Making Peace With Global E-Commerce
As much as the Internet facilitates international commerce, the irony is that many businesses limit electronic sales to a more confined geography by choice. The primary reason is that electronic sales of hard goods are still subject to the same old headaches of international laws, tariffs and shipping.
John Cislo, manager of hosted commerce solutions for IBM's Global Web Solutions division, says international tax calculations are "hideously complex," involving merchant banks following numerous laws from various nations, equally numerous tax structures and many new nation-by-nation taxes aimed specifically at the Internet.
Software such as TAXWARE's WORLDTAX System is available to help smooth out the task. But Jon Abolins, senior tax counsel for TAXWARE, says he doesn't expect the product (which is bundled with Open Market's Transact) to address the entire globe for at least three years. And merchants say there's no software that effectively handles the back-end task of physically paying out international taxes to a variety of entities.
Furthermore, many CSPs are convinced that a software snap-in will never meet the challenge because of affiliated problems, such as quoting a transaction in dollars and then hoping the buyer has a credit card that works in the United States. To deal with local currency issues, IBM helps some of its larger customers set up sites abroad and provides local language or currency support--"but it isn't cheap," says Cislo.
Cislo says he knows of small companies that have simply shipped a rare international order at no charge rather than calculate the taxes.
Some CSPs say the best way for merchants to handle the issue is to tell online buyers that they will be responsible for tax and shipping charges when they receive the product. Of course, they may end up paying more to cover those charges than for the item itself, which doesn't help customer relations.
In the United States, some CSPs have found ways to work around laws that until recently seemed to require merchants to pay taxes whenever they had a legal presence in the same locality as the online buyer. Some merchants responded by simply taxing all customers as if they were in the same location as the hosting site--which CSPs acknowledge, with a shrug, is probably illegal.
At least one point of clarity lies with the recently adopted U.S. moratorium on taxes for Internet "access," which clarifies that online merchants must pay existing sales and use taxes but that they will be treated the same as mail-order houses, which are taxed according to the location of their inventory.
Many CSPs support the idea of an international treaty conference that would declare the Internet a tax-free zone, but there's not much momentum behind it. At such a conference, security would be right behind taxes atop CSPs' agenda.
CSPs would most like to see global acceptance of strong encryption for commerce-related tasks through SSL. Today, there are payment applications, like those from CyberCash, that can be readily exported from the United States because the application can be used only for one particular commerce-related task. (The SET specification is similar in this respect, but performance problems and a lack of client software seem to have stalled efforts to deploy SET-based products.)
Most commerce-hosting providers use applications that depend on the more generic SSL. That means, for example, that back-end transmissions from a U.S. company to a company based elsewhere typically won't rely on strong encryption. One way around this is to use strong encryption products designed outside the United States, such as C2Net's Stronghold, an Apache-based SSL Web server. C2Net also provides an independent strong encryption engine that works with Microsoft's Internet Information Server. On the client, C2Net provides strong cryptography to Web browsers with its Safe Passage Web Proxy.
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