Consider this scenario: I order a pair of Air Jordans from Nike while visiting family in New Delhi, India. I want the shoes delivered to my home in New York from the Nike factory in Manila, Philippines. Thanks to e-commerce on the Web, it takes me three minutes to buy my shoes. It’s that simple for me, the buyer. But is it that simple for Nike, Inc., the shipper?
Most countries have a tax on the sale of goods. To determine who got the better end of the e-deal, we must keep in mind that within each country, each state, city and district or local government may have its own variation of this tax. Consider this: New Delhi has a city and a state tax, and the country of India has a value-added tax and a special excise duty on the import of sports shoes. But — lucky me, I happened to order the shoes during Diwali, a national festival, where the State of Delhi has declared a half-tax week; Manila may decide that it will increase its taxes on export of shoes by 1.5 percent from November 3, the date the shoes have to be shipped; the Postal Department in New York may have levied special taxes on international packages arriving in the city for the next year to generate much needed additional revenues. Furthermore, the Upper West side of Manhattan may have recently enacted a local “use” tax applicable only in the few block district where I live. Add to this the fact that our sales clerk, who works part-time from his home in Dayton, Ohio copying orders from on-line to paper, is situated in a special zoning district that levies a special tax on people working from home.

Things were relatively easy when a local store sold goods to local consumers; there was only one set of laws to follow. What do e-businesses, who have neither the time nor the finances to track all the various permutations and combinations of laws spanning across the globe, do to comply with sales taxes worldwide?

Currently, sales taxes vary from each state in the country, to each nation in the world. They vary in the percentage that is taxed, the goods that are taxed and on how goods and services are taxed. They vary, additionally, on who collects the taxes. The same city may have different taxes — or no taxes — on the same item at different times in the year. If the same transaction is done over the Web, how do e-businesses know what items to tax, in which state, and at what time?

The US Department of Commerce believes that the number of Internet users and the number of Web pages both double every 100 days. With the explosion in e-commerce arises the issue of taxation of goods and services sold by e-businesses. After all, sale of goods and services has always been taxed by governments worldwide. If there is no taxation, governments will lose billions of dollars in revenue.