Taxation Resources on Port 80: Shoreline: issues

As expected, California Gov. Gray Davis vetoed a bill that would have tacked a 7.25% tax onto Internet sales by merchants who also have brick-and-mortar operations in the state. Davis had made no secret of being "philosophically opposed to Internet taxes," and last year vetoed a similar bill. ...

Davis also signed a bill that creates a California Commission on Tax Policy in the New Economy to further study the taxation issue and develop a long-term strategy.

before September 25, 2000

electronic currency

"The technology behind the various digital cash options varies from use of scrip to smart cards to electronic cash that's stored in a "wallet" on your system's hard drive. These options are all based on the same economic proposition: Credit cards are fine for a lot of Web transactions, but for purchases that are less than $10 they are too costly for vendors to process.

The advantage of digital cash for businesses is fairly straightforward: It's an economical way for online merchants to charge for low-cost items, such as a single news article or a one-time visit to a premium Web site. The benefits to consumers are far less clear, however, particularly in light of the high-quality news and information that is already available online free of charge. DigiCash's Ecash or CyberCash's CyberCoin are the two currencies currently available. The company Digital has signed up 68 merchants for its launch of the MilliCent. The idea is to get as many wallets on consumer computers as possible, and then allow people to try out all of the new content free of charge. Once these consumers become hooked on the content, they will be willing to spend real money when the trial ends. That's the theory, at least. But MilliCent isn't without competitors. Besides CyberCoin and Ecash, both Visa and Mondex International (backed by MasterCard) are experimenting with smart cards for online payments that use smart-card readers. These devices pop into a computer's floppy drive just like a standard floppy disk, and the smart card would, in turn, be inserted into these readers. Digital believes that merchants will pay consumers in MilliCent for viewing new portions of their Web site or for filling out online marketing surveys.

But until technical kinks are ironed out and the benefit to consumers becomes obvious, digital cash will not be widely deployed. ATM cards were around for roughly 25 years before their use became commonplace."

This site featured an article called Digital Cash and Monetary Freedom by Matonis, Jon W. This paper describes the differences between mere encrypted credit card
schemes and true digital cash.

"The nine key elements of an electronic, digital cash are outlined and a tenth element is proposed which would embody digital cash with a non-political unit of value. It is this final element of true digital cash which represents monetary freedom - the freedom to establish and trade negotiable instruments. Key elements of a private digital cash system:

Secure (a should be able to pass digital cash to b w/o either of them or anyone else altering or reproducing the unit)

Anonymous (Beyond encryption, this optional untraceability feature of digital cash promises to be one of the major points of competition as well as controversy between the various providers [7]. Transactional privacy will also be at the heart of the government's attack on digital cash because it is that feature which will most likely render current
legal tender irrelevant)

Portable (physical independence) (. Digital wealth should not be restricted to a unique, proprietary computer network)

Two-way (unrestricted) (Essentially, peer-to-peer payments are possible
without either party required to attain registered merchant status as
with today's card-based systems)

Off-line capable (meaning that neither is required to be host-connected
in order to process)

Divisible (fungible) (A digital cash token in a given amount can be
subdivided into smaller pieces of cash in smaller amounts. The cash must
be fungible so that reasonable portions of change can be made)

Wide acceptability (trust) ( With several digital cash providers
displaying wide acceptability, one should be able to use their preferred
unit in more than just a restricted local setting)

User-friendly (simple) (from both the spending perspective and the
receiving perspective. Simplicity leads to mass use and mass use leads
to wide acceptability)

Unit-of-value freedom (The theme of this paper: the digital cash is
denominated in market-determined, non-political monetary units. People
should be able to issue on-political digital cash denominated in any
defined unit which competes with governmental-unit digital cash)

Suggestions for monetary backing include equity mutual funds, commodity funds, precious metals, real estate, universal merchandise and/or services, and even other units of digital cash. This will undoubtedly develop into a main basis for competition among digital cash providers as each one promotes their underlying currency backing as the strongest and most reliable. Unlike today's national monetary systems, the benefits of a strong currency will be immediately noticeable within a country's borders. With multiple monetary unit providers, domestic prices will adjust rapidly to reflect relative values of monetary units and the holders of stronger currencies will benefit.

True digital cash as an enabling mechanism for electronic commerce depends upon the marriage of economics and cryptography. There must be a synergy between the field of economics which emphasizes that the market will dictate the best monetary unit of value and cryptography which enhances individual privacy and security to the point of choosing
between several monetary providers.

Resources

http://dcinternet.com/news/article/0,1934,2102_274411,00.html
http://www.boardwatch.com/mag/200/jan/bwm2pg2.html
http://webdeveloper.internet.com/refresh_111299.html

The first article entitled Slow Going for Internet Sales on 9/29/99, stated that Donald Borut, executive director of National League of Cities argued strongly in favor of state and local taxes for commercial businesses done over the internet. The current retail sales tax is the largest source of state tax revenue and a major part of local government revenue.

The Internet Tax Freedom Act was discussed in an article conducted on October 21,1998, The article stated that the freedom act is based on the simple principle, information should not be taxed. There is currently a 3 year moratorium on internet taxation. The tax freedom act has undergone a number of changes since its introduction in March 1997. The legislation has been altered to reflect state and local concerns and now reflects a balanced compromised between the national interest in protecting the marketplace.

The article entitled Rumors Tax the Net was an article on the warning that internet taxation is coming soon. The article stated that many will ignore the warning, but taxation of the internet is coming. The article referred to articles from the Washington Times, to read more information about internet taxtation.

Another article was in reference to Networks Solutions Inc. (NSI). A few years ago, the federal district court found the $30.00 fee that NSI collected for the registration of the domain names, and illegal tax. The problem was NSI had been collecting the fee for some time which had amounted to a lot of money that had been placed in a trust fund. The courts pressed their claim during an appeal that NSI was a monopoly.

The article The Tax Man Cometh 10/13/99, was an article in reference to internet telephone service providers. The author stated that they should be paying some type of taxes due to the fact that they are a telephone service provider. They should pay state taxes because if they become required to pay taxes, including back taxes on their services, they can end up paying quite a lot of money in the future.

The last article, entitled Tax Internet, Mail and Telephone Sales Alike was in reference to a survey conducted on how consumers feel about internet taxation. Most Americans oppose paying taxes on internet purchases, but found that very few shoppers purchase on-line to avoid paying taxes and there is no evidence that the collection of internet sales taxes deters most consumers from purchasing on-line. Many oppose taxes but if they have to pay them, many believe it should be taxes the same way as mail and telephone sales orders.

best bet

First Monday articles

Digital Money, Liquidity, and Monetary Policy
by Aleksander Berentsen

Electronic Cash and Monetary Policy
by Mark Bernkopf

Electronic Purses, Interoperability, and the Internet
by Leo Van Hove

Questions for taxation panel discussion?

What is your opinion about introducing tax on e-commerce at the end of
the period of internet taxation moratorium?

If you are on taxation side, what kind of taxes do you think to be imposed?

If you do not agree with the above, how do you think compensate the
government's lost revenues?

They say that in order to collect tax revenues on the cyber-commerce a
totally new tax system would be needed to substitute for the current
one. How could it be realized?


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modified: September 27, 2000 by Douglas Anderson http://RicciStreet.net/port80/shoreline/taxationresources.htm

Taxation Resources

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October 26

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before September 25, 2000

electronic currency

Resources

best bet

First Monday articles