-plica mera consulta e não negócios realmen-te concretizados.

• A empresa Boston Consulting Group es-tima em duzentos e quinze milhões de dóla-res o volume de negócios do tipo B2C (ven-da ao consumidor) realizado na AméricaLatina em 2000. O Brasil é responsável poroitenta por cento desse universo, num mon-tante de cento e setenta milhões de vendason-line, projetando-se um crescimento paradois bilhões e seiscentos e quarenta milhõespara 2003.

• Edge Group, firma de consultoria, dáconta que o comércio eletrônico teve fatura-


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mento de duzentos milhões de dólares noBrasil, no ano de 1999, e em três anos essemovimento irá para a casa dos quatro bi-lhões de dólares.

• A International Data Corporation, con-sultora norte-americana, avalia que o e-com-merce movimentou quatrocentos e quarentae nove milhões de dólares no Brasil duranteo ano 2000.

• Para a Fundação Getúlio Vargas, o co-mércio eletrônico envolveu, em 2000, no Bra-sil, 0,43% do mercado total B2B e 0,16% dosnegócios B2C, ficando patente que o maiorpotencial de crescimento do e-commerce estáno segmento dos negócios interempresari-ais, já que as vendas empresa–consumidordificilmente ultrapassarão 10% do total dasvendas varejistas tradicionais.

• O site B2B Mercado Eletrônico, por seudiretor Márcio Mansur, afirma que o B2Btotalizou, no Brasil, três bilhões e trezentosmilhões de dólares em 2000, sendo possívelo seu crescimento para setenta e seis bilhõesde dólares em 2004.

• Nos Estados Unidos, as vendas B2Cforam estimadas por R. Josten, com relaçãoa 1998, em sete bilhões e oitocentos milhõesde dólares com previsão de cento e oito bi-lhões para 2003.

• O movimento do e-commerce no Mundovariou de cem bilhões a quinhentos bilhõesde dólares em 2000, segundo a Forrester Re-search, que prevê um movimento universalentre um trilhão e quatrocentos milhões etrês trilhões e duzentos milhões de dólares,para o ano de 2003.

A disparidade dos números, em favor doB2B, pode ser explicada pela incerteza queo consumidor final e singular ainda detémem relação aos negócios celebrados pela viavirtual.

Austan GOOLSBEE (2002, p. 14), econo-mista e pesquisador da Universidade deChicago, dá conta que durante o ano de 1998o governo dos Estados Unidos deixou dearrecadar quatrocentos e trinta milhões dedólares em impostos, entre estes a maiorparte correspondente a taxas estaduais (sí-

miles do ICM brasileiro), em razão da inér-cia tributária ante o comércio eletrônico, pre-vendo ainda uma situação mais preocupan-te pois, segundo a empresa de pesquisasForrester Research, as vendas on-line nos EUAcrescerão, até 2003, cerca de setenta por cen-to.

Tem-se, pois, um inequívoco crescimen-to das operações eletrônicas no panoramaeconômico mundial, com inescondível pre-valência, atual, dos tratos entre empresas,mas sem poder ser desconsiderada uma al-vissareira ampliação do B2C advinda, prin-cipalmente, da ruptura de vários preconcei-tos negociais ainda existentes em relação àscompras virtuais, superação essa que podeser (e possivelmente será) conseguida coma consolidação de uma ética empresarialforte para a área, em que a fidúcia e crescerácomo elemento preponderante. Paradoxal-mente, numa sociedade mesclada pelo “Ad-mirável mundo novo” idealizado por Al-dous Huxley, a firmação dos cyber negóciosterá como fortíssimo esteio insumos que fo-ram cruciais para os tratos fechados na basedo fio de bigode, prática bastante difundidano Brasil colonial e na Velha República: apalavra e a honradez.

2.4. De como reage a tributação, diante docomércio eletrônico

É inescondível a antipatia que a socie-dade nutre sobre a imposição e a cobrançade tributos. Tanto que historicamente a fi-gura do agente arrecadador é repulsada porparticulares ou empreendedores e a lei queinstitui tributos sempre é tida, pelo potenci-al pagador, como uma norma de recusa so-cial. Com efeito, por mais que o contribuinteacredite que o governante vai dar bom uso àriqueza arrecadada, ainda paga o tributo sobprotesto e deseja, sinceramente, ver a suaquota de contribuição diminuída ou extin-ta.

Assim, decorrência psicológica dessaaversão coletiva ao pagamento de tributos éque tanto o contribuinte direto com o substi-tuto tributário criam os embaraços possíveis


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para que a máquina arrecadadora estatalnão funcione a contento. Mas, mesmo de-baixo dessa aura de indesejabilidade, o con-tribuinte – digamos – real é compelido pelacogência das leis a dispor das informaçõesque lhe forem solicitadas pelos agentes daadministração tributária.

Já diante da realidade do e-commerce, asdificuldades aumentam, especialmente noque diz respeito aos registros das operações,que podem ser escamoteados por meio demanobras tecnológicas. A fraude tem cam-po fértil no mundo da informática, sendonecessária a adoção de medidas de fiscali-zação mais compatíveis com as facilidadesdo comércio on-line.

O baixo índice de intermediação varejis-ta nas operações de e-commerce pode signifi-car um entrave à fiscalização e à arrecada-ção de tributos, tanto os incidentes sobrevendas e serviços, como os de renda.

Deve ser lembrado que são os varejistasos responsáveis pela retenção e pelo reco-lhimento de muitos dos impostos aqui refe-ridos (ISS, ICMS, IR etc.). E aí é que são pos-tos os desafios ao Estado, para melhor apa-relhamento da sua máquina de tributação,fiscalização e arrecadação.

3. Provedor: insumo imprescindívelpara os negócios do mundo web e asperspectivas da tributação sobre ele

incidente. Natureza jurídica do serviçoprestado, para fins de tributação

O provedor de acesso é o instrumentoatravés do qual a clientela web ingressa nomundo da Internet. Configura, em primeiroolhar, uma espécie de clube virtual, por meiodo qual pessoas (físicas ou jurídicas) ideal-mente se reúnem, a partir daí ingressandono espaço etéreo da rede mundial de com-putadores. Assim visto, pode ser considera-do um mero suporte técnico para permitir aconexão entre os interessados, via Internet.Mas, a exemplo do que acontece com os clu-bes existentes no ambiente convencional, osprovedores geralmente agregam ao seu mis-

ter original uma gama infinita de prestaçãode serviços, que vão desde a publicidade vei-culada nos seus portais (banners etc.) até aintermediação de negócios ou a realizaçãode consultoria on-line, passando pela divul-gação de músicas ou de outras mídias.

Mas, visto que as atividades desenvolvi-das por um provedor não estão limitadasapenas a patrocinar a conexão de pessoas àInternet, e tomando-se em conta a necessi-dade de tributação de todos os meios de mo-vimentação de riquezas ou de serviços, qualseria a natureza jurídica da atuação dosprovedores, para fins de exação? Para Gil-berto Luiz do AMARAL (2002) está lança-da a dúvida, firmada entre os chamadosserviços de qualquer natureza (prevendoincidência de imposto sobre serviços – ISS)e os serviços de comunicação (desafiando oimposto sobre circulação de mercadorias eserviços – ICMS), explicando que, apesar dadissensão doutrinária existente,

“a corrente majoritária é de que se tratade serviços taxados pelo ISS, inclusive comprecedentes jurisprudenciais. Mas o proble-ma não se encerra aí, pois daí vem a questãodo local da prestação do serviço (recente-mente o STJ pacificou que o ISS é devido nolocal da prestação do serviço, independen-temente do local do estabelecimento do pres-tador)”.

Entretanto, o assunto não é tão singelocomo aparenta ser, notadamente pela dis-tinção dos entes tributantes, ocupantes defaixas autônomas na organização do Esta-do, é dizer, os Estados-membros e os Muni-cípios. Mesmo que a análise tenha por pa-radigma um provedor de acesso que tenhanesse mister a sua única atividade (não ser-vindo de portal de propaganda ou de reali-zação de pesquisas etc.), as dificuldades nãosão apoucadas, como será visto a seguir.

Do ponto de vista técnico, há o questio-namento acerca do fato de o provedor pres-tar um serviço de comunicação ou de prestarum mero serviço, em sentido estrito. E o es-clarecimento dessa dúvida é de fundamen-tal importância para a incidência da tribu-


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tação, já que a competência para instituirimpostos sobre a comunicação é conferidaaos Estados e ao Distrito Federal, conformeestá lançado na Constituição Federal. Já atributação incidente sobre a prestação de ser-viços (sem a especialidade de comunicação,como acima destacado) está englobada, tam-bém por imperativo constitucional, na com-petência dos Municípios.

A propósito do tema, Fernando FacurySCAFF (2001, p. 415), concluindo pela invi-abilidade da cobrança do ICMS, em razãode o aspecto material da hipótese de inci-dência trazida na Constituição (art. 155, II)não estar presente no fato imponível reali-zado pelos provedores de acesso, afirma queestes não são prestadores de serviço de co-municação, pois, em verdade, assim nãoagem, sendo certo que a sua atividade “con-siste em disponibilizar um locus para quesejam conectadas as linhas de acesso à In-ternet e conhecidos os conteúdos veicula-dos pela rede em qualquer parte do mundo.Está muito mais próximo do conceito de lo-cação do que do de serviços.”.

Ampliando a discussão sobre o assun-to, não pode ser esquecido que a Lei nº 9.472,de 16 de julho de 1997, disciplinando a or-ganização dos serviços de telecomunicação,cuidou de traçar um rol de conceitos úteis àaplicação da própria lei e que servem tam-bém ao sistema juridico-tributário como umtodo, pré-traçando, no seu art. 61, a distin-ção entre serviço de telecomunicações e ser-viço de valor adicionado. Tem-se daí que oserviço de valor adicionado é a atividadeque ajunta a um serviço de comunicaçõesnovas utilidades relacionadas ao acessoàs redes de informática, cuidando de ar-mazenamento, apresentação, movimenta-ção ou recuperação de informações, dan-do suporte ao serviço, mas sem se con-fundir com este.

Mais adiante, no § 1º do mencionado art.61 da Lei 9.472/97, está consignado que oserviço de valor adicionado não constituiserviços de telecomunicações, sendo o pro-vedor de tal prestação um usuário daquele

serviço (o de telecomunicações) que lhe dásuporte. Usuário que é, o provedor tem di-reitos e deveres próprios dessa classificação.

A inserção do provedor como usuário,por força de lei, tem o condão de excluí-lodo rol dos prestadores de serviço de teleco-municação (diferentemente do que ocorre,por exemplo, com as empresas de telefonia,atualmente atuando no país sob o regimeprivatístico, sucedendo as paraestatais ou-trora reinantes no ramo). Assim, localiza-dos os provedores de acesso como tomado-res dos serviços de telecomunicação (e não– repita-se – como prestadores destes), é in-contornável a conclusão de que não existe ahipótese de incidência deflagradora da exi-gência de recolhimento do ICMS, subsistin-do, entretanto, as obrigações próprias de umconsumidor final.

Mas, excluída a possibilidade de reco-lhimento do ICMS pela prestação do servi-ço típico de provedor de acesso, remanescea exigibilidade do ISS sobre as operações,feitas pelo mesmo provedor, envolvendo con-teúdo (ex: divulgação de banners propagan-dísticos, realização de pesquisas qualitati-vas etc.)? Ao que parece, há, nesse particu-lar, um novo obstáculo de ordem legal a evi-tar a cobrança do referido tributo munici-pal. Com efeito, para que as atividades dosprovedores de conteúdo sejam tributadasem ISS, necessária se faz a edição de lei com-plementar listando essa atividade como de-flagradora da exigência do imposto, confor-me determina o art. 156, § 3º, do CódigoTributário Nacional. Aliás, olhando a ques-tão sob o prisma estritamente constitucio-nal, lembra Celso Ribeiro BASTOS (2001, p.75) o teor do art. 156, III, da Carta Magna,exigente de lei complementar municipalpara que seja formada a nominata dos ser-viços que servem à imposição tributária, ediz: “Portanto, fica explícito que só são pas-síveis de incidência do ISS aqueles serviçosnão abarcados pelo ICMS e que constem delei complementar. Nesse sentido, os servi-dores de acesso à Internet estão excluídosda incidência do ISS”.


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Pelo acima exposto, algumas conclusõespodem ser adiantadas, entre estas: a) impos-sível é a cobrança do ICMS em razão dasatividades típicas do provedor de acesso,posto que não desenvolve ele um serviço decomunicação, mas sim uma atividade em-presarial que agrega novas utilidades à pres-tação da comunicação stricto sensu; b) não éde todo desarrazoado o intento da cobran-ça do ISS sobre as atividades do provedorde acesso, sendo necessário, entretanto, quelei complementar, editada em consonânciacom o regramento competencial previsto naConstituição Federal, elabore lista que con-temple os serviços aqui comentados.

4. Imunidade ou isenção tributária emrelação às operações virtuais

Não bastassem as dúvidas que pairamsobre o correto enquadramento tributáriodas atividades realizadas via Internet, no-tadamente no que diz respeito ao papel dosprovedores de acesso ou de conteúdo, outraquestão não pode ficar indene aos que in-gressam na análise jurídica dessa modernaforma de interação e de negócios entre pesso-as físicas e jurídicas. Fala-se aqui da possívelimunidade beneficente desse elo tão impor-tante na realidade virtual, que é o provedor.

