Question

Some argue that if online retailers are required to collect and pay sales taxes im jirisdictions in which they have no physical presence, they have no democratic way to fight high taxes in those places. Is this an instance of taxtation without representation? Discuss.

Answer 1

Taxation without representation is term that is used to describe a situation in which the taxing authority impose tax but fail to provide any political voice through the elected representatives. In e-commerce world it is used to describe a situation in which an e commerce is being taxed in state which it does not have physical presence. In the past the ruling courts have stated that a state could require only businesses with a physical presence in the state to comply with the state tax laws. Recently, Amazon offered a deal to the Texas that in exchange for 300-Million- dollar investment in creating different distribution center and creating 5000 jobs, there would be no sales tax collection. The point here although to consider is that although some business operating on Internet might not have a physical business presence but revenues through the Internet can not be completely tax free because then people starts to manipulate this process to avoid the taxes. There has to be some level of taxation to create a level playing field for local retailers.