The Principle of Nexus in E-Commerce Tax

The Principle of Nexus in E-Commerce Tax

James G. S. Yang (Montclair State University, USA)
DOI: 10.4018/978-1-4666-9787-4.ch025
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Introduction

According to the most recent report from the U. S. Department of Commerce, the amount of e-commerce has been increasing rapidly from a meager $35 billion in 2001 to a whopping $225 billion in 2012. It accounts for as little as 1.1% of the total retail sales in 2001 to as much as 5.2% in 2012. Its growth rate maintains steadily at an incredible 19.3% a year on the average in the past ten years. During this short period of time the e-commerce has grown from its infancy to its maturity. The annual data are shown in Table 1 (U.S. Department of Commerce, 2013).

Table 1.
Growth of E-Commerce
Amount (in Billions)As a Percent of Total Retail SalesAnnual Growth Rate
2012$2255.2%16.6%
2011$1934.6%16.9%
2010$1654.2%14.6%
2009$1443.4%1.4%
2008$1423.6%3.7%
2007$1373.4%20.2%
2006$1143.0%20.4%
2005$922.5%24.3%
2004$742.1%25.6%
2003$581.8%28.9%
2002$451.5%28.6%
2001$351.1%25.0%

Source: The United States Department of Commerce, Census Bureau, E-Commerce Survey, February 15, 2013.

Key Terms in this Chapter

Economic Nexus: Justification to collect sales tax or use tax from a remote seller by the state government on the basis that the seller has derived economic benefits from the state.

Physical Presence: Justification to collect sales tax or use tax from a buyer by the state government on the basis that the buyer is residing in the state.

Amazon Tax: Sales tax collected from Amazon.com by the state government on the basis of claiming economic nexus between the seller and the state.

Jenkins Act: A law that requires an out-of-state seller tobacco seller to collect sales tax from the buyer and remit it to the buyer’s home state.

Internet Commerce: A business transaction executed through Internet connection.

Internet Commerce Taxation: Sales tax or use tax related to a transaction executed through Internet connection.

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