E não se diga que, uma vez sustentada aimpossibilidade atual de cobrança do ICMSou do ISS em decorrência das atividadesprestadas pelo provedor, estaria superada– por desnecessária – qualquer discussãoacerca da possível imunidade tributáriaconferida a tal atividade. É de ser lembrado,por exemplo, que a maioria dos provedoresatuam de forma mista, ou seja, como meiode acesso dos contratantes à rede de com-putadores e como fornecedor de informaçõesjornalísticas, empresariais, lúdicas, institu-cionais etc. Congregam, não raro, ativida-des de provedores de acesso e provedoresde conteúdo. E é justamente sobre este últi-mo viés que pode ser deitada a controvérsiasobre o alcance da imunidade listada no art.150, inciso VI, “d”, da Constituição Federal.

Não pode ficar sem observação, nestaquadra da discussão, os argumentos de po-lítica fiscal que são esgrimidos quando o as-sunto envolve arrecadação, pelo Estado, dosmeios destinados ao custeio da máquinaoficial. Assim, tanto em sede de imunidadecomo no que toca à isenção, não são poucasas justificativas apresentadas para que oEstado não se porte como absenteísta em tri-butar e arrecadar em decorrência das ativi-dades realizadas via Internet. Com efeito,por exemplo, é repetida a afirmação de que,com o crescimento das vendas on-line (ain-da que abaixo do patamar que se projetavano final do século vinte), a isenção ou a imu-nidade tributária dessas transações impli-caria considerável erosão de receitas a sersuportada pelo Estado, pois os consumido-res migrariam do comércio tradicional paraa nova via, além da possibilidade de essemesmo comércio tradicional usar artifíciospara se maquiar de virtual, mirando obteras vantagens do esquecimento tributário.Ocorreria, nessa última hipótese, algo asse-melhado ao que pode ser constatado em al-guns segmentos do comércio varejista po-pular, em que tradicionais empresas de pe-queno ou médio porte optaram por fragmen-tar os seus estoques e vendedores por meiode bancas de camelô, fugindo da tributaçãoe das obrigações sociais, num perigoso jogode conseqüências sociais nefastas ou pelomenos duvidosas. O mesmo ocorreu comsetores da produção industrial, que migra-ram para a falácia da terceirização ou parao disfarce da cooperativização, com mesmofito.

Outro raciocínio que se desenvolve emprol da efetiva cobrança de tributos sobre asoperações on-line diz respeito ao chamadoprincípio da justiça tributária, que dianteda inação estatal poderia ser maculado. Éque, nessa linha de argumentação, toma-seem conta que o perfil dos consumidores viaInternet, especialmente em países no está-gio de desenvolvimento do Brasil, é forma-do por pessoas de renda mais elevada e commelhor padrão educacional. A imunidade


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ou a isenção implicaria um retrocesso doponto de vista distributivo, já que as pesso-as menos aquinhoadas economicamente,sem acesso à Internet, arcariam com a quita-ção tributária indireta, em flagrante desa-tenção do já referido princípio da justiça tri-butária.

Do ponto de vista técnico, é possível que,se adotada claramente uma política de nãotributação dos negócios praticados via In-ternet, acontecesse uma corrida das empre-sas, no sentido de que as suas operaçõesvirtuais fossem formalmente separadas dasoperações convencionais, evitando assimqualquer incidência tributária sobre os ne-gócios on-line.

A argumentação em favor da tributaçãodos negócios eletrônicos passa pela asserti-va de que, no sistema tributário brasileiro, anatureza específica do tributo é determina-da pelo fato gerador da obrigação respecti-va, sendo de relevância nenhuma, para qua-lificá-la, a denominação e demais caracte-rísticas formais traçadas em lei, bem como adestinação do produto da sua arrecadação.Assim, tem-se certo que a prática do comér-cio por meio eletrônico não desnatura a com-pra e venda de bens e serviços.

Apesar de todas as agruras enfrentadaspelo Estado para tributar as operações on-line, já referidas no curso deste ensaio, des-taca-se que, do ponto de vista de políticatributária, a conduta omissiva nesse parti-cular implicaria resultados negativos, aexemplo do enfraquecimento da soberaniatributária do País. Outrossim, vulneradoestaria o princípio da neutralidade tributá-ria, segundo o qual a legislação pertinente aesse assunto deve ser neutra em relação àatividade econômica, posto que o consumi-dor-contribuinte não deve ser levado a to-mar decisão negocial diferente da que to-maria em razão do fator tributário. Ou seja,o pagamento de um tributo não pode ser oponto fulcral da influência na decisão deum agente econômico, sendo certo que aisenção do comércio eletrônico afetaria aneutralidade da tributação, já que transa-

ções da mesma natureza seriam tributadasou não, dependendo da maneira como fos-sem praticadas (via virtual ou real).

Outro argumento que milita pela cobran-ça de impostos sobre os negócios eletrôni-cos diz respeito à eqüidade da tributação, jáque os contribuintes devem ser chamadosao pagamento de tais exações na proporçãoda sua capacidade econômica. O valor dejusteza aqui comentado deixaria de existirse o comércio via Internet não fosse tributa-do, pois contribuintes com a mesma capaci-dade econômica, pelos mesmos negócios,pagariam impostos quantitativamente dife-rentes, a depender da via eleita para fazer acompra (real ou virtual). Assim, a competi-tividade de uma certa empresa no mercadoseria aferida pela sua habilidade de venderos seus produtos ou serviços pela Internet,sendo a sua performance avaliada positivaou negativamente na proporção dos negó-cios virtuais realizados e não pelos critérioséticos e lógicos da produtividade com eficá-cia e eficiência.

5. Conclusões

Ao término das análises desenvolvidasneste estudo, algumas conclusões podem seralinhadas, como adiante se vê.

Assim, é certo dizer que a Internet ingres-sou nas relações sociais como instrumentode união entre pessoas e interesses, causan-do reflexos, com muita rapidez, em áreas atéde certa forma acomodadas aos padrões tra-dicionais, como é o caso dos segmentos es-tatais responsáveis pela tributação e pelaarrecadação. O chamado poder tributárioestá sendo constantemente desafiado a or-ganizar-se de modo a poder auferir riquezadecorrente das operações realizadas on-linee que configuram fatos geradores de impos-tos.

Sendo, como é, um instrumento essenci-al à prática de negócios via Internet, o pro-vedor de acesso ainda não conseguiu sersatisfatoriamente enquadrado para fins detributação, posto que ainda perduram dú-


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vidas acerca da natureza dos serviços porele prestados (se de comunicação ou servi-ço stricto sensu, de sorte a definir a destina-ção dos impostos gerados por sua atuação(estaduais ou municipais).

Afigura-se como perigosa mácula aopoder tributante e à soberania do próprioEstado a hipotética conduta retrativa deste,no campo da tributação, em relação às ope-rações realizadas via Internet. Destarte, de-saconselhável, sobre todos os aspectos, aimunidade ou a isenção incidente sobre osnegócios on-line.

Notas1 A propósito do manejo de princípios penais

no trato de outras áreas do Direito, valiosa é a con-tribuição de Edilson Pereira NOBRE JÚNIOR(2000): “Não se duvida que crime ou delito e infra-ção administrativa são entidades distintas em suaessência. Prova disso, vários critérios foram sugeri-dos pela doutrina para diferençá-las, dos quais so-bressai o de adorno prático, formulado por GuidoZANOBINI, no sentido de que a infração adminis-trativa não integra o Direito Penal, porque a res-ponsabilização do infrator não é tornada concretapela função jurisdicional, mas pelo Estado no de-sempenho de uma competência administrativa. (...)Essa distinção ontológica, no entanto, não pode ol-vidar que, tanto no ilícito criminal como no admi-nistrativo, está-se ante situação ensejadora da ma-nifestação punitiva do Estado. Segue-se, em linhade princípio, nada haver a obstar, antes a recomen-dar, serem os postulados retores da aplicação daspunições criminais, cuja sistematização doutriná-ria e legislativa é bem anterior à ordenação das san-ções administrativas, a estas aplicáveis. Há neces-sidade, porém, de restarem sempre consideradasas peculiaridades das últimas.”

2 Disponível em: <http://www.receita. fazen-da. gov.br>. Acesso em: 3 maio 2002.

Bibliografia

AMARAL, Gilberto Luiz. Internet e tributação: ano-va economia e a tributação. Disponível em: <http:// www.tributarista.com.br/content/estudos/internet.html >. Acesso em: 2 jun. 2002.

BASTOS, Celso Ribeiro. Tributação na internet. In:MARTINS, Ives Gandra da Silva. Tributação na in-ternet. São Paulo: Revista dos Tribunais: Centro deExtensão Universitária, 2001.

GAMBARINI, Cristiano. Profili impositivi delle ope-razioni di commercio eletrônico. Disponível em: <http:// www.uckmar.com.br/next/gambarini.htm >.Acesso em: 23 abr. 2002.

GOOLSBEE, Austan. Em primeiro lugar. Exame,Rio de Janeiro, n. 1967, jul. 1999.

LAGUNA, Francisco A. Tributação sobre consu-mo, vendas e uso no comércio eletrônico. In: SILVAJÚNIOR, Ronaldo Lemos da; WAISBERG, Ivo(Org.). Comércio eletrônico. São Paulo: Instituto dosAdvogados de São Paulo: Revista dos Tribunais,2001.

NOBRE JÚNIOR, Edilson Pereira. Justiça federal deprimeiro grau: seção judiciária do Rio Grande doNorte: sanções administrativas e princípios de di-reito penal. Disponível em: <http:// www.jfrn.gov.br/doutrin1.htm>. Acesso em: 1 ago. 2000.

POLETTI, Ronaldo. Introdução ao direito. 3. ed. SãoPaulo: Saraiva, 1996.

SCAFF, Fernando Facury. O direi to tr ibutáriodas futuras gerações. In: MARTINS, Ives Gan-dra da Silva. Tributação na internet. São Paulo:Revista dos Tribunais: Centro de Extensão Uni-versitária, 2001.

UNCITRAL model law on eletronic commerce withguide to enactment 1996= Lei modelo da UNCI-TRAL sobre comércio eletrônico: 1996: com guiapara sua incorporação ao direito interno. Disponí-vel em: <http://www.mct.gov.br/temas/info/pa-lestras/legisla%C3%A7%C3%A3o.pdf>. Acessoem: 12 abr. 2002.


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Visão Anotada

SOLUÇÃO DE CONSULTA DIANA/SRRF09 Nº 77, DE 16 DE MAIO DE 2013

(Publicado(a) no DOU de 12/06/2013, seção , pág. 18)

Normas - Sistema Gestão da Informação

Assunto: Imposto sobre Produtos Industrializados – IPIGRAVAÇÃO DE SOFTWARE EM MÍDIA. INCIDÊNCIA DE IPI.CONFECÇÃO DE SOFTWARE E TRANSFERÊNCIAELETRÔNICA. NÃO INCIDÊNCIA DO IPI. NÃO CABIMENTODE CÓDIGO NCM PARA SOFTWARE.

Assunto: Imposto sobre Produtos Industrializados - IPI

GRAVAÇÃO DE SOFTWARE EM MÍDIA. INCIDÊNCIA DE IPI. CONFECÇÃO DESOFTWARE E TRANSFERÊNCIA ELETRÔNICA. NÃO INCIDÊNCIA DO IPI. NÃO CABIMENTO DECÓDIGO NCM PARA SOFTWARE.

A gravação de software em mídia é operação de industrialização, sujeita à incidência doIPI. A confecção de software bem como sua transferência por meio eletrônico não são operações deindustrialização, o que implica a não incidência do IPI. O software não é mercadoria, não sendocabível sua classificação em código NCM nem a exigência desse código para fim de emissão de notafiscal eletrônica.

Dispositivos Legais: Lei nº 5.172, de 1966 (CTN), art. 46, parágrafo único; Lei nº 4.502, de1964, arts. 1º a 4º; Decreto-lei nº 34, de 1966, art. 1º; Lei nº 10.451, de 2002, art. 6º; Decreto nº7.212, de 2010 (Ripi/2010), arts. 2º a 4º, 8º a 10 e 35.

MARCO ANTÔNIO FERREIRA POSSETTIChefe

*Este texto não substitui o publicado oficialmente.

SC Diana/SRRF09 nº 77 - 2013 http://normas.receita.fazenda.gov.br/sijut2consulta/imprimir.action?vis...

1 de 1 12/07/2016 09:07


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SRRF09/DisitFls. 45

1

44

Superintendência Regional da Receita Federal do Brasil da 9ª RF

Solução de Consulta nº 78 - SRRF09/DisitData 16 de maio de 2013

Processo ****

Interessado ****

CNPJ/CPF ****

ASSUNTO: IMPOSTO SOBRE PRODUTOS INDUSTRIALIZADOS - IPI GRAVAÇÃO DE SOFTWARE EM MÍDIA. INCIDÊNCIA DE IPI. CONFECÇÃO DE SOFTWARE E TRANSFERÊNCIA ELETRÔNICA. NÃO INCIDÊNCIA DO IPI. NÃO CABIMENTO DE CÓDIGO NCM PARA SOFTWARE. A gravação de software em mídia é operação de industrialização, sujeita à incidência do IPI. A confecção de software bem como sua transferência por meio eletrônico não são operações de industrialização, o que implica a não incidência do IPI. O software não é mercadoria, não sendo cabível sua classificação em código NCM nem a exigência desse código para fim de emissão de nota fiscal eletrônica. Dispositivos Legais: Lei nº 5.172, de 1966 (CTN), art. 46, parágrafo único; Lei nº 4.502, de 1964, arts. 1º a 4º; Decreto-lei nº 34, de 1966, art. 1º; Lei nº 10.451, de 2002, art. 6º; Decreto nº 7.212, de 2010 (Ripi/2010), arts. 2º a 4º, 8º a 10 e 35.

Relatório

O interessado, acima identificado, vem formular consulta a esta Superintendência sobre a interpretação do art. 4º do Decreto nº 7.212, de 15 de junho de 2010, no que tange ao enquadramento no conceito de industrialização da gravação de software em mídia e da transferência de software por meio eletrônico.

