The sale of goods and services that are ordered electronically and delivered physically and the sale of digital products that are ordered and delivered electronically. This article will highlight the sales of digital products ordered electronically and delivered electronically . Electronic commerce could raise many questions as to whether a foreign seller has a sufficient level of business activity in a state to justify source-based jurisdiction over its income. Most tax treaties employ the concept of permanent establishment to determine whether a state has source-based jurisdiction over a foreign seller's income. Permanent establishment typically requires a higher level of physical presence or a greater number of activities before a state has source-based jurisdiction over income.
Electronic commerce raises many questions relating to the concept of permanent establishment .
States generally assert residence-based jurisdiction over income earned in other states if the taxpayer has a strong enough connection to the state. For example, a state could assert residence-based jurisdiction over a corporation that has its headquarters in that state and makes most of its management decisions from that state. Generally value added taxes are imposed on the provision of services where the services are performed. However, some VAT systems do not require a foreign service provider to register and charge VAT for services provided to individuals who reside in the tax jurisdiction. Goods , on the other hand, are nearly always subject to VAT in the jurisdiction where the goods are used or consumed.