The Electronic Commerce In the US - Case Study Example

The emergence of the internet has brought various changes in almost every field of daily life. The usage of the internet is growing rapidly. The internet is not only a resourceful medium for communications and entertainment, but it has proven itself a prospective channel for the sale of goods and services. This potentiality has been recognized by many businesses, both large and small, which are now using the internet as an appropriate place for conducting commerce and accordingly marketing plans are being drawn. According to the Association of National Advertisers, nearly 44 percent of the U.S. companies are selling their products or services online. Since this is a new medium for commerce and as the global marketing of goods or services is growing enormously, there is a need for redrafting the legal environment suitably. The legitimate revenues to the governments were previously realized through taxes on sales, as applicable under the standard law. This new face of marketing which is termed electronic commerce has once again highlighted the need for creating new laws to safeguard the interests of the customers as well as the manufacturers and revamping the source for taxes to be levied. The changes, which result from electronic commerce and related technology offer significant benefits to business, consumers and government. They increase convenience, efficiency and productivity and reduce costs. It is important to look forward to the changes and how they will influence the current tax laws as they relate to maintaining consistent revenue flows and taxpayer equity. In the U.S., the emergence of the electronic commerce has left a prominent impact on the telecommunication, information and computer sectors, advertising, publishing and media industries. The issues brought forth by the electronic commerce, which relate to sales tax and use tax, have attracted the attention of the federal, state and local governments. Promoting the growth of internet commerce is inevitable because of its potential in generating revenues and jobs and increasing productivity. However, the state and local governments are dependent on a consistent inflow of revenues to maintain essential services. Sales and use tax account for 36.7 percent of overall tax revenues. There is a need for a cooperative and simplified sales and use tax system to provide for efficient and equitable taxation of interstate commerce. The Internet Tax Freedom Act created the Advisory Commission on Electronic Commerce and this commission recommended that while the internet should not be taxed more than other channels, it should not permit the avoidance of tax. The remote vendors argued that imposition of sales tax collection responsibilities in all of the thousands of the taxing jurisdictions in the U.S. would create an unacceptable burden (Pennsylvania Department of Revenue, September 22, 1999). The doctrine of sovereign immunity, in international law, permits a court to give up its jurisdictional rights in respect of foreign enterprises or countries. This doctrine has as its bases the traditional notions that a sovereign should not be subject to litigation in a foreign court. The result is that, investors may be unable to obtain relief in their country's legal system. In some countries, this doctrine's application to commerce has been limited. While, contracting with a private party if a foreign nation does not allow itself to be subject to the local laws, then recourse to U.S. courts in case of breach is not possible. The Foreign Sovereign Immunities Act provides a uniform rule for the determining sovereign immunity in respect of legal actions in the US courts. The provisions of the Act are that under international law, countries fall under the jurisdiction of foreign courts in their commercial activities, and that their commercial property can be appropriated to satisfy the judgments in connection with their commercial activities. Business with foreign partners can result in problems that are not encountered in domestic business. Issues of jurisdiction, effect of statutes and treaties, the ability to obtain a judgment and the realization judgmental decrees constitute major apprehensions. In contrast to the domestic market, the international market additionally involves financial, political, and regulatory risks. These risks are caused by the differences in currencies, language, business customs, legal and social philosophies and national economic goals. International trade law is based on the laws of the individual countries, the laws that are created due to trade agreements between different countries and due to the rules enacted by worldwide or regional trade organizations. In order to reduce trade barriers, most nations participated in the General Agreement on Tariffs and Trade or the GATT. This resulted in the formation of the World Trade Organization, which attempts to resolve such trade disputes. Import restrictions consist of import license requirements, import quotas, safety standards, government procurement policies and customs procedures. In order to standardize tariff schedules and their application, most countries have adopted the harmonized tariff schedule to classify goods. The United States imposes prohibitions on the export of certain technologies that could be used by hostile nations or terrorists. The export of weapons and computers is monitored by the government. Examples of common international business arrangements are wholly owned subsidiaries, joint ventures, licensing agreements, franchise agreements and contract manufacturing. The Foreign Corrupt Practices Act (FCPA) forbids U.S. companies and their agents from bribing foreign officials and makes it a criminal offense. This act makes it mandatory for U.S. companies to establish mechanisms, which prevent such bribery. In international contracts, a business has to take cognizance of the differences that exist in business customs, attitudes toward the contractual relationship and the language involved and in this context, some of the important considerations to be borne in mind are the payment, choice of language, force majeure, forum selection and choice-of-law clauses. Business in a foreign country is subject to the risk caused by political change, unstable monetary systems, drastic legal changes and problems posed in doing business with a developing country. Losses may be incurred due to nationalization, expropriation, or confiscation of the foreign investment. Sometimes, disputes arise in respect of the performance of contracts, although most international trade is dispute free. Such dispute resolution is assisted by the various national and international institutions such as the country court systems and arbitration. On occasion, the doctrine of sovereign immunity hinders recovery through the judicial system (The Legal Environment of Business, 2006). Though government cannot exercise its authority in another country, all the same it can exercise its authority if a foreigner contracts with consumers in its jurisdiction. References Pennsylvania Department of Revenue, September 22, 1999, The Impact of Electronic Commerce On Pennsylvania Sales and Use Tax The Legal Environment of Business, 2006, The International Legal Environment of Business Read More