2. Afirma o consulente que o software se destina à automatização de balanças e que é comercialmente conhecido pelo nome de “****”, fabricado por ****. A função do software é controlar o fluxo de veículos de entrada e saída, bem como realizar a classificação automatizada de grãos, com o fornecimento de relatórios de análises e controles gerenciais e contábeis. O funcionamento do software é através de acoplamentos de comunicação tipo serial TCPIP, RS485, com os equipamentos instalados nas balanças, adquirindo os dados e processando-os, convertendo-os em informações.


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SSoolluuççããoo de Consulta n.º 78 SRRF09/DisitFls. 46

2

3. Explica que a comercialização ou disponibilização do software ocorre por meio de transferência eletrônica de dados (download)

4. Menciona o conceito de software como uma atividade eminentemente intelectual, que pode ser percebida por meio de um instrumento físico, como o CD-ROM e o pendrive, ou através de instrumentos virtuais, como o download.

5. Relata a inexistência do item software na Tabela de Incidência do IPI – Tipi e explica que a legislação teria abstraído o conteúdo intangível da criação e tratado tudo como se meio físico fosse. Exemplifica com a posição 85.24 da Tipi, que fala em meio físico gravado e CD-ROM gravado com software.

6. Afirma que o software operacional gravado em mídia eletrônica sofre a incidência do IPI, uma vez que a Tipi trata o software gravado em meio físico como mercadoria, estando previsto para ele a posição 85.24 da Tipi. Neste sentido, traz à colação ementas da Solução de Consulta SRRF/Diana/10ª RF nº 140, de 22 de outubro de 2010, e do Acórdão DRJ/POR nº 14-5378, de 6 de abril de 2004. A primeira classifica o software gravado em CD-ROM no código 8523.40.22 e o segundo afirma que a gravação de software e suporte físico é operação de industrialização, sujeita à incidência do IPI.

7. Refere, no entanto, que quando o software é comercializado via download, sem estar agregado a nenhum suporte físico, não haveria qualquer previsão de incidência do IPI. Cita a Solução de Consulta SRRF/Disit/10ª RF nº 227, de 14 de novembro de 2005, e a Solução de Consulta SRRF/Disit/8ª RF nº 42, de 22 de janeiro de 2010.

8. Relata que executa atividades que têm como documento fiscal a nota fiscal eletrônica (NF-e) e que, segundo o Ajuste do SINIEF 07/05, deverá constar nas operações respaldadas por documento fiscal eletrônico, a NCM da mercadoria. Com base nesta exigência, pretende a classificação do software no código 9999.99.99, destinado a “usos especiais pelas partes contratantes”.

9. Indaga se o software gravado em mídia gera tributação nos termos da posição 85.24 da Tipi. Questiona também se está correto o entendimento de não tributação do software pelo IPI, quando este é transferido por meio eletrônico (download). Por fim pergunta qual a NCM aplicável para executar as atividades.

Fundamentos

10. Examinemos primeiramente o caso do software gravado em mídia. Conforme o art. 35 Regulamento do IPI – Ripi/2010 (Decreto nº 7.212, de 15 de junho de 2010), o fato gerador do imposto corresponde à saída do produto de estabelecimento industrial ou equiparado a industrial, senão vejamos:

Art. 35. Fato gerador do imposto é (Lei nº 4.502, de 1964, art. 2º): I - o desembaraço aduaneiro de produto de procedência estrangeira; ou II - a saída de produto do estabelecimento industrial, ou equiparado a industrial. [sem grifo no original]


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3

11. O produto cuja saída implica a incidência o IPI é o produto industrializado, de acordo com o art. 2º do Ripi/2010:

Art. 2o O imposto incide sobre produtos industrializados, nacionais e estrangeiros, obedecidas as especificações constantes da Tabela de Incidência do Imposto sobre Produtos Industrializados - TIPI (Lei no 4.502, de 30 de novembro de 1964, art. 1o, e Decreto-Lei no 34, de 18 de novembro de 1966, art. 1o). Parágrafo único. O campo de incidência do imposto abrange todos os produtos com alíquota, ainda que zero, relacionados na TIPI, observadas as disposições contidas nas respectivas notas complementares, excluídos aqueles a que corresponde a notação “NT” (não tributado) (Lei no 10.451, de 10 de maio de 2002, art.6º). [sem grifo no original]

12. Para efeito da legislação do IPI, o conceito de produto industrializado corresponde ao produto resultante de qualquer operação definida como industrialização pelo Regulamento, conforme o art. 3º do Ripi/2010:

Art. 3o Produto industrializado é o resultante de qualquer operação definida neste Regulamento como industrialização, mesmo incompleta, parcial ou intermediária (Lei no 5.172, de 25 de outubro de 1966, art. 46, parágrafo único, e Lei nº 4.502, de 1964, art. 3º). [sem grifo no original]

13. Portanto, para definir sobre a incidência do IPI no processo de gravação do software em mídia é necessário verificar se esta operação pode ser enquadrada como operação de industrialização. Para isso, verifiquemos o art. 4º do Ripi/2010:

Art. 4o Caracteriza industrialização qualquer operação que modifique a natureza, o funcionamento, o acabamento, a apresentação ou a finalidade do produto, ou o aperfeiçoe para consumo, tal como (Lei nº 5.172, de 1966, art. 46, parágrafo único, e Lei nº 4.502, de 1964, art. 3º, parágrafo único): I - a que, exercida sobre matérias-primas ou produtos intermediários, importe na obtenção de espécie nova (transformação); II - a que importe em modificar, aperfeiçoar ou, de qualquer forma, alterar o funcionamento, a utilização, o acabamento ou a aparência do produto(beneficiamento); III - a que consista na reunião de produtos, peças ou partes e de que resulte um novo produto ou unidade autônoma, ainda que sob a mesma classificação fiscal (montagem); IV - a que importe em alterar a apresentação do produto, pela colocação da embalagem, ainda que em substituição da original, salvo quando a embalagem colocada se destine apenas ao transporte da mercadoria (acondicionamento ou reacondicionamento); ou V - a que, exercida sobre produto usado ou parte remanescente de produto deteriorado ou inutilizado, renove ou restaure o produto para utilização (renovação ou recondicionamento). Parágrafo único. São irrelevantes, para caracterizar a operação como industrialização, o processo utilizado para obtenção do produto e a localização e condições das instalações ou equipamentos empregados. [sem grifo no original]

14. Pois bem, não há dúvida de que a gravação do software na mídia modifica o funcionamento e a finalidade do produto, enquadrando-se a atividade na modalidade de


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industrialização denominada beneficiamento. Dessa forma, está sujeito a gravação de software à incidência do IPI.

15. No caso do software transferido por meio eletrônico, sem a utilização de suporte físico, verifica-se a inexistência de um bem material que pudesse ser entendido como mercadoria. Não está, assim, o software passível de classificação na Tabela de Incidência do IPI - Tipi. Conforme o parágrafo único do art. 2º do Ripi/2010, retrotranscrito, o campo de incidência do IPI abrange todos os produtos com alíquotas, ainda que zero, relacionados na Tipi. Logo, como o software não tem um código na Tipi para incluí-lo, é de se concluir que não é abrangido pelo campo de incidência do IPI.

16. Traz ainda o consulente questionamento a respeito da exigência do código NCM contida no inciso V da cláusula terceira do Ajuste Sinief 07/05, nestes termos:

Cláusula terceira A NF-e deverá ser emitida com base em leiaute estabelecido no “Manual de Integração - Contribuinte”, por meio de software desenvolvido ou adquirido pelo contribuinte ou disponibilizado pela administração tributária, observadas as seguintes formalidades: I - o arquivo digital da NF-e deverá ser elaborado no padrão XML (Extended Markup Language); II - a numeração da NF-e será seqüencial de 1 a 999.999.999, por estabelecimento e por série, devendo ser reiniciada quando atingido esse limite; III - a NF-e deverá conter um “código numérico”, gerado pelo emitente, que comporá a “chave de acesso” de identificação da NF-e, juntamente com o CNPJ do emitente, número e série da NF-e; IV - a NF-e deverá ser assinada pelo emitente, com assinatura digital, certificada por entidade credenciada pela Infra-estrutura de Chaves Públicas Brasileira - ICP-Brasil, contendo o nº do CNPJ de qualquer dos estabelecimentos do contribuinte, a fim de garantir a autoria do documento digital. V - A identificação das mercadorias comercializadas com a utilização da NF-e deverá conter, também, o seu correspondente código estabelecido na Nomenclatura Comum do Mercosul - NCM, nas operações: a) realizadas por estabelecimento industrial ou a ele equiparado, nos termos da legislação federal; b) de comércio exterior.

17. Como se vê, a exigência de identificação das mercadorias com o código NCM é aplicável apenas às operações realizadas por estabelecimento industrial ou a ele equiparado e às operações de comércio exterior. O estabelecimento industrial é definido pelo art. 8º do Ripi/2010, enquanto o estabelecimento equiparado a industrial é definido pelo art. 9º do mesmo regulamento, nestes termos:

Estabelecimento IndustrialArt. 8o Estabelecimento industrial é o que executa qualquer das operações referidas no art. 4o, de que resulte produto tributado, ainda que de alíquota zero ou isento (Lei no 4.502, de 1964, art. 3o).Estabelecimentos Equiparados a IndustrialArt. 9o Equiparam-se a estabelecimento industrial:I - os estabelecimentos importadores de produtos de procedência estrangeira, que derem saída a esses produtos (Lei nº 4.502, de 1964, art. 4º, inciso I);


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II - os estabelecimentos, ainda que varejistas, que receberem, para comercialização, diretamente da repartição que os liberou, produtos importados por outro estabelecimento da mesma firma;III - as filiais e demais estabelecimentos que exercerem o comércio de produtos importados, industrializados ou mandados industrializar por outro estabelecimento da mesma firma, salvo se aqueles operarem exclusivamente na venda a varejo e não estiverem enquadrados na hipótese do inciso II (Lei nº 4.502, de 1964, art. 4º, inciso II, e § 2º, Decreto-Lei no 34, de 1966, art. 2o, alteração 1a, e Lei no 9.532, de 10 de dezembro de 1997, art. 37, inciso I);IV - os estabelecimentos comerciais de produtos cuja industrialização tenha sido realizada por outro estabelecimento da mesma firma ou de terceiro, mediante a remessa, por eles efetuada, de matérias-primas, produtos intermediários, embalagens, recipientes, moldes, matrizes ou modelos (Lei nº 4.502, de 1964, art. 4º, inciso III, e Decreto-Lei nº 34, de 1966, art. 2º, alteração 33a);V - os estabelecimentos comerciais de produtos do Capítulo 22 da TIPI, cuja industrialização tenha sido encomendada a estabelecimento industrial, sob marca ou nome de fantasia de propriedade do encomendante, de terceiro ou do próprio executor da encomenda (Decreto-Lei no 1.593, de 21 de dezembro de 1977, art. 23);VI - os estabelecimentos comerciais atacadistas dos produtos classificados nas Posições 71.01 a 71.16 da TIPI (Lei nº 4.502, de 1964, Observações ao Capítulo 71 da Tabela);VII - os estabelecimentos atacadistas e cooperativas de produtores que derem saída a bebidas alcoólicas e demais produtos, de produção nacional, classificados nas Posições 22.04, 22.05, 22.06 e 22.08 da TIPI e acondicionados em recipientes de capacidade superior ao limite máximo permitido para venda a varejo, com destino aos seguintes estabelecimentos (Lei nº 9.493, de 1997, art. 3º):a) industriais que utilizarem os produtos mencionados como matéria-prima ou produto intermediário na fabricação de bebidas;b) atacadistas e cooperativas de produtores; ouc) engarrafadores dos mesmos produtos;VIII - os estabelecimentos comerciais atacadistas que adquirirem de estabelecimentos importadores produtos de procedência estrangeira, classificados nas Posições 33.03 a 33.07 da TIPI (Medida Provisória no 2.158-35, de 24 de agosto de 2001, art. 39);IX - os estabelecimentos, atacadistas ou varejistas, que adquirirem produtos de procedência estrangeira, importados por encomenda ou por sua conta e ordem, por intermédio de pessoa jurídica importadora (Medida Provisória nº 2.158-35, de 2001, art. 79, e Lei no 11.281, de 20 de fevereiro de 2006, art. 13);X - os estabelecimentos atacadistas dos produtos da Posição 87.03 da TIPI (Lei no 9.779, de 19 de janeiro de 1999, art. 12);XI - os estabelecimentos comerciais atacadistas dos produtos classificados nos Códigos e Posições 2106.90.10 Ex 02, 22.01, 22.02, exceto os Ex 01 e Ex 02 do Código 2202.90.00, e 22.03, da TIPI, de fabricação nacional, sujeitos ao imposto conforme regime geral de tributação de que trata o art. 222 (Lei no 10.833, de 29 de dezembro de 2003, arts. 58-A e 58-E, inciso I, e Lei no 11.727, de 23 de junho de 2008, art. 32);XII - os estabelecimentos comerciais varejistas que adquirirem os produtos de que trata o inciso XI, diretamente de estabelecimento industrial, ou de encomendante equiparado na forma do inciso XIII (Lei nº 10.833, de 2003, arts. 58-A e 58-E, inciso II, e Lei nº 11.727, de 2008, art. 32);XIII - os estabelecimentos comerciais de produtos de que trata o inciso XI, cuja industrialização tenha sido por eles encomendada a estabelecimento industrial, sob marca ou nome de fantasia de propriedade do encomendante, de terceiro ou do próprio executor da encomenda (Lei nº 10.833, de 2003, arts. 58-A e 58-E, inciso III, e Lei nº 11.727, de 2008, art. 32);XIV - os estabelecimentos comerciais atacadistas dos produtos classificados nos Códigos e Posições 2106.90.10 Ex 02, 22.01, 22.02, exceto os Ex 01 e Ex 02 do Código 2202.90.00, e 22.03, da TIPI, de procedência estrangeira, sujeitos ao imposto conforme


