This article is designed to give the reader a balanced perspective on some of the issues surrounding the current discussions related to state and local taxation of Internet access fees and sales transactions. It attempts to express the issues being discussed and presents several viewpoints. The proponents of Internet taxation are searching for technological and administrative system to meet their goal. After much deliberation, the Advisory Commission on Electronic Commerce released its final recommendations to Congress in April 2000. Major emphasis is being placed on simplification, neutrality, avoiding double taxation and accepting the existing tax rules with no new taxes. The United States economy has benefited tremendously by e-commerce. This escalation has created numerous highly skilled jobs, providing the consumer with goods and services at competitive prices. The Internet Tax Fairness Coalition and many other groups feel that implementing taxes on the Internet transaction can have an adverse affect on the businesses. According to the Supreme Court of United States, a vendor has a sales tax obligation only when the buyer and seller are in the same state or has a physical presence (nexus) in the buyer’s state. These coalitions feel that entry barriers for new and old companies, who have yet to exploit the e-commerce, will slow the growth in this sector. With over 30,000 taxing jurisdictions, tax collection and payment can be a complex process. Many street retailers collect at a single rate, and prepare and file a single tax return at one place. Taxation of online transactions would require the vendor to identify and send forms to all taxing jurisdictions. Under the present circumstances, the ever-changing maze of state and local tax policies makes application of a single Internet transaction tax policy virtually impossible. The complicated, complex and ever changing maze of state and local tax policies and laws make application of a sensible, fair and easily understood Internet transaction tax policy virtually impossible under the present circumstances. James Plummer, a policy analyst at Consumer Alert wrote, “Nefarious new taxes and regulations will kill many new start-up e-businesses before they even start up; denying consumers their chance to find the specialized products and services for their needs” (Plummer, 2000). The anti-tax community and coalitions have a strong adversary in the National Governor’s Association. The State is worried that the brick and mortar stores are jeopardized by the popularization of Internet commerce, which is taxfree. The Governors suggest that government tax policy offers a competitive advantage to Internet stores. Major brick and mortar retailers such as Sears and Wal-Mart are concerned that if unresolved, this issue may gain much public resistance, thus making the taxing of e-commerce politically impossible.
A decade ago, IT — through its innovations in business process reengineering — led the way in breaking down the inefficiencies within companies. Firms in the new millennium now face relentless pressure to perform better, faster, cheaper, while maintaining a high level of guaranteed results. Firms must thus focus on their core competencies and outsource all other activities. Working with a partner, however, requires breaking down the inefficiencies between organizations and coping with frequent change across the entire end-to-end value chain. In this new world of collaborative commerce and collaborative souring, a standard business process is simply inadequate. Using e-contracts to build new business relationships and to fulfill e-contracts through the Internet are important trends. E-contracting is however not a new concept. The history of e-contracting can be reviewed from legal and technology aspects.
Over the last 20 years or so, a growing body of research in artificial intelligence has focused on the representation of legislation and regulations (Sergor, 1991). As specific regulations, contracts are used to regulate the actions of two- or multi-party interactions. Gardner (1987) has developed contract formation rules. Her work concerns legislation about the nature of exchanges that lead to contractual relations. The ALDUS project and Legal Expert project investigated drafting the Sale Goods contract (ALDUS, 1992) and the United Nations Convention on contracts for the international sale of goods (Yoshino 1997, 1998), respectively. Detailed information on developing logic-based tools for the analysis and representation of legal contracts can be found in Daskalopulu (1997, 1999).
The law regards contracts as collections of obligations; research in this area includes automated inference methods, which are intended to facilitate application of the theory to the analysis of practical problems. The purpose of a legal e-contracting system is to clarify and expand an incomplete and imprecise statement of requirements into a precise formal specification.
In the early 1990s, the development of EDI (electronic data interchange) was a significant movement for electronic commerce. EDI was considered a term that refers solely to electronic transactions and contracts (Justice Canada, 1995). EDI requires an agreement between trading partners that not only dictates a standard data format for their computer-to-computer communications, but also governs all related legal issues of EDI usage. In 1987, the first set of EDI rules was named the Uniform Rules of Conduct for Interchange of Trade Data by Teletransmission (UNCID, 1987). In 1990, the American Bar Association (ABA) published a Model Trading Partner Agreement and Commentary, together with an explanatory report (Winn & Wright, 2001). In 2000 IBM submitted to OASIS (for standardization) the first example of an XML-based EDI TPA language, called Trading Partner Agreement Markup Language (tpaML).
While the EDI standard introduced efficient communication channels between companies, its implementation was not widely accepted due to its high installation costs, lack of flexibility, and technological limitations (Raman, 1996). With the development of the Internet, electronic contracting began to be interpreted in broader terms. In this new view, an e-contract is not only used as a legally binding agreement between a buyer and seller, but it can also used across different workflow systems to cross different organizational business processes (Koetsier, Grefen, & Vonk, 1999; Kafeza, Chiu, & Kafeza, 2001; Cheung, Chiu & Till, 2002) to integrate different Web services (Cheung et al., 2002, 2003). E-contracting has become synonymous with business integration over electronic networks.