Where is this bit from?
In the good old days shopping trips were simple. I lived in town A, went to a store in town A and bought whatever I needed. Sometimes I would go all the way to big city B. If they didn't have what I wanted in big city B, the people at the store might order it for me.
Today (in these convenient new times) I am in town A, log onto an ISP in city B, that connects to a site hosted in country C; the site belonging to a company headquartered in country D; that fulfills my order from a distribution center that could be anywhere in the world.
So the question is: When tax laws require triangulation between point of order capture, point of sale and final ship to address, how do we figure these out? When nearly everything is electronic, which tax jurisdiction do my bits live in?
In the standard brick and mortar example, the customer, the point of sale and the transaction all happen at the same place and time. I go to a store, get what I want, pay for it there. Everything is simple.
When I order online or over the phone, what is my point of order capture? Is it the call center's location, or is it the site location, or is it the company's headquarters?
What is my point of sale? Is it related to when inventory changed hands? Or is it when money changed hands? Often such questions involve us talking to the company legal team, and this discussion morphs into a larger discussion on cyber laws, jurisdiction of cyber transactions and that's a lifetime of research in itself.
The challenge we face in our multi channel implementations is that we need to interface our transactions with tax calculation software and we just need to tell the software all the information that it needs to triangulate and figure out tax. And this opens up the whole discussion on the geographical location of the transaction. Unfortunately cyber space has no latitude or longitude.
The usual solution is to go with what the local "normal world" laws.
So how have you solved this problem? How have you figured out where your bits are from ?
Comments
Hi CB:
Sorry, i don’t have the solution - but one more complication, with the advent of Mobile Web - and consequently online shopping on the move - the customer location and hence tax jurisdiction would also be constantly changing :)
Posted by: Ashutosh | September 30, 2008 6:00 AM
CD, That was a very interesting thought. As you said, I would have just let the tax calculation software handle the complexity.
However I have been thinking tax is always calculated on the basis of
1. where is the product being shipped from
2. where is the product being delivered to
It does not matter if it crossed multiple tax jurisdictions. Your blog has brought a complete different view to it.
Also we suggested following to determine point of sale for one of our retail customers
1. online - We suggested dotcom being a faux location that attributes to credits if order is placed online. We specifically suggested this so as to understand and identify how well is dotcom performing
2. call center - all call center locations were marked as faux location as well. Again the only driving factor was to determine credits.
Anyways this was a wonderful blog. I am sure there is much more complexity associated to determing the right thing and calls for more research by the relevant practiioners to lay down the rules.
Posted by: Madhavan Vasantham | January 26, 2010 10:29 PM