EU Tax on Digitally Delivered E-Commerce (CRS Report for Congress)
| Release Date |
April 7, 2005 |
| Report Number |
RS21596 |
| Report Type |
Report |
| Authors |
Martin A. Weiss, Foreign Affairs, Defense, and Trade Division; and Nonna A. Noto, Government and Finance Division |
| Source Agency |
Congressional Research Service |
Summary:
On July 1, 2003, the European Union (EU) began requiring U.S. and other non-EUfirms to pay value added tax (VAT) on the sale of goods and services digitally deliveredto individual customers in the EU. The tax rules apply to the supply over electronicnetworks (digital delivery) of software and computer services generally, plus a widearray of information services. U.S. and other non-EU firms are required to register inone EU country but pay the VAT at the rate applicable in each customer's country. Incontrast, EU firms pay tax at the single rate of the country in which they are located.EU taxation of digital transactions raises several policy questions for the UnitedStates. These include the taxation of digital commerce, unequal taxation of EU versusnon-EU firms, high tax compliance costs, EU competition with the Organization forEconomic Cooperation and Development's (OECD's) multilateral discussions of thetaxation of e-commerce, and the possibility of a complaint to the World TradeOrganization (WTO). The issue of requiring a foreign firm to collect tax on sales atmultiple rates depending on the customer's country of residence is similar to thedomestic issue, raised in connection with the Internet tax moratorium, of possiblyrequiring U.S. sellers to collect tax on interstate sales based on the tax in the customer'sstate of residence.
