The propensity of governments to want to impose opportunistic forms of taxation (and other potential burdens such as localized regulatory rules) is strong. The problem is one of ubiquitous commercial activity that touches multiple local jurisdictions, each of which might choose to say, "if it crosses our borders, we want to put our hands on it" (by taxing it, regulating it, etc.). And that problem is much compounded when the commercial activity sought to be taxed or regulated remains in a nascent state because taxing or regulating such early-stage activity is as likely to kill or seriously impair it as it is to help anyone.

The U.S. had its own history with this issue during the era when it was taking shape as a country amidst the rising industrial revolution where the several states sought to assert their individual tax/regulatory authority over multi-state commercial activities that cut across their borders. This created serious problems that were not really solved until the Interstate Commerce Clause (under the federal constitution) finally let the national authority bring order to the situation.

Today, given that the Commerce Clause has this last century been used primarily as a basis (for Congress) to justify large expansions in government's power to regulate interstate commercial activity, we forget that this Clause was used during its first century mostly to prevent governments (local and state) from interfering with such activity.

The classic case (Gibbons v. Ogden - opinion by Chief Justice John Marshall in 1824) involved the state of New York's attempt to give a steamboat monopoly to one firm within its borders, meaning that the multiple steamboat firms operating on any river that happened to cross through New York would cease having the capacity to operate lawfully as soon as their navigation path touched a New York border. The legal argument in support of New York's right to do this is summed up as follows: "[Ogden] contended New York could control river traffic within New York all the way to the border with New Jersey, that New Jersey could control river traffic within New Jersey all the way to the border with New York, leaving Congress with the power to control the traffic as it crossed the state line." (http://en.wikipedia.org/wiki/Commerce_Clause)

Of course, such a position would have led to commercial chaos, where local protectionist schemes (for taxation, regulation, etc.) could have been used in multiple ways to choke, in this case, the development of the steamboat industry and many other forms of rising commercial activity made possible by industrial development. The mercantile mindset of the prior centuries, tied to shopkeeper activity that was highly localized, was purely protectionist - "we, the local authorities, will do everything in our power to protect our local weavers (or whomever) from outside influences." That mindset actually made sense in the era when most people's livelihood derived from an agrarian economy, when industry was barely formed, and when whatever industry or commerce did exist was purely local - in such an era, each local governing jurisdiction was its own little fiefdom and could further or impede commerce pretty much as it liked with only its local citizens feeling the impact. Such thinking made no sense for an industrialized society unless the broader society were content to watch a limiting or crippling of modern forms of commercial activity in favor of an endless array of localized interests that sought to protect themselves at the expense of the development of the whole. And that is why, at least in the U.S., the old mercantile forms of thinking largely fell away and the country went on a trajectory of unprecedented commercial growth throughout the 1800s and beyond.

Of course, state and local governments need the power to tax and regulate. The key to the new thinking was that they could not impose discriminatory forms of regulation or taxation that unduly burdened interstate commerce. This laid a foundation where we today take the basic principles for granted and do not even think about them (for example, we would regard it as laughable for, say, the state of New York today to try to say, e.g., that Bing has an exclusive monopoly to conduct web-based search services on transactions affecting residents within its borders).

So we today have a tension between the legitimate right of state and local governments to tax and regulate activities within their borders, on the one hand, and the outer bound on that activity (mostly through the Interstate Commerce Clause) preventing taxation/regulation that is discriminatory and unduly burdensome on interstate commerce. That tension is not always easily resolved, however, as the lines are often blurry on whether what the local governments are doing falls within one category or the other.

Concerning the Internet, therefore, Congress passed a moratorium back in 1997 on any form of discriminatory taxation on e-commerce activity by state or local governments and the thinking behind this was precisely that the U.S. government did not want to see a young industry choked off or devoured by a bunch of rapacious local jurisdictions trying to get their hands on it for their own local purposes.

The situation with France today wanting to impose discriminatory taxes in favor of its local interests raises parallel issues to those dealt with by the U.S. as described above. And the fate of e-commerce activity will ultimately depend on whether a rational system can be put in place to prevent such activity from unduly interfering with it while still allowing the various jurisdictions affected by it a reasonable scope to regulate/tax in a way that is not discriminatory and unduly burdensome.

When it comes to national sovereignty, however, there is no check on discriminatory activity at the macro level comparable to the U.S. Commerce Clause and it is possible (indeed probable) that many countries such as France will seek to impose old mercantile forms of thinking on modern e-commerce that could potentially seriously harm such activity.

Don't know what the solution may be. But these are the key issues and the stakes are pretty high.