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regime geral de tributação de que trata o art. 222 (Lei nº 10.833, de 2003, arts. 58-A e 58-E, inciso I, e Lei nº 11.727, de 2008, art. 32); eXV - os estabelecimentos comerciais varejistas que adquirirem os produtos de que trata o inciso XIV, diretamente de estabelecimento importador (Lei nº 10.833, de 2003, arts. 58-A e 58-E, inciso II, e Lei nº 11.727, de 2008, art. 32).§ 1o Nas hipóteses do inciso IX, a Secretaria da Receita Federal do Brasil (Medida Provisória nº 2.158-35, de 2001, art. 80, e Lei nº 11.281, de 2006, art. 11, § 1º):I - deverá estabelecer requisitos e condições para a atuação de pessoa jurídica importadora:a) por conta e ordem de terceiro; oub) que adquira mercadorias no exterior para revenda a encomendante predeterminado; e II - poderá exigir prestação de garantia como condição para a entrega de mercadorias, quando o valor das importações for incompatível com o capital social ou o patrimônio líquido do importador ou encomendante predeterminado ou, no caso de importação por conta e ordem, do adquirente. § 2o Presume-se por conta e ordem de terceiro, ressalvado o disposto no § 3o, a operação de comércio exterior realizada nas condições previstas no inciso IX:I - mediante utilização de recursos daquele (Lei no 10.637, de 30 dezembro de 2002, art. 27); ouII - em desacordo com os requisitos e condições estabelecidos nos termos da alínea “b”do inciso I do § 1o (Lei nº 11.281, de 2006, art. 11, § 2º).§ 3o Considera-se promovida por encomenda, nos termos do inciso IX, não configurando importação por conta e ordem, a importação realizada com recursos próprios da pessoa jurídica importadora que adquira mercadorias no exterior para revenda a encomendante predeterminado, participando ou não o encomendante das operações comerciais relativas à aquisição dos produtos no exterior, ressalvado o disposto na alínea “b” do inciso I do § 1o (Lei nº 11.281, de 2006, art. 11, caput e § 3º, e Lei no 11.452, de 2007, art. 18).§ 4o No caso do inciso X, a equiparação aplica-se, inclusive, ao estabelecimento fabricante dos produtos da Posição 87.03 da TIPI, em relação aos produtos da mesma Posição, produzidos por outro fabricante, ainda que domiciliado no exterior, que revender (Lei nº 9.779, de 1999, art. 12, parágrafo único).§ 5o O disposto nos incisos XI a XV, relativamente aos produtos classificados nas posições 22.01 e 22.02 da TIPI, alcança exclusivamente aqueles mencionados no parágrafo único do art. 222 (Lei nº 10.833, de 2003, art. 58-V, e Lei no 11.945, de 4 de junho de 2009, art. 18).§ 6o Os estabelecimentos industriais quando derem saída a matéria-prima, produto intermediário e material de embalagem, adquiridos de terceiros, com destino a outros estabelecimentos, para industrialização ou revenda, serão considerados estabelecimentos comerciais de bens de produção e obrigatoriamente equiparados a estabelecimento industrial em relação a essas operações (Lei no 4.502, de 1964, art. 4o, inciso IV, e Decreto-Lei no 34, de 1966, art. 2o, alteração 1a).§ 7º Aos estabelecimentos comerciais atacadistas e varejistas de cigarros e cigarrilhas dos Códigos 2402.20.00, excetuados os classificados no Ex 01, e 2402.10.00 da TIPI, de fabricação nacional ou importados, não se aplicam as equiparações a estabelecimento industrial previstas na legislação do imposto (Lei nº 11.933, de 28 de abril de 2009, art. 9ºe Lei nº 12.402, de 2 de maio de 2011, art. 6º, caput, inciso I). (Redação dada pelo Decreto nº 7.790, de 2013) (Produção de efeito)§ 8º O previsto no § 7º não se aplica aos estabelecimentos comerciais atacadistas e varejistas que receberem, com suspensão do imposto, cigarros saídos do estabelecimento industrial até 30 de abril de 2009 e cigarrilhas saídas do estabelecimento industrial até 31 de agosto de 2011 (Lei nº 11.933, de 2009, art. 9º, parágrafo único e Lei nº 12.402, de 2011, art. 6º, caput, inciso I). (Redação dada pelo Decreto nº 7.790, de 2013) (Produção de efeito)


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Art. 10. São equiparados a estabelecimento industrial os estabelecimentos atacadistas que adquirirem os produtos relacionados no Anexo III da Lei no 7.798, de 10 de julho de 1989, de estabelecimentos industriais ou dos estabelecimentos equiparados a industriais de que tratam os incisos I a V do art. 9o (Lei nº 7.798, de 1989, arts. 7º e 8º).§ 1o O disposto neste artigo aplica-se nas hipóteses em que o adquirente e o remetente dos produtos sejam empresas controladoras ou controladas - Lei no 6.404, de 15 de dezembro de 1976, art. 243, coligadas - Lei no 10.406, de 10 de janeiro de 2002, art. 1.099, e Lei no 11.941, de 27 de maio de 2009, art. 46, parágrafo único, interligadas - Decreto-Lei no

1.950, de 14 de julho de 1982, art. 10, § 2o - ou interdependentes (Lei nº 7.798, de 1989, art. 7º § 1º).§ 2o Da relação de que trata o caput poderão, mediante decreto, ser excluídos produtos ou grupo de produtos cuja permanência se torne irrelevante para arrecadação do imposto, ou incluídos outros cuja alíquota seja igual ou superior a quinze por cento (Lei nº 7.798, de 1989, art. 8º). [sem grifo no original]

18. É considerado estabelecimento industrial aquele que realiza operações industriais, nos termos do art. 4º do Ripi/2010, ou seja, que modifique a natureza, o funcionamento, o acabamento, a apresentação ou a finalidade do produto, ou o aperfeiçoe para consumo. Como na confecção do software não existe produto cuja natureza, funcionamento, acabamento, apresentação ou finalidade esteja sendo modificada, não se está diante de industrialização e, consequentemente, de estabelecimento industrial.

19. Os estabelecimentos equiparados a industrial, por sua vez, são basicamente os importadores e comerciantes atacadistas de produtos industriais, bem como os estabelecimentos encomendantes na industrialização por conta e ordem de terceiros. Não se enquadra a confecção de software em nenhuma das hipóteses mencionadas nos arts. 9º e 10 do Ripi/2010, de modo que não se está diante de um estabelecimento equiparado a industrial.

20. Também não é cabível ao caso a exigência de código NCM quando de operações de comércio exterior, eis que o caso em questão diz respeito a venda no mercado interno.

21. Assim, não é aplicável ao caso a exigência do inciso V da cláusula terceira do Ajuste Sinief 07/05 de identificação das mercadorias com o código NCM

Conclusão

22. Diante do exposto, soluciona-se a consulta respondendo ao interessado que a gravação de software em mídia é operação de industrialização, sujeita à incidência do IPI. A confecção de software bem como sua transferência por meio eletrônico não são operações de industrialização, o que implica a não incidência do IPI. O software não é mercadoria, não sendo cabível sua classificação em código NCM nem a exigência desse código para fim de emissão de nota fiscal eletrônica.


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Propõe-se o encaminhamento deste processo à ****, para dar ciência ao consulente e demais providências cabíveis.

À consideração superior.

Assinatura digital

JOSÉ FERNANDO HÜNING Auditor-Fiscal da Receita Federal do Brasil

Ordem de Intimação

Aprovo a Solução de Consulta e o encaminhamento proposto.

Assinatura digital

MARCO ANTÔNIO FERREIRA POSSETTI Chefe da Divisão de Tributação

SRRF 9ª RF - Matr. 1936 Competência delegada pela Portaria SRRF09 nº 794, de 11/10/2011

(DOU de 18/10/2011)


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University of Michigan Law SchoolUniversity of Michigan Law School Scholarship Repository

Articles Faculty Scholarship

2001

Tax Competition and E-CommerceReuven S. Avi-YonahUniversity of Michigan Law School, [email protected]

Follow this and additional works at: http://repository.law.umich.edu/articles

Part of the Business Organizations Law Commons, Computer Law Commons, and the Taxation-Transnational Commons

This Article is brought to you for free and open access by the Faculty Scholarship at University of Michigan Law School Scholarship Repository. It hasbeen accepted for inclusion in Articles by an authorized administrator of University of Michigan Law School Scholarship Repository. For moreinformation, please contact [email protected].

Recommended CitationAvi-Yonah, Reuven S. "Tax Competition and E-Commerce." Tax Notes Int'l 23, no. 12 (2001): 1395-400.


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Doc 2001-23778 (6 pgs)TAX ANALYSTS TAX DOCUMENT SERVICE


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Electronic copy available at: http://ssrn.com/abstract=2259127

PUBLIC LAW AND LEGAL THEORY RESEARCH PAPER SERIES

PAPER NO. 328 APRIL 2013

VIRTUAL PE: INTERNATIONAL TAXATION AND THE FAIRNESS ACT

REUVEN S. AVI-YONAH

THE SOCIAL SCIENCE RESEARCH NETWORK ELECTRONIC PAPER COLLECTION:HTTP://SSRN.COM/ABSTRACT=2259127


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Electronic copy available at: http://ssrn.com/abstract=2259127Electronic copy available at: http://ssrn.com/abstract=2259127

April 30, 2013

A VIRTUAL PE:

INTERNATIONAL TAX AND THE MARKETPLACE FAIRNESS ACT

Reuven S. Avi‐Yonah

The University of Michigan

The US Senate is about to pass the Marketplace Fairness Act of 2013 (the “Fairness Act”), and the House may follow suit. The Fairness Act overrules the US Supreme Court’s Quill decision (1992) which prohibited states from requiring remote vendors to collect use tax due on sales to state residents unless they have a physical presence in the state.1

Quill was decided before the Internet and e‐commerce, and has drawn a lot of criticism for relying on an obsolete physical presence requirement that is inappropriate for a 21st century virtual economy. The decision explicitly invited Congress to overrule it by relying solely on the Commerce Clause. However, Congress did not see fit to address the issue until the current recession, which caused state income tax revenues to decline while sales taxes (which were invented in the Great Depression because they are less cyclical) could not produce adequate revenues because of the limits placed by Quill. Now, however, Congress seems poised to finally allow states to collect sales taxes that everyone admits are due from their residents who shop in e‐commerce.

The Fairness Act includes two important limitations on states. First, states that have not adopted the Streamlined Sales and Use Tax Agreement (SSUTA) must provide sellers with “adequate software” to calculate the correct tax rate.2 Second, for all states, a state may only require use tax collection by remote sellers who lack physical presence if the seller’s gross annual receipts in total remote sales in the US in the preceding calendar year exceed $500,000.3

The first limitation is intended to address the major reason for the Court’s decision in Quill, which is that there are close to 10,000 sales tax jurisdictions in the US and calculating whether a sale to residents of each one is taxable and what the rate is can be a major hurdle which imposes undue burdens on businesses. The second limitation is intended to protect small businesses.

1 Quill v. North Dakota, 504 US 298 (1992). 2 Fairness Act section 3(b). 3 Fairness Act section 3©.


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Electronic copy available at: http://ssrn.com/abstract=2259127Electronic copy available at: http://ssrn.com/abstract=2259127

From an international tax perspective, it is the second limitation that is the most intriguing, especially since it is similar to small business exceptions in many countries’ VAT rules.4 The most interesting implication is for the taxation of profits from e‐commerce under tax treaties.

Under article 7 of most tax treaties, business profits may not be taxed by a source jurisdiction unless the profits are attributable to a “permanent establishment”, defined in article 5 to require a fixed physical presence in the taxing jurisdictions directly or through a dependent agent.

This physical presence requirement, like the one imposed by Quill, has also been criticized as obsolete in a virtual economy, in which businesses can derive billions of dollars in profits through remote sales into a market jurisdiction without being subject to tax because they lack a PE.5 The PE concept was developed in part to counteract claims by source countries to impose tax on the income of sellers from isolated transactions, where the cost of filing a tax return may exceed the income derived from the transaction. This is similar to the considerations underlying the VAT small business rule and the small business exception in the Fairness Act.

Thus, I would suggest that the time has come to re‐evaluate the PE concept in the modern economy. A plausible reformulation that would be appropriate for e‐commerce would be an absolute threshold of sales into a given host jurisdiction. A taxpayer whose US sales (defined by the destination principle, as under VAT and sales taxes) exceed $500,000 in any given calendar year would be deemed to have a PE in the US and taxed on profits attributable to those sales. Look‐through rules and attribution rules would be needed to avoid manipulation of this concept by selling through minimal profit distributors or disaggregating related sellers.

Of course, such a fundamental re‐evaluation would require a rewrite of all the treaties, so it is not imminent. But at a time when even the OECD seems to be rethinking fundamental concepts of international tax under pressure from revenue‐hungry governments, it may be appropriate to revisit the PE threshold and modify it along the lines suggested by the Fairness Act.

4 See, e.g., ABA Model VAT Statute section 4003(a)(3)(A). Most countries have a similar small business exemption ranging up to Japan’s (about $300,000). 5 For an early critique see, e.g., Reuven Avi‐Yonah, International Taxation of Electronic Commerce, 52 Tax L. Rev. 507 (1997); for a comprehensive recent overview see Michael Kobetsky, International Taxation of Permanent Establishments: Principles and Policy (2011).


