Subject: RE: "A Riddle at the Register"

From: "Smith, Chris" <[email-masked]>
Date: Tue, 6 Apr 1999 19:06:00 -0400

OK, maybe meat and ice cream aren't good examples - but I can see 
bottled water being sold over the Internet. It doesn't go stale, it 
doesn't need to be kept cold, and you might want to order special water 
from a remote location.

   The 'break point' is 500 mL. (millilitres)

   The defining characteristic is 'manufacturer packaging'.

So:

   1 x 600 mL bottle is tax free.
   1 x 300 mL bottle is taxed.

   A prepackaged box of 6 x 300 mL bottles (1800mL) is tax free.

   A 'merchant packed' box of 6 x 300 mL bottles (1800mL) is taxed.

   If the merchant opens the prepackaged box of 6 (tax free) and
   places the individual bottles in his own box, it is now taxed. (!)

Trust me - we don't get out of this issue by claiming it just won't 
happen.
 
However, I think we can get out of it by simply making clear that it is 
not the job of the merchant (and, by extension, IOTP) to explain the tax 
rules to the consumer. In fact, only whoever calculates the tax needs to 
understand the rules. 

The merchant just has to have *some* mechanism to get the tax correct. 
He does not *have* to understand the rules. (That is one way to do it, 
but it's not clear that it's the best one in a multi-jurisdictional/ 
multi-tax environment.)

More to the point, I don't think that IOTP is going to fill such a role. 
I think all we clearly need to do is indicate some fundamental aspects 
of any tax paid:

1) The jurisdiction (which may be a hierarchial description)
   "Geographical" "CA" "ON"    Canada.Ontario

2) Which tax within that jurisdiction.
   "PST"        Provincal Sales Tax

3) How much is this tax
   "0.80" "CAD" An amount and currency

4) An indication as to who has the money now, such as a nerchant tax number.
   "1002383404"

5) Optionally - a note regarding the tax, suitable for one line display
   "Ontario PST - 8%"

This can be repeated for any additional taxes. (Airline tickets often
provide a 
really complicated example.)

I do not see any requirement that an IOTP message provide all the
information 
needed to allow any party (merchant or consumer) to re-do the detailed tax 
calculation. There certainly is no such requirement in the real world of 
commerce. Anyone who wants to redo the tax calculation would normally have
to 
take responsibility for finding and learning the relevant tax rules.

...Chris Smith
   Royal Bank of Canada

______________________________ Reply Separator
_________________________________
Subject: RE: "A Riddle at the Register"
Author:  "David Burdett" [SMTP:[email-masked]] at Internet
Date:    1999-04-06 13:57

Mark provides some interesting examples of bizarre tax rules that currently 
exist. But if you look at them closely, I can't honestly seem many of the 
products Mark suggests being sold over the Internet to out of state 
customers, for example:
*     heated frozen food would be inedible and unsafe to eat 
*     a cold meat sandwich would be stale
*     the ice cream cone would have melted

To do physical delivery takes time which will help remove from the equation 
a whole variety of food related products from Internet commerce.

However I agree with Mark that collecing "out of state" (or even "out of 
country" !! ) tax is not a simple thing to do and will require effective 
ways of communicating the necessary "tax rules" from those that set them to 
those that need to apply them - perhaps the Internet could be used for this.

I also think that a simplification of the rules themselves will probably be 
required ... and that will take a lot of talking ...

David
-----------------------------------------------------------------------
Message addressed to: [email-masked]
Archive available at: http://www.elistx.com/archives/ietf-trade/
To (un)subscribe send a message with "subscribe" or "unsubscribe" in the
body to: [email-masked]

---

From: "Richard D. Brown" <[email-masked]>
Date: Wed, 7 Apr 1999 11:25:14 -0500

I do not think that IOTP problem is about "how tax is being computed or how
difficult it will be to compute such tax." Supposedly, as the legislators
will define the rules, some technology providers will package adequate
engines to perform such cumbersome calculations.

The real problem is that some tax computation might require pieces of
information beyond the ones directly available to the Seller (i.e
characteristics of the goods being sold and tax juridiction of the Seller).
Among others, tax computation may require the location of the Buyer at time
of purchase, the permanent tax juridiction of the Buyer, the type of the
Buyer (Corporate vs. Consumer), etc... Therefore, the real problem will
consist of providing securely these pieces of information to the Seller.

There are two other aspects that the legislators may want to consider if
electronic commerce transactions were to be taxed. The first one is to
provide an audit trail of the tax collected by the Seller (to make sure they
are properly reversed to the tax agencies). This would be something like
these huge rolls of paper in the cash registers. To this purpose, IOTP and
other trade protocols may have to provide for a tax item in the description
of the Order. The second aspect will be how to provide adequate feedback to
the Buyer so that he can understand why and for what he is being taxed. As a
consumer, I may agree to pay tax (if so defined by law), but I want to make
sure that I have been charged appropriately. I do not want the tax item to
become an equivalent to "shipping and handling" in those cheap TV adds - a
means for the Seller to recoup part of an appealing discount for example.

Sincerely,

Richard D. Brown
Software Architect - R&D
GlobeSet, Inc. Austin TX - U.S.

> -----Original Message-----
> From: [email-masked]
> [mailto:[email-masked]]On Behalf Of Smith, Chris
> Sent: Tuesday, April 06, 1999 6:06 PM
> To: Ietf Trade WG; David Burdett