Taxes! (Eeew)

Death and Taxes are inevitable, they say. A good question to ask is, "How do we determine the tax situs of electronic transactions?" It's another way of asking, "Who gets to tax my purchases on amazon.com?"

Our E-Commerce law goes straight to the point with Section 23, paragraph one:

"Unless otherwise agreed between the originator and the addressee, an electronic data message or electronic document is deemed to be dispatched at the place where the originator has its place of business and received at the place where the addressee has its place of business. This rule shall apply even if the originator or addressee had used a laptop or other portable device to transmit or receive his electronic data message or electronic document. This rule shall also apply to determine the tax situs of such transaction."

The first sentence tells us that the electronic document is dispatched and received in the respective places of business of the originator and addressee. This rule applies regardless of where or how the transmission is made.

There is a pandora's box in the words, "unless otherwise agreed between..", because it seems to allow the parties to determine who taxes the transactions by stipulating where the transactions take place. What are the solutions? Well, perhaps judicial review, based on the civil code prohibition on stipulations that contravene law, morals, public order and public policy. But that would be a difficult remedy to avail of, since contracts do not usually have parties or privies who would contest their own stipulations. The best solution is to change the law to make tax situs unchanged by these stipulations.

Based on what we've discussed, here is my take on the rule on tax situs:

1. If the parties do not stipulate as to where a message is dispatched or received, the message is dispatched and received in the respective places of business of the originator and addressee. The transaction thus takes place in those areas, and will be taxed accordingly. Basis: Sentence One, Section 23

2. If the parties stipulate as to the place of dispatch and receipt, the stipulation controls (subject, theoretically, to judicial review). Basis: Sentence One, Section 23, and the civil code.

Section 23 should be amended to make tax situs unaffected by stipulations as to the dispatch and receipt of electronic documents.