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ADDRESSING THE TAX CHALLENGES OF THE DIGITAL ECONOMY – © OECD 2015

7. BROADER DIRECT TAX CHALLENGES RAISED BY THE DIGITAL ECONOMY AND THE OPTIONS TO ADDRESS THEM – 97

Chapter 7

Broader direct tax challenges raised by the digital economy and the options to address them

This chapter discusses the challenges that the digital economy raises for direct taxation, with respect to nexus, the tax treatment of data, and characterisation of payments made under new business models, as well as certain administrative challenges faced by tax administrations in applying the current rules. The chapter then provides an overview of potential options that have been discussed by the Task Force on the Digital Economy to address these challenges.


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98 – 7. BROADER DIRECT TAX CHALLENGES RAISED BY THE DIGITAL ECONOMY AND THE OPTIONS TO ADDRESS THEM

7.1. The digital economy and the challenges for policy makers

243. The spread of the digital economy brings about many benefits, for example in terms of growth, employment and well-being more generally. At the same time it gives rise to a number of challenges for policy makers. These challenges extend well beyond domestic and international tax policy and touch upon areas such as international privacy law and data protection, as well as accounting and regulation.

244. From a strategic tax policy perspective, the uptake of digital technologies may potentially constrain the options available to policymakers in relation to the overall tax mix. For decades, companies have contributed to public expenses via a broad range of taxes in addition to corporate income tax. These taxes include employment taxes, environmental taxes, property and land taxes. The development of digital technologies has the potential to enable economic actors to operate in ways that avoid, remove, or significantly reduce, their tax liability within these bases. This may increase the pressure on a smaller number of taxpayers to compensate for the related loss of revenues. It also highlights the importance of designing corporate income and consumption tax systems that promote growth and investment, while reducing inequality and establishing a level playing field among economic actors.

245. The following sections examine a number of the tax challenges raised by the digital economy in relation to corporate income tax.

7.2. An overview of the tax challenges raised by the digital economy

246. The evolution of business models in general, and the growth of the digital economy in particular, have resulted in non-resident companies operating in a market jurisdiction in a fundamentally different manner today than at the time international tax rules were designed. For example, while a non-resident company has always been able to sell into a jurisdiction without a physical presence there, advances in information and communication technology (ICT) have dramatically expanded the scale at which such activity is now possible. In addition, traditionally for companies to expand opportunities in a market jurisdiction, a local physical presence in the form of manufacturing, marketing, and distribution was very often required. These in-country operations would have engaged operations such as procurement, inventory management, local marketing, branding and other activities that earned a local return subject to tax in the market country. Advances in business practices, coupled with advances in ICT and liberalisation of trade policy, have allowed businesses to centrally manage many functions that previously required local presence, rendering the traditional model of doing business in market economies obsolete. The fact that existing thresholds for taxation rely on physical presence is partly due to the need in many traditional businesses for a local physical presence in order to conduct substantial sales of goods and services into a market jurisdiction. It is also due in part to the need to ensure that the source country has the administrative capability of enforcing its taxing rights over a non-resident enterprise. The fact that less physical presence is required in market economies in typical business structures today – an effect that can be amplified in certain types of businesses in the ICT sector – therefore raises challenges for international taxation.

247. Other elements of the digital economy have also raised challenges for policy makers. As noted above, growing reliance in certain new business models on data may raise tax challenges both in terms of characterisation of and attribution of value from data, and in terms of the changing ways in which users and customers interact with businesses. Further, new revenue streams adopted in particular due to the spread of multi-sided business models or the use of massive computing power and broadband connection


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trigger questions regarding the appropriate characterisation of certain transactions and payments for tax purposes. Finally, digital technologies make it easier to do business across jurisdictions, as well as enabling consumers to access products and services from anywhere in the world, generating challenges in terms of collecting the appropriate amounts of consumption tax.

248. In general terms, in the area of direct taxation, the main policy challenges raised by the digital economy fall into three broad categories:

• Nexus: The continual increase in the potential of digital technologies and the reduced need in many cases for extensive physical presence in order to carry on business, combined with the increasing role of network effects generated by customer interactions, can raise questions as to whether the current rules to determine nexus with a jurisdiction for tax purposes are appropriate.

• Data: The growth in sophistication of information technologies has permitted companies in the digital economy to gather and use information across borders to an unprecedented degree. This raises the issues of how to attribute value created from the generation of data through digital products and services, and of how to characterise for tax purposes a person or entity’s supply of data in a transaction, for example, as a free supply of a good, as a barter transaction, or some other way.

• Characterisation: The development of new digital products or means of delivering services creates uncertainties in relation to the proper characterisation of payments made in the context of new business models, particularly in relation to cloud computing.

249. These challenges raise questions as to whether the current international tax framework continues to be appropriate to deal with the changes brought about by the digital economy and the business models that it makes possible, and also relate to the allocation of taxing rights between source and residence jurisdictions. These challenges also raise questions regarding the paradigm used to determine where economic activities are carried out and value is created for tax purposes, which is based on an analysis of the functions performed, assets used and risks assumed. At the same time, when these challenges create opportunities for achieving double non-taxation, for example due to the lack of nexus in the market country under current rules coupled with lack of taxation in the jurisdiction of the income recipient and of that of the ultimate parent company, they also generate BEPS issues.

250. Although the challenges related to corporate income tax (nexus, data and character) are distinct in nature, they may overlap with each other. For example, the characterisation of payments may trigger taxation in the jurisdiction where the payor is resident or established and hence overlap with the issue of nexus. Similarly, the collection of data from users located in a jurisdiction may trigger questions regarding whether it should give rise to nexus with that jurisdiction, and if so, whether and how the income generated from the use of these data should be attributed to that nexus. It also raises questions regarding how income from transactions involving data should be characterised for tax purposes.

251. The digital economy also creates challenges for value added tax (VAT) systems, particularly where goods, services and intangibles are acquired by private consumers from suppliers abroad. This is partly due to the absence of an effective international framework to ensure VAT collection in the jurisdiction of consumption. For economic actors, and in particular small and medium enterprises (SMEs), the absence of an international standard for charging, collecting and remitting the tax to a potentially large number of tax authorities, creates difficulties and high compliance costs. From a government viewpoint,


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there is a risk of loss of revenue and trade distortion, as well as the challenge of managing tax liabilities generated by a high volume of low value transactions, which can create a significant administrative burden but marginal revenues.

252. In addition to these policy challenges, which are further discussed below, the Task Force on the Digital Economy (TFDE) has also identified a number of administrative issues raised by the digital economy. These latter issues are outlined in the box at the end of this chapter.

7.3. Nexus and the ability to have a significant presence without being liable to tax

253. Advances in digital technology have not changed the fundamental nature of the core activities that businesses carry out as part of a business model to generate profits. To generate income, businesses still need to source and acquire inputs, create or add value, and sell to customers. To support their sales activities, businesses have always needed to carry out activities such as market research, marketing and advertising, and customer support. Digital technology has, however, had significant impact on how these activities are carried out, for example by enhancing the ability to carry out activities remotely, increasing the speed at which information can be processed, analysed and utilised, and, because distance forms less of a barrier to trade, expanding the number of potential customers that can be targeted and reached. Digital infrastructure and the investments that support it can be leveraged today in many businesses to access far more customers than before. As a result, certain processes previously carried out by local personnel can now be performed cross-border by automated equipment, changing the nature and scope of activities to be performed by staff. Thus, the growth of a customer base in a country does not always need the level of local infrastructure and personnel that would have been needed in a “pre-digital” age.

254. This increases the flexibility of businesses to choose where substantial business activities take place, or to move existing functions to a new location, even if those locations may be removed both from the ultimate market jurisdiction and from the jurisdictions in which other related business functions may take place. As a result, it is increasingly possible for a business’s personnel, IT infrastructure (e.g. servers), and customers each to be spread among multiple jurisdictions, away from the market jurisdiction. Advances in computing power have also meant that certain functions, including decision-making capabilities, can now be carried out by increasingly sophisticated software programmes and algorithms. For example, contracts can in some cases be automatically accepted by software programmes, so that no intervention of local staff is necessary. As discussed below, this is also true in relation to functions such as data collection, which can be done automatically, without direct intervention of the employees of the enterprise.

255. Despite this increased flexibility, in many cases large multinational enterprises (MNEs) will indeed have a taxable presence in the country where their customers are located. As noted in Chapter 4, there are often compelling reasons for businesses to ensure that core resources are placed as close as possible to key markets. This may be because the enterprise wants to ensure a high quality of service and have a direct relationship with key clients. It may also be because minimising latency is essential in certain types of business, or because in certain industries regulatory constraints limit choices about where to locate key infrastructure, capital, and personnel. It is therefore important not to overstate the issue of nexus. Nevertheless, the fact that it is possible to generate a large quantity of sales without a taxable presence should not be understated either and it raises questions about whether the current rules continue to be appropriate in the digital economy.


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256. These questions relate in particular to the definition of permanent establishment (PE) for treaty purposes, and the related profit attribution rules. It had already been recognised in the past that the concept of PE referred not only to a substantial physical presence in the country concerned, but also to situations where the non-resident carried on business in the country concerned via a dependent agent (hence the rules contained in paragraphs 5 and 6 of Article 5 of the OECD Model Tax Convention). As nowadays it is possible to be heavily involved in the economic life of another country without having a fixed place of business or a dependent agent therein, concerns are raised regarding whether the existing definition of PE remains consistent with the underlying principles on which it was based. For example, the ability to conclude contracts remotely through technological means, with no involvement of individual employees or dependent agents, raises questions about whether the focus of the existing rules on conclusion of contracts by persons other than agents of an independent status remains appropriate in all cases.

257. These concerns are exacerbated in some instances by the fact that in certain business models, customers are more frequently entering into ongoing relationships with providers of services that extend beyond the point of sale. This ongoing interaction with customers generates network effects that can increase the value of a particular business to other potential customers. For example, in the case of a retail business operated via a website that provides a platform for customers to review and tag products, the interactions of those customers with the website can increase the value of the website to other customers, by enabling them to make more informed choices about products and to find products more relevant to their interests.

258. Similarly, users of a participative networked platform contribute user-created content, with the result that the value of the platform to existing users is enhanced as new users join and contribute. In most cases, the users are not directly remunerated for the content they contribute, although the business may monetise that content via advertising revenues (as described in relation to multi-sided business models below), subscription sales, or licensing of content to third parties. Alternatively, the value generated by user contributions may be reflected in the value of business itself, which is monetised via the sale price when the business is sold by its owners. Concerns that the changing nature of customer and user interaction allows greater participation in the economic life of countries without physical presence are further exacerbated in markets in which customer choices compounded by network effects have resulted in a monopoly or oligopoly.

259. These various developments must be understood in light of their relationship to more traditional ways of doing business. For example, while having a market in a country is clearly valuable to a seller, this condition by itself has not created a taxing right in the area of direct taxation to this point. It is also true that data about markets and about customers has always been a source of value for businesses as illustrated by phenomena such as frequent flyer programmes, loyalty programmes, the creation and sale of customer lists, and marketing surveys (in which customers participate for no remuneration), to name a few. The traditional economy also benefited from “network” effects in ways that are perhaps less obvious than the network effect present in social networks. Sellers of fax machines, for example, were dependent on a sufficiently broad supplier of purchasers in order to ensure that their product had value. The digital economy has, however, enabled access to markets with less reliance on physical presence than in the past. In addition, the digital economy has enabled collection and analysis of data at unprecedented levels, and has enhanced the impact of customer and user participation in the market, as well as the degree of network effects. It has been suggested that the lower marginal costs in digital businesses coupled with increased network effects generated by higher levels of user participation may justify


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a change in tax policy. See, e.g. Crémer (2015); Pistone and Hongler (2015). In considering policy changes to reflect customer interactions to the imposition of income tax, however, potential impact on traditional ways of doing business must be taken into account in order to maintain coherence in cross border tax policy. In addition, consideration should be given both to solutions based on income tax and to solutions focused on indirect taxes.

260. Another specific issue raised by the changing ways in which businesses are conducted is whether certain activities that were previously considered preparatory or auxiliary (and hence benefit from the exceptions to the definition of PE) may be increasingly significant components of businesses in the digital economy. For example, as indicated in Chapter 6, if proximity to customers and the need for quick delivery to clients are key components of the business model of an online seller of physical products, the maintenance of a local warehouse could constitute a core activity of that seller. Similarly, where the success of a high-frequency trading company depends so heavily on the ability to be faster than competitors that the server must be located close to the relevant exchange, questions may be raised regarding whether the automated processes carried out by that server can be considered mere preparatory or auxiliary activities.

261. Although it is true that tax treaties do not permit the taxation of business profits of a non-resident enterprise in the absence of a PE to which these profits are attributable, the issue of nexus goes beyond questions of PE under tax treaties. In fact, even in the absence of the limitations imposed by tax treaties, it appears that many jurisdictions would not in any case consider this nexus to exist under their domestic laws. For example, many jurisdictions would not tax income derived by a non-resident enterprise from remote sales to customers located in that jurisdiction unless the enterprise maintained some degree of physical presence in that jurisdiction. As a result, the issue of nexus also relates to the domestic rules for the taxation of non-resident enterprises.

