International tax management for e-commerce

The term electronic commerce (e-commerce) refers to a business model that allows companies and individuals to buy and sell goods and services through the Internet.

The internet is so big where a wide range of products can be stored, and there is no limit to how they are purchased. Many companies are turning to social media channels, such as Facebook and Instagram, to target specific customers and promote certain products.

Based on the knowledge we have about e-commerce, in a nutshell, I am going to mention how many types of e-commerce there are, starting from a simple example that might be known to you:

There are three main types of e-commerce:

-Business-to-business (sites such as Shopify),
-Business-to-consumer (sites such as Amazon) and
-Customer-to-customer (sites such as eBay).

Without further ado I will continue to inform you about one of the most important parts of International E-Commerce – Tax Management: e-commerce technology makes it relatively easy for computer servers in a country to sell products and services in another jurisdiction, and thus companies that use e-commerce for sales transactions are perceived to have greater flexibility in shifting revenue and consequently in their tax planning.

We begin to address the question of whether multinational corporations use the opportunities created by e-commerce to reduce income taxes, and in particular whether those multinational corporations that use e-commerce are largely cutting taxes by shifting revenue between jurisdictions. The particular mechanism we explore for revenue shifting is the use of e-commerce to facilitate export sales.

When Internet businesses first entered the mainstream in the 1990s, few people were able to predict the transformative impact that e-commerce would have on the U.S. economy. In 1999, total online retail sales in the United States reached about $ 15 billion, or approximately half of one percent of nationwide retail sales.

By 2016, this digit had grown to over $ 389 billion, with e-commerce accounting for eight percent of total retail sales. This kind of growth is almost unprecedented in U.S. economic history, and lawmakers have worked to develop rules for the e-commerce industry that ensure both continuous development and effective regulation of this increasingly important market.

This is especially true in the development of e-commerce tax laws, which have recently shifted the focus from facilitating growth in e-commerce markets to ensuring that online businesses contribute their fair share of the public coffers.

This module explains how e-commerce activities are taxed. The discussion begins with how e-commerce taxes were raised in an environment created to protect this thriving industry from unnecessary financial and regulatory burdens.

The analysis then highlights recent developments in e-commerce taxation that have changed national policy. These developments will affect online businesses. The module closes with a discussion of tax issues related to ordinary business activity across e-commerce, including online auctions, credit card third-party payment network transactions, and virtual currency, or “crypto” activities.

If you want to know more about e-commerce development platforms or apps, read our blog posts for Shopify and Shopware. Our dedicated outsourcing team can be your collaborator in ecommerce.