The Texas Comptroller of Public Accounts has recently determined that electronically downloaded software licensed by a Utah corporation to Texas customers constituted physical presence in Texas sufficient to establish sales and use tax nexus. According to the decision, nexus was established because the software was characterized as tangible personal property and the Utah corporation retained all property rights in the software, which was physically present and generating revenue in Texas. The Comptroller upheld an Administrative Law Judge (ALJ) determination that the corporation had an obligation to charge and collect use tax from customers, and denied refund claims of sales tax paid and an interest waiver. [201409970H; SOAH Docket No. 304-13-5657.26; CPA Hearing No. 106,632, Texas Comptroller of Public Accounts (9/19/2014)]
Fifteen years ago, in the heyday of the e-business boom, Internet promised to change industries and business models very quickly, first of all in the retail sector. When these promised changes did not realise that quick, it resulted in the burst of the dot-com bubble.
However, even if change took longer than expected, now it is already part of our lives and not only in the developed countries, but all around the world. New online business models have a disruptive effect on long established businesses, as the fate of firms, such as Blockbuster, Borders and quite recently, RadioShack shows.
In Iceland the reduced VAT rate applicable to e-books and electronically published music increased from 7% to 11% as of 1 January 2015. Therefore, it must be ensured that you account for VAT on such sales at the appropriate rates. You can access further information of the overall Icelandic tax rules in 2015 here.
2015 seems to start with book related VAT news in the EU. After the ECJ’s judgment in the K Oy case (C-219/13) which we previously discussed, the Finnish Supreme Administrative Court (“SAC”) delivered its ruling at the end of December. The SAC held that the standard Finnish VAT rate (currently 24%) applies to books on other physical means of support such as a CD, CD-ROM or memory stick.The ECJ left it to the national courts to decide whether fiscal neutrality (i.e. the same VAT treatment) is applicable to printed books and books published on other physical means. Even though the ECJ judgment also appreciated that this can also be impacted by the level of penetration of new technologies in the various EU Member States.
The SAC followed the argumentation of the ECJ and held that books on other physical means of support are not similar to printed books. According to the Finnish court the other physical means do not satisfy the same needs of the average consumer and therefore they cannot be subject to the reduced VAT rate. The SAC argues that books on physical means of support have a closer link to e-books downloadable from the internet, to which reduced VAT rates cannot be applied based on the EU legislation. As a result the SAC concluded that the different VAT treatment of printed books and books on other physical means of support does not offend the principle of fiscal neutrality.
The Italian Parliament passed the 2015 Finance Law on 22 December, which applies the 4% VAT rate to e-books as of 1 January 2015. According to the legislation any publication that is identified by an ISBN code (International Standard Book Number) and transmitted through any physical or electronic means, should be considered as a book and as a result subject to the 4% reduced VAT rate.
The Czech Republic is going to introduce a new VAT rate into its VAT legislation with effect from 1 January 2015.
On 6 November, the president of the Czech Republic signed the amendment to the current VAT law introducing a VAT rate of 10% from 1 January 2015. As a result of this, the Czech VAT law will have two reduced VAT rates.
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The Czech virtual currency, Czech Crown Coin (officially named by the authors “CZC”) which started the distribution of the pre-mined CZC in August 2014, is distributing a next set of 100,000 CZC to the first 1,000 EU based individuals who have registered and obtained the so called “myID” via the official website of CZC. This should increase the amount of CZC in the circulation as well as to support its usage and importance on the global level.
Earlier this week the Hungarian government submitted its proposed tax bill for 2015. One of the most interesting changes is the proposed introduction of the “Internet tax” that will be imposed on Internet service providers at a rate of HUF 150 (approx. USD 0.60) for every gigabyte of data or part thereof. By way of example, downloading a movie in HD quality (8.5 GB) would attract a tax charge of approx. USD 5 or the download of a 6GB game would have an additional cost of approx. USD 4 according to the original version of the proposal. You may expect that providers will try to recharge this cost to their customers, which makes surfing even more expensive.
Japan’s current JCT regime was established in 1989 – before the rise of the digital economy. Accordingly, the taxation of B2C supply of eservices by non-established companies to Japanese customers was not considered and currently these are not subject to JCT.
This provides an unfair advantage to non-established eservice providers compared to Japanese businesses in this field, which has become more apparent since the JCT rate increased form 5% to 8%, with another increase to 10% estimated from 1 October 2015.
On September 18, 2014, President Obama signed House Joint Resolution 124, which includes provisions extending the Internet Tax Freedom Act (ITFA) through December 11. The Act was previously scheduled to expire November 1, 2014, and the extension gives Congress a chance to consider the ITFA’s long-term future during the lame-duck session after the midterm elections.