7.4. Data and the attribution of value created from the generation of marketable location-relevant data through the use of digital products and services

262. Digital technologies enable the collection, storage and use of data, and also enable data to be gathered remotely and from a greater distance from the market than previously. Data can be gathered directly from users, consumers or other sources of information, or indirectly via third parties. Data can also be gathered through a range of transactional relationships with users, or based on other explicit or implicit forms of agreement with users. Companies collect data through different methods. These can be proactive, requesting or requiring users to provide data and using data analytics, or primarily reactive, with the quantity and nature of the information provided largely within the control of users e.g. social networking and cloud computing. As set out in Chapter 3, data gathered from various sources is often a primary input into the process of value creation in the digital economy. Leveraging data can create value for businesses in a variety of ways, including by allowing businesses to segment populations in order to tailor offerings, to improve the development of products and services, to better understand variability in performance, and to improve decision making. The expanding role of data raises questions about whether current nexus rules continue to be appropriate or whether any profits attributable to the remote gathering of data by an enterprise should be taxable in the State from which the data is gathered, as well as questions about whether data is being appropriately characterised and valued for tax purposes. As noted above, the issue of data collection is not new, although the ability to collect and categorise data has increased exponentially in large part due to computing power


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and the growth of the internet. As a result, addressing the growing role of data would require consideration of potential impact on more traditional business models as well.

263. While it is clear that many businesses have developed ways to collect, analyse, and ultimately monetise data, it may be challenging for purposes of an analysis of functions, assets, and risks, to assign an objective value to the raw data itself, as distinct from the processes used to collect, analyse, and use that data. For accounting purposes, the value of data collected by a business, like other self-created intangibles, would generally not appear on the balance sheet of the business, and would therefore not generally be relevant for determining profits for tax purposes. Although data purchased from another related or unrelated business would be treated as an asset in the hands of the buyer (and its subsequent sale would generate tax consequences), outright sale of data is only one of many ways in which collection and analysis of data can be monetised. For example, as with other user contributions, the value of data may be reflected in the value of the business itself, and may be monetised when the business is sold. Even where data itself is sold, the value of that data may vary widely depending on the capacity of the purchaser to analyse and make use of that data. The issue of valuing data as an asset is further complicated by existing legal questions about the ownership of personal data, and the ability of users to control whether businesses can access and utilise user data by using digital services anonymously, or by deleting data stored in local caches. Many jurisdictions have passed data protection and privacy legislation to ensure that the personal data of consumers is closely protected. Under most such legislation, this information is considered to be the property of the individual from which it is derived, rather than an asset owned by a company or a public good. Economic literature analysing intangibles, in contrast, has tended to embrace modern business realities and value also assets whose ownership may not be protected by legal rules (Corrado et al., 2012).

264. The value of data, and the difficulties associated with determining that value, is also relevant for tax purposes in the cross-border context and triggers questions regarding whether the remote collection of data should give rise to nexus for tax purposes even in the absence of a physical presence, and if so (or in the case of an existing taxable presence) what impact this would have on the application of transfer pricing and profit attribution principles, which in turn require an analysis of the functions performed, assets used and risks assumed. The fact that the value of data can impact tax results places pressure on the valuation of data. Further, the fact that the value of data can impact tax results if attributable to a PE or if held by a local subsidiary and sold to a foreign enterprise, but not if collected directly by a foreign enterprise with no PE, places pressure on the nexus issues and raises questions regarding the location of data collection. This distinction between the taxation of those with a PE and those without a PE was, of course, present in the traditional economy as well.

265. In addition, data, including location-specific data, may be collected from customers or devices in one country using technology developed in a second country. It may then be processed in the second country and used to improve product offerings or target advertisements to customers in the first country. Determining whether profit is attributable to each of these functions and the appropriate allocation of that profit between the first country and the second country raises tax challenges. These challenges may be exacerbated by the fact that in practice a range of data may be gathered from different sources and for different purposes by businesses and combined in various ways to create value, making tracing the source of data challenging. This data may be stored and processed using cloud computing, making the determination of the location where the processing takes place similarly challenging.


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266. Additional challenges are presented by the increasing prominence in the digital economy of multi-sided business models. A key feature of two-sided business models is that the ability of a company to attract one group of customers often depends on the company’s ability to attract a second group of customers or users. For example, a company may develop valuable services, which it offers to companies and individuals for free or at a price below the cost of providing the service, in order to build a user base and to collect data from those companies and individuals. This data can then be used by the business to generate revenues by selling services to a second group of customers interested in the data itself or in access to the first group. For example, in the context of internet advertising data collected from a group of users or customers can be used to offer a second group of customers the opportunity to tailor advertisements based on those data. Where the two groups of customers are spread among multiple countries, challenges arise regarding the issue of nexus mentioned above and in determining the appropriate allocation of profits among those countries. Questions may also arise about the appropriate characterisation of transactions involving data, including assessing the extent to which data and transactions based on data exchange can be considered free goods or barter transactions, and how they should be treated for tax and accounting purposes. However, as discussed more generally above, the location of advertising customers and the location of users are frequently aligned in practice, such that the value of the user data is reflected in the advertising revenue generated in a country. The scale of this challenge may, in addition, be mitigated by the fact that advertising will frequently require a local presence to attract advertisers.

267. The changing relationship of businesses with users/customers in the digital economy may raise other challenges as well. The current tax rules for allocating income among different parts of the same MNE require an analysis of functions performed, assets used, and risks assumed. This raises questions in relation to some digital economy business models where part of the value creation may lie in the contributions of users or customers in a jurisdiction. As noted above, the increased importance of users/customers therefore relates to the core question of how to determine where economic activities are carried out and value is created for income tax purposes.

7.5. Characterisation of income derived from new business models

268. Products and services can be provided to customers in new ways through digital technology. The digital economy has enabled monetisation in new ways, as discussed in Chapters 3 and 4, and this raises questions regarding both the rationale behind existing categorisations of income and consistency of treatment of similar types of transactions.

269. Prior work by the Treaty Characterisation Technical Advisory Group (TAG), discussed further in Annex A examined many characterisation issues related to e-commerce. Although this work remains relevant, new business models raise new questions about how to characterise certain transactions and payments for domestic and tax treaty law purposes.1 For example, although the TAG considered the treatment of application hosting, cloud computing has developed significantly since that work, and the character of payments for cloud computing is not specifically addressed in the existing Commentary to the OECD Model Tax Convention. The question for tax treaty purposes is often whether such payments should be treated as royalties (particularly under treaties in which the definition of royalties includes payments for rentals of commercial, industrial, or scientific equipment), fees for technical services (under treaties that contain specific provisions in that respect), or business profits. More specifically, questions arise regarding whether infrastructure-as-a-service transactions should be treated as services (and hence payments characterised as business profits for treaty


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purposes), as rentals of space on the cloud service provider’s servers by others (and hence be characterised as royalties for purposes of treaties that include in the definition of royalties payments for rentals of commercial, industrial, or scientific equipment), or as the provision of technical services. The same questions arise regarding payments for software-as-a-service or platform-as-a-service transactions.

270. In the future, development and increasing use of 3D printing may also raise character questions. For example, if direct manufacturing for delivery evolves into a license of designs for remote printing directly by purchasers, questions may arise as to whether

Box 7.1. Administrative challenges in the digital economy

There is a pressing need to consider how investment in skills, technologies and data management can help tax administrations keep up with the ways in which technology is transforming business operations. The borderless nature of digital economy produces specific administrative issues around identification of businesses, determination of the extent of activities, information collection and verification, and identification of customers. These issues are outlined below, while possible ways to address them are outlined in the later sections of this chapter. Further, operational work is underway within the Forum on Tax Administration to develop a strong voluntary compliance culture and expand the use of modern technology for self-service delivery purposes (OECD, 2014).

• Identification: While global business structures in the digital economy involve traditional identification challenges, these challenges are magnified in the digital economy. For example, the market jurisdiction may not require registration or other identification when overseas businesses sell remotely to customers in the jurisdiction, or may have issues with implementing registration requirements, as it is often difficult for tax authorities to know that activities are taking place, to identify remote sellers and to ensure compliance with domestic rules. Difficulties in identifying remote sellers may also make ultimate collection of tax difficult.

• Determining the extent of activities: Even if the identity and role of the parties involved can be determined, it may be impossible to ascertain the extent of sales or other activities without information from the offshore seller, as there may be no sales or other accounting records held in the local jurisdiction or otherwise accessible by the local revenue authority. It may be possible to obtain this information from third parties such as the customers or payment intermediaries, but this may be dependent on privacy or financial regulation laws.

• Information collection and verification: To verify local activity, the market jurisdiction’s tax administration may need to seek information from parties that have no operations in the jurisdiction and are not subject to regulation therein. While exchange of information can be a very useful tool where the proper legal basis is in place, this is predicated on knowledge of where the offshore entity is tax resident and information retained or accessible by the reciprocating tax authority. This can create challenges for a market jurisdiction revenue authority seeking to independently verify any information provided by the offshore entity.

• Identification of customers: There are in principle a number of ways in which a business can identify the country of residence of its client and/or the country in which consumption occurs. These could include freight forwarders or other customs documentation or tracking of Internet Protocol (IP) and card billing addresses. However, this could be burdensome for the business and would not work where customers are able to disguise their location.


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and under what circumstances payments by purchasers may be classified as royalties rather than as business profits, or may be treated as fees for technical services.

271. Under most tax treaties, business profits would be taxable in a country only if attributable to a PE located therein. In contrast, certain other types of income, such as royalties, may be subject to withholding tax in the country of the payer, depending on the terms of any applicable treaty. Whether a transaction is characterised as business profits or as another type of income, therefore, can result in a different treatment for tax treaty purposes. There is therefore a need to clarify the application of existing rules to some new business models.

272. At the same time, when considering questions regarding the characterisation of income derived from new business models it may be necessary to examine the rationale behind existing rules, in order to determine whether those rules produce appropriate results in the digital economy and whether differences in treatment of substantially similar transactions are justified in policy terms. In this respect, further clarity may be needed regarding the tax treaty characterisation of certain payments under new business models, especially cloud computing payments (including payments for infrastructure-as-a-service, software-as-a-service, and platform-as-a-service transactions). In addition, issues of characterisation have broader implications for the allocation of taxing rights for direct tax purposes. For example, if a new type of business is able to interact extensively with customers in a market jurisdiction and generate business profits without physical presence that would rise to the level of a PE, and it were determined that the market jurisdiction should be able to tax such income on a net basis, modifying the PE threshold and associated profit attribution rules could permit such taxation. Source taxation could also be ensured by creating a new category of income that is subject to withholding tax. As a result, the issue of characterisation has significant implications for the issue of nexus.

7.6. Developing options to address the broader direct tax challenges of the digital economy

273. In the context of its work, the TFDE received and discussed several proposals for potential options to address the broader direct tax challenges raised by the digital economy, including novel work carried out by academics (Bloch, 2015; Bourreau, 2015; Brauner, 2015; Crémer, 2015; Hongler, 2015). As there is a substantial overlap between the challenges related to nexus, data, and characterisation, it was considered that rather than attempting to individually target them, any potential option should instead focus more generally on the ability of businesses in the digital economy to (i) derive sales income from a country without a physical presence, and (ii) use the contributions of users in the value chain (including through collection and monitoring of data), and monetise these contributions by selling the data to third parties, by selling targeted ads, by selling the business itself, or in any other way.

274. The options analysed by the TFDE in 2014 included modifications to the exceptions from PE status, alternatives to the existing PE threshold, the imposition of a withholding tax on certain types of digital transactions, and the introduction of a tax on bandwidth use.

275. With respect to the exceptions from PE status, work in the context of Action 7 of the BEPS Project (preventing the artificial avoidance of PE status) analysed whether activities that may previously have been preparatory or auxiliary should continue to benefit from exceptions (contained in Article 5(4) of the OECD Model Tax Convention) to the permanent establishment definition where they have become core components of a


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business. As a result of this work, these exceptions have been modified to ensure that they are available only for activities that are of a preparatory or auxiliary nature.

276. The technical details of the other three options have been developed further and are presented below. Like the challenges they are intended to address, the impact of these options overlaps in a number of respects. They have therefore been conceived in a way that allows them to be either combined into a single option or chosen individually. More specifically, elements of the three potential options could be combined into a new concept of nexus for net-basis taxation (a “significant economic presence”), with the intent to reflect situations where an enterprise leverages digital technology to participate in the economic life of a country in a regular and sustained manner without having a physical presence in that country. In this context, the application of a withholding tax on digital transactions could be considered as a tool to enforce compliance with net taxation based on this potential new nexus, while an equalisation levy could be considered as an alternative to overcome the difficulties raised by the attribution of income to the new nexus.

7.6.1. A new nexus based on the concept of significant economic presence277. This option would create a taxable presence in a country when a non-resident enterprise has a significant economic presence in a country on the basis of factors that evidence a purposeful and sustained interaction with the economy of that country via technology and other automated tools. These factors would be combined with a factor based on the revenue derived from remote transactions into the country, in order to ensure that only cases of significant economic presence are covered, limit compliance costs of the taxpayers, and provide certainty for cross-border activities. The following sections describe the details of such an option, together with potential approaches for attributing income to the new nexus.

7.6.1.1. Revenue-based factor278. As a general matter, revenue that is generated on a sustained basis from a country could be considered to be one of the clearest potential indicators of the existence of a significant economic presence. This is based on the assumption that even in multi-sided business models, and particularly those dependent on network effects, the two markets are likely to be strongly interrelated, and as a result are likely to besituated in the same country. To the extent that the country of the users and country of the paying customers are aligned, the value of an enterprise’s users and user data would generally be reflected in the enterprise’s revenue in a country. In other words, because user data serves to enhance the value of the services an enterprise offers, a strong user network (and the attendant user data) is likely to result in enterprises either selling more or enterprises charging more for its core products/services, or both. Under such circumstances, the revenues earned from customers in a country are a potential factor for establishing nexus in the form of a significant economic presence in the country concerned. Revenues will not be sufficient in isolation to establish nexus but they could be considered a basic factor that, when combined with other factors, could potentially be used to establish nexus in the form of a significant economic presence in the country concerned. In addition, the use of revenue as a basic factor could limit the compliance costs of taxpayers and provides a high degree of tax certainty for cross-border activities. In developing a revenue factor, consideration was given to the following technical issues:

• Transactions covered. One approach that could be considered in defining a basic revenue factor is to include only revenues generated from digital transactions concluded with in-country customers through an enterprise’s digital platform.


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Specifically, these transactions would involve the conclusion of a contract for the sale (or exchange) of goods and services between two or more parties effectuated through a digital platform where the contract conclusion primarily relies on automated systems. Such an approach could however create incentives for particular ways of doing business with remote customers. For example, such an approach would treat remote digital transactions differently from mail-order transactions (e.g. catalogue shopping) and telephone transactions (e.g. sale through call centres). Although in practice the latter transactions are less likely to enable a business to generate a significant amount of revenue, all three ways of transacting enable businesses to engage in sales transactions without physical presence in the country of the customer. In addition, businesses may leverage digital technology to reach a broader range of customers in another country without entering into digital transactions (e.g. website displaying the products but routing the customers to a call centre to perform the final purchase). Accordingly, to ensure that taxpayers in similar situations carrying out similar transactions will be subject to similar levels of taxation, it may be preferable to define the factor so as to include all revenue generated by transactions concluded by the non-resident enterprise remotely with in-country customers. Potential adverse effects associated with such a broad scope would in any case be addressed by the application of the other factors (see further below at 7.6.1.4).

• Level of the threshold. The core element of the revenue factor could be the gross revenues generated from remote transactions concluded with customers in the country concerned. This amount should be framed in absolute terms and in local currency, in order to minimise the risk of manipulation. A key objective in setting the level of threshold would be to set it at a high enough level to minimise the administrative burden for tax administrations as well as the compliance burden on and level of uncertainty for the taxpayer, while ensuring that nexus is less likely to be created in cases in which minimal tax revenue would be collected. The size of the country’s market might also be a relevant factor in setting the level of the revenue threshold. Given the relative mobility and flexibility in choosing the location of automated functions related to revenue-generating activities in the digital economy, the factor could be applied on a related-group basis rather than on a separate-entity basis to prevent any risk of artificial fragmentation of distance selling activities with customers of the same country among a variety of foreign affiliated entities. This aggregation rule could be introduced as a rebuttable presumption, with the taxpayer being able to demonstrate that it did not artificially fragment the distance selling activities in order to manipulate the revenue threshold.

• Administration of the threshold. An accurate application of the revenue threshold would depend on the ability of the country to identify and measure remote sales activities of the non-resident enterprise. One possible approach to address this challenge could be to introduce a mandatory registration system for enterprises that meet the factors giving rise to a significant economic presence. On the other hand, it could be difficult for tax authorities to know when activities are taking place and at what scale, to identify remote sellers, and ultimately to ensure compliance. Similarly, in the case of transactions concluded and fulfilled entirely online, it may be difficult for enterprises to identify with certainty the country of residence of clients. In this respect, regimes introduced to ensure compliance with VAT/GST rules by non-resident suppliers could prove extremely useful (see also Chapter 8 for additional details).


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7.6.1.2. Digital factors279. In the case of “brick and mortar” businesses, the ability to reach significant numbers of customers in a country generally depends on a variety of factors, including a store’s location, local marketing and promotion, payment options, and sales and customer service employees. In the digital economy, the ability to establish and maintain a purposeful and sustained interaction with users or customers in a specific country via an online presence depends on analogous factors. A range of digital factors based on the current development of the digital economy could be used as part of a test for significant economic presence, including the following:

• A local domain name. A non-resident enterprise targeting customers or users in a country will generally obtain the digital equivalent of a local “address” where the non-resident enterprise establishes its store front, typically taking the form of a localised or specialised domain name. For example, while an enterprise’s “home” domain name might be “.com”, the enterprise’s site targeting one country would likely use a domain name reflecting that, in order to make it more likely that a local user would find the local site. This is reinforced by the need of enterprises to protect their trademarks by purchasing related domain names, including a local country domain name. In summary, while it is possible for an enterprise to do business in a country without a local domain name, the choice to do so carries reputational risk from potential domain “squatting” and trademark infringement from not protecting the enterprise’s business name, trademarks and trade names across various domains. Accordingly, MNEs doing substantial cross-border business would very likely operate in a country via a local domain name. Whether local domain names will remain the predominant method for accessing markets, however, is uncertain. In the near future, merchants selling camera equipment globally may, for example, use a generic “.camera” domain name, thus reducing the relevance of country specific domain name.

• A local digital platform. Non-resident enterprises frequently establish “local” websites or other digital platforms in order to present the goods or services being offered in the light that most appeals to the local users or customers, taking into account language and cultural norms in particular. Local websites or digital platforms could include features intended to facilitate interaction by local users and customers with the site’s content, services and functions. Such features include language, local marketing such as targeted discounts and promotions, and local terms of service for users and customers that reflect the commercial and legal context of the local environment. Although some enterprises may elect to only operate only in one language and not attempt to undertake local marketing or promotional efforts, establishing a local platform is often critical to attracting meaningful numbers of local users and customers. Note, however, that local platforms do not necessarily correspond to political boundary lines.

• Local payment options. A non-resident enterprise that maintains a purposeful and sustained interaction with the economy of a country will frequently ensure that local customers have a seamless purchasing experience with prices reflected in local currency, taxes, duties and fees already calculated, with the option of using a local form of payment to complete the purchase. Integration of local forms of payment into a site’s commercial features is a complicated technical, commercial, and legal exercise requiring substantial resources, and an enterprise would normally not undertake such an investment unless it purposefully participates in the country’s economic life. While this factor may be less relevant in countries that share a common currency, it


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generally is a critical commercial requirement in countries that have stringent banking regulations, currency controls, or low penetration of international credit cards.

7.6.1.3. User-based factors280. Given the importance of network effects in the digital economy, the user base and the associated data input may also be important indicators of a purposeful and sustained interaction with the economy of that another country. A range of factors based on users could be used to reflect the level of participation in the economic life of a country, namely:

• Monthly active users (MAU). One factor reflecting the level of penetration in a country’s economy is the number of “monthly active users” (MAU) on the digital platform that are habitually resident in a given country in a taxable year. The term MAU refers to registered user who logged in and visited a company’s digital platform in the 30-day period ending on the date of measurement. A factor based on MAU presents the advantage of measuring the customer/user base in a given country both in terms of size and level of engagement. Given that little material is publicly available on the process of defining and identifying MAU, more detailed metrics would need to be developed in consultation with businesses and IT experts for the purpose of using this factor, such as how to identify a unique “user” or what level of engagement is required for a user to be considered “active”. Reliability and veracity of the information would also need to be ensured, to address fraudulent accounts, multiple accounts, false information volunteered by users, and “bot”-produced data, to name a few.

• Online contract conclusion. Another factor indicating the level of participation of an enterprise in the economic life of a country is the regular conclusion of contracts. This is the focus of the existing “dependent agent” PE test contained in Article 5 of the OECD Model which, in broad terms, requires that this contract conclusion be carried out in the country by a person acting on behalf of the non-resident enterprise. In the digital economy, contracts can frequently be concluded with customers via a digital platform without the need for the intervention of local personnel or dependent agents. For example, online platforms providing free services to their users often specify on their websites that by accessing or using the products and services of the company the user agrees to the “Terms of Service” and each use of the platform results in the conclusion of a legally binding agreement. The number of contracts concluded through a digital platform with customers or users that are habitually resident in the country in any taxable year could therefore be considered an important factor.

• Data collected. Another factor which could be considered to reflect an enterprise’s level of participation in the economic life of a country is the volume of digital content collected through a digital platform from users and customers habitually resident in that country in a taxable year. The focus would be on the origin of the data collected, irrespective of where that data is subsequently stored and processed (e.g. data warehouse). The range of data captured by the threshold would not be confined to personal data, but would cover also, e.g. user created content, product reviews, and search histories. This core element could be coupled with proportionality tests, such as whether the volume of digital content collected exceeds a percentage of the enterprise’s overall stored digital content. Information on data collected is increasingly available, reliable and up-to-date, especially if the factor is focusing on data collected that is effectively stored by the non-resident


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enterprise on a server. At the same time, businesses may not necessarily maintain separate and comprehensive track records of the volume of data collected and stored on a country-by-country basis. In addition, the volume of data collected (and stored) from users in a country may not necessarily reflect an effective contribution to the profits generated by the non-resident enterprise, as the value of raw data is rather uncertain and particularly volatile.

7.6.1.4. Possible combinations of the revenue factor with the other factors281. For purposes of this potential option, total revenue in excess of the revenue threshold would be an indicator of the existence of a significant economic presence.

282. Total revenue, however, may not by itself suffice to evidence a non-resident enterprise’s regular and sustained participation in the economic life of a country. To be an appropriate measure of participation in the economic life of a country, the revenue factor could be combined with other factors, such as the digital and/or user-based factors that indicate a purposeful and sustained interaction with the economy of the country concerned. In other words, a link would have to be created between the revenue-generating activity of the non-resident enterprise and its significant economic presence in the country. The choice of which factors should be combined with the revenue factor to ascertain whether a significant economic presence should be deemed to exist is likely to be driven by the unique features and economic attributes of each market (e.g. size, local language, currency restrictions, banking system).

283. This concept may be illustrated by an example. If a non-resident enterprise generates gross revenues above the threshold from transactions with in-country customers concluded electronically through a localised digital platform where the customer is required to create a personalised account and utilise the local payment options offered on the site to execute the purchase, it could be considered that there is a link between the revenue generated from that country and the digital and/or user-based factors evidencing a significant economic presence in that country. In contrast, it would be more difficult to find such a link where a non-resident enterprise generates gross revenues above the threshold from transactions with in-country customers through in-person negotiation taking place outside of the market jurisdiction, if the enterprise only maintains a passive website that provides product information with no functionalities permitting transactions or intensive interaction with users (including data collection).

7.6.2. Determining the income attributable to the significant economic presence284. Attribution of profits is a key consideration in developing a nexus based on significant economic presence. The option outlined in 7.6.1 above would establish nexus for taxation in cases where an enterprise has no physical presence in the country concerned. Consideration must therefore be given to what changes to profit attribution rules would need to be made if the significant economic presence option were adopted, while ensuring parity to the extent possible between enterprises that are subject to tax due to physical presence in the market country (i.e. local subsidiary or traditional PE) and those that are taxable only due to the application of the option.

7.6.2.1. Existing rules and principles285. A significant economic presence associated with little or no physical presence in terms of tangible assets and/or personnel in the other country is not likely to involve the carrying on of any functions of the enterprise in the traditional sense. Unless significant


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adjustments are made to the existing rules, therefore, it would not be possible to allocate any meaningful income to the new nexus.

286. Several adjustments to existing principles were considered during the course of the work, including allocating business functions handled remotely through automated systems to the significant economic presence, as well as treating customers and users as performing certain functions on behalf of an enterprise under certain circumstances. Other substantial departures from existing rules, such as replacing a functional analysis with an analysis based on game theory that would allocate profits by analogy with a bargaining process within a joint venture, were also considered (see Pellefigue, 2015). All such potential adjustments, however, would require substantial departures from existing standards for allocating profits within a MNE operating in multiple jurisdictions, which are currently based on an analysis of the functions, assets and risks of the enterprises concerned. It was concluded, therefore, that, unless there is a substantial rewrite of the rules for the attribution of profits, alternative methods would need to be considered.

7.6.2.2. Methods based on fractional apportionment287. Another approach considered would be to apportion the profits of the whole enterprise to the digital presence either on the basis of a predetermined formula, or on the basis of variable allocation factors determined on a case-by-case basis. In the context of a significant economic presence, the implementation of a method based on fractional apportionment would require the performance of three successive steps: (1) the definition of the tax base to be divided, (2) the determination of the allocation keys to divide that tax base, and (3) the weighting of these allocation keys.

288. It is important to note that the domestic laws of most countries use profit attribution methods based on the separate accounts of the PE, rather than fractional apportionment. In addition, fractional apportionment methods would be a departure from current international standards. Furthermore, pursuing such an approach in the case of application of the new nexus would produce very different tax results depending on whether business was conducted through a “traditional” permanent establishment, a separate subsidiary or the new nexus. Given those constraints, fractional apportionment methods were not pursued further.

7.6.2.3. Modified deemed profit methods289. The use of empirical presumption methods such as “deemed profit” systems is sometimes a way to avoid profit computations based on the taxpayer’s accounts in situations where a high proportion of expenses associated with revenues are incurred overseas, making it difficult from a practical perspective to audit locally. Deemed profits methods have been used, for example, in the insurance industry, by applying a coefficient based on the ratio of profit to gross premiums of resident insurance companies to gross premiums received from policy holders in the source country.

290. In the context of a nexus based on significant economic presence, one possible approach would thus be to regard the presence to be equivalent to a physical presence from which the non-resident enterprise is operating a commercial business and determine the deemed net income by applying a ratio of presumed expenses to the non-resident enterprise’s revenue derived from transactions concluded with in-country customers, hence aligning it to one of the key factors of the option as described above. Determining an appropriate ratio would depend on a number of factors, including the industry concerned, the degree of integration of the particular enterprise, and the type of product and service provided. One


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possible approach would thus be to classify taxpayers by industry and apply an industry-specific profit percentage. A more refined approach would be to divide taxpayers within a given industry into additional classes based on relevant factors (e.g. capital equipment, turnover, employees), with a specific profit percentage within each band. The determination of the latter percentage would require an extensive analysis of actual profit margins of domestic taxpayers operating in the same specific class of industry or type of business.

291. Deemed profit methods are generally perceived as relatively easy to administer and raise revenue. However, for large MNE groups with complex structures operating in many lines of business, applying multiple industry-specific presumptive profit margins to the same significant economic presence presents several practical challenges. Another challenge relates to the comparability of digital and traditional business models when considering the applicability of such deemed profit margins. Many digital business models have a different cost structure than traditional business models, such that adjustments to margins found in this context are very likely to be required. In addition, application of deemed profit methods in this context may be considered as a substantial departure from current international standards, resulting in a tax liability even where there are no actual profits generated through the significant economic presence. One possible way to mitigate this negative impact would be to create a rebuttable presumption limited to situations where the foreign taxpayer is able to demonstrate that its overall activity (or specific line of business related to the activity of the significant economic presence if it can be ring-fenced from other business activities of the enterprise) is in a loss-making position at the end of the fiscal year.

7.6.3. A withholding tax on digital transactions292. A withholding tax on payments by residents (and local PEs) of a country for goods and services purchased online from non-resident providers has also been considered. This withholding tax could in theory be imposed as a standalone gross-basis final withholding tax on certain payments made to non-resident providers of goods and services ordered online or, alternatively, as a primary collection mechanism and enforcement tool to support the application of the nexus option described above, i.e. net-basis taxation. Both approaches raise similar technical issues with respect to the scope of transactions covered and the collection of the ensuing tax liability. In addition, the application of a standalone final withholding tax raises specific challenges regarding trade obligations and EU law.

7.6.3.1. Scope of transactions covered293. The scope of transactions covered by the tax must be clearly defined, so that taxpayers and withholding agents will know when the tax applies, and to ensure that tax administrations will be able to ensure compliance. The scope should also be defined as simply as possible in order to avoid unnecessary complexity and classification disputes. The need for clarity and simplicity, however, must be balanced against a need to ensure that similar types of transactions will be taxed similarly, in order to avoid creating incentives for or against particular ways of structuring them.

294. For this purpose, although listing specific types of transactions covered would provide a degree of clarity, it would also likely result in disputes over the character of transactions, particularly as technology continues to advance. Such an approach also could lead to differences in treatment for tax purposes between economically equivalent transactions depending on their form. For this reason, a more general definition of covered transactions appears more appropriate. The tax could be applied, for example, to transactions for goods or services ordered online (i.e. digital sales transactions), or to all sales operations concluded


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remotely with non-residents. The latter would have the advantage of flexibility, and would ensure tax neutrality between similar ways of doing business, and may reduce disputes over characterisation. In addition, if withholding is used as a tool to support net-basis taxation, a broad scope covering all distance selling would be more consistent with the sales threshold discussed above in the context of a nexus based on significant economic presence.

7.6.3.2. Collection of the tax295. In practice, the liability to pay a withholding tax on outbound payments is often shifted from the non-resident enterprise to a local collecting agent, such as the customer or a third-party payment processing intermediary. For such a mechanism to function efficiently, the agent responsible for withholding must have access to information about the covered transactions sufficient to know when the tax will apply, and must be reasonably expected to comply with its obligation to withhold.

296. In the case of B2B transactions, businesses resident in the source country may reasonably be expected to comply with the withholding obligation. In the case of B2C transactions, however, requiring withholding from the payor would be more challenging as private consumers have little experience nor incentive to declare and pay the tax due. Moreover, enforcing the collection of small amounts of withholding from large numbers of private consumers would involve considerable costs and administrative challenges.

297. One possible solution would be to require intermediaries processing the payment to withhold on the payment in a B2C context. As a practical matter, however, this presents several technical issues. For example, an intermediary would generally not have access to transaction-identifying information enabling it to determine its character and hence the amount of tax due. In practice, it would only see a value without any description of the underlying transaction, in which case it would not be able to determine with sufficient certainty when it was required to withhold. The task of the intermediary could be facilitated if the collection regime is supplemented by a mandatory registration system for non-resident enterprises whereby all remote sellers of goods and services must designate a dedicated bank account for all payments received from local customers. In the latter situation, intermediaries may be required to withhold the tax only for payments made to these specific bank accounts. However, the application of this approach may pose challenges in imposing compliance obligations on intermediaries that are situated in third-countries with no connection to the jurisdiction of the customer, thereby creating opportunities for tax avoidance strategies.

7.6.3.3. Negative impact of gross-basis taxation and relationship with trade and other obligations298. The initial development and hosting of the technology required to provide products and services online typically requires substantial up-front investment of resources, including labour and capital. After initial creation of the technology, however, providing products and services online frequently requires only limited marginal costs for businesses. Where this is the case, it has been argued that payments made in consideration for digital goods or services share common features with royalties and fees for technical services, i.e. that gross revenue is a reliable proxy for net income. In many businesses, however, providing products and services online will require ongoing expenditures for continued product development (including maintenance of products and addition of new features), marketing, and ongoing customer support due to rapid product cycles as technology and competition evolve. Where this is the case, imposition of withholding tax on gross revenues


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will be an imperfect proxy for tax on net income. One potential way to reduce the negative impact of gross-basis taxation would be to fix the rate at a relatively low amount that would reflect typical profit margins. Such margins could be determined, for example, on the basis of a statistical analysis of actual profit margins of local domestic taxpayers operating in the same specific class of industry or type of business.

299. Assuming that domestic suppliers of similar products are subject to net-basis taxation, the imposition of a standalone gross-basis final withholding tax on foreign suppliers for remote sales of goods and services is likely to raise substantial conflicts with trade obligations and EU law. Trade obligations may differ substantially depending on whether a particular digital transaction is treated as involving a product, in which case the General Agreement on Tariffs and Trade (GATT) would apply, or a service, in which case the General Agreement on Trade in Services (GATS) would apply. Both agreements generally require foreign suppliers of goods (in the case of GATT) and services (in the case of GATS) to be taxed no less favourably than domestic suppliers. However, GATS provides broad exceptions for the application of provisions of tax treaties and for the imposition of direct tax provisions aimed at ensuring the equitable or effective imposition of direct taxes. In contrast, GATT contains no exceptions to national treatment obligations, and simply prohibits parties from subjecting imported products to taxes in excess of those that would apply to similar products produced domestically. Thus, at least to the extent GATT applies (i.e. to goods delivered physically, and to digital products considered “goods” for trade purposes), consideration would need to be given to ways to preserve national treatment.

300. In addition, for some countries EU law imposes comparable obligations – i.e. non-discrimination between resident and non-resident businesses – that would not permit the application to non-resident suppliers of a gross-basis final withholding tax, even if the rate is fixed at a very low amount.

301. Given the above issues, a more viable approach could be to use this mechanism as a back-up mechanism to enforce net-basis taxation on the basis of a significant economic presence nexus, rather than as a standalone option. Whether the withholding tax is used as a gross basis payments tax or a collection mechanism for net basis income tax, remittance of the tax by local businesses would both ensure compliance and facilitate identification of the covered remote sales. One approach in this regard would be to establish a registration system for taxpayers that agree to file tax returns and pay tax on their net income, coupled with a credit system enabling taxpayers to pay any tax due on net income in addition to the tax withheld, or for taxpayers that are in a loss position on a net basis at the end of the fiscal year to claim a tax refund. However, such a system would need to take into account that taxpayers may have an incentive not to file a return where their net tax liability would be greater than the amount of withholding tax payable.

7.6.4. Introducing an “equalisation levy”302. To avoid some of the difficulties arising from creating new profit attribution rules for purposes of a nexus based on significant economic presence, an “equalisation levy” could be considered as an alternative way to address the broader direct tax challenges of the digital economy. This approach has been used by some countries in order to ensure equal treatment of foreign and domestic suppliers. For example, in the area of insurance, some countries have adopted equalisation levies in the form of excise taxes based on the amount of gross premiums paid to offshore suppliers. Such taxes are intended to address a disparity in tax treatment between domestic corporations engaged in insurance activities and wholly taxable on the related profits, and foreign corporations that are able to sell insurance without


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being subject to income tax on those profits, neither in the state from where the premiums are collected nor in state of residence. As discussed below, an equalisation levy could be structured in a variety of ways depending on its ultimate policy objective. In general, an equalisation levy would be intended to serve as a way to tax a non-resident enterprise’s significant economic presence in a country. In order to provide clarity, certainty and equity to all stakeholders, and to avoid undue burden on small and medium-sized businesses, therefore, the equalisation levy would be applied only in cases where it is determined that a non-resident enterprise has a significant economic presence.

7.6.4.1. Scope of the levy303. If the policy priority is to tax remote sales transactions with customers in a market jurisdiction, one possibility is to apply the levy to all transactions concluded remotely with in-country customers. To target the scope of the levy more closely to the situation in which a business establishes and maintains a purposeful and sustained interaction with users or customers in a specific country via an online presence, the levy would be applied only where the business maintains a significant economic presence as described above.

304. An alternative would be to limit the scope to transactions involving the conclusion through automated systems of a contract for the sale (or exchange) of goods and services between two or more parties effectuated through a digital platform. Although this would create an incentive to choose non-digital means of conducting transactions, it would also focus more closely on the specific types of transactions that have generated concern. There is no rule, however, that prevents a broader scope of application. Indeed, focusing too narrowly on specific types of transactions may limit the flexibility of the levy to accommodate future developments, which would limit its ultimate effectiveness in addressing the tax disparity between foreign and domestic suppliers of products through an online presence. The levy would be imposed on the gross value of the goods or services provided to in-country customers and users, paid by in-country customers and users, and collected by the foreign enterprise via a simplified registration regime, or collected by a local intermediary.

305. Alternatively, if the policy priority is to tax the value considered to be directly contributed by customers and users, then a levy could be imposed on data and other contributions gathered from in-country customers and users. For that purpose, a number of options could be available. One option would be to impose a charge based on the average number of MAU in the country. As noted above, however, measuring MAU accurately may prove to be challenging. Moreover, the number of MAU of a foreign enterprise may not be directly related to in-country revenue generated by a foreign enterprise. Setting an appropriate rate for a levy measured by active users would also be challenging, as the average value of each user to a non-resident enterprise may vary widely. Another option would be to base the levy on the volume of data collected from in-country customers and users. Similar to MAU, however, data may also vary widely in value depending on its content and the purpose for which it was gathered, and it would be challenging to identify a reliable direct connection between the in-country revenue and the data collected from in-country customers and users.

7.6.4.2. Potential trade and other issues306. As is the case with the imposition of a gross-basis final withholding tax, a levy that applied only to non-resident enterprises would be likely to raise substantial questions both with respect to trade agreements and with respect to EU law. In order to address these questions, potential solutions that would ensure equal treatment of domestic and non-resident enterprises would need to be explored, as discussed above in section 7.6.3.3.


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Depending on the structure of the levy, one option that could be considered would be to impose the tax on both domestic and foreign entities. If this approach were to be taken, however, presumably consideration would also need to be given to ways to mitigate the potential impact of applying both the corporate income tax and the levy to domestic entities and foreign entities taxable under existing corporate income tax rules.

7.6.4.3. Relationship with corporate income tax307. Imposing an equalisation levy raises risks that the same income would be subject to both corporate income tax and the levy. This could arise either in the situation in which a foreign entity is subject to the levy at source and to corporate income tax in its country of residence or in the situation in which an entity is subject to both corporate income tax and the levy in the country of source. In the case of a foreign entity, for example, if the income is subject to corporate income tax in the country of residence of the enterprise, the levy would be unlikely to be creditable against that tax. To address these potential concerns, it would be necessary to structure the levy to apply only to situations in which the income would otherwise be untaxed or subject only to a very low rate of tax.

308. Another approach could be to allow a taxpayer subject to both CIT and the levy to credit the levy against its domestic corporate income tax. Such an approach would ensure that foreign entities with no nexus for corporate income tax purposes would be subject only to the levy in the source country, while the tax burden of entities subject to corporate tax would effectively be limited to the greater of the corporate income tax or the levy.

Note

1. In addition, the conclusions drawn by the TAG have not been accepted by all countries participating in the BEPS Project.

Bibliography

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Bourreau M. et al. (2015), “Digital Platforms, Advertising and Taxation”, in Taxation and the digital economy: A survey of theoretical models, France Stratégie, Paris.

Brauner Y. and Baez A. (2015), Withholding Taxes in the Service of BEPS Action 1: Address the Tax Challenges of the Digital Economy, IBFD White Papers, Amsterdam.


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Corrado C. et al. (2012), “Intangible capital and growth in advanced economies: measurement and comparative results”, IZA Discussion Paper No. 6733.

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Pellefigue J. (2015), “Transfer Pricing Economics for the Digital Economy”, in International Transfer Pricing Journal, Vol. 22, Issue 2.


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LEONARDO DE ANDRADE COSTAMestre em Direito Econômico e Financeiro, pela Harvard Law School e USP. Pós-Graduado em Contabilidade pela FGV. bacharel em Ciências Econômicas, pela Puc-RJ, bacharel em Direito, pela Puc-RJ. Auditor Fis-cal do Estado do Rio de Janeiro.


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FICHA TÉCNICA

Fundação Getulio Vargas

Carlos Ivan Simonsen LealPRESIDENTE

FGV DIREITO RIO

Joaquim FalcãoDIRETOR

Sérgio GuerraViCE-DiRETOR DE ENSiNO, PESQUiSA E PÓS-GRADUAçãO

Rodrigo ViannaViCE-DiRETOR ADMiNiSTRATiVO

Thiago Bottino do AmaralCOORDENADOR DA GRADUAçãO

André Pacheco Teixeira MendesCOORDENADOR DO NÚCLEO DE PRÁTiCA JURÍDiCA

Cristina Nacif AlvesCOORDENADORA DE ENSiNO

Marília AraújoCOORDENADORA EXECUTiVA DA GRADUAçãO

Documents

TRIBUTAÇÃO NA ERA DA INTERNET - FGV DIREITO RIOdireitorio.fgv.br/sites/direitorio.fgv.br/files/u... · A Internet e a Tributação da Renda em face da globalização 17.10.2016