International news

G7 Finance Ministers agree on 15% global minimum tax

  • At the G7 Summit, held June 4-5, 2021, the finance ministers from G7 countries agreed to a 15% global minimum corporate tax, aligning with the Biden administration’s proposal. The G7 also agreed that market countries would be awarded taxing rights on at least 20% of profit exceeding a 10% margin for the largest and most profitable multinational enterprises, and for the “coordination between the application of the new international tax rules and the removal of all Digital Services Taxes, and other relevant similar measures, on all companies.”

US Trade Rep imposes, then suspends, tariffs on six countries for digital services taxes (DSTs)

  • On June 2, 2021, US Trade Representative Katherine Tai announced 25% tariffs on $2 billion worth of apparel, footwear, jewelry, glassware and seafood items from Austria, India, Italy, Spain, Turkey and the United Kingdom in retaliation for unilateral digital services taxes imposed by the six countries. The tariffs were subsequently suspended for six months in an effort “to provide time for [the OECD] negotiations to continue to make progress while maintaining the option of imposing tariffs under Section 301 if warranted in the future.”

Cambodia to impose 10% VAT on digital goods and services

  • Cambodia has joined the growing list of countries enacting unilateral digital tax measures, as Prime Minister Hun Sen approved a regulation to expand the country’s 10% value-added tax (VAT) to sales of digital goods and services. Under the regulation, foreign businesses that facilitate their services over the internet and have an annual turnover exceeding USD 61,500 (KHR 250 million), or that generate revenue of more than USD 14,700 (KHR 60 million) for three consecutive months per calendar year, will be subject to the 10% VAT.

European Commission proposing 0.3% to 0.5% digital levy

  • Following discussions regarding an EU bloc-wide digital levy, the European Commission is reportedly planning to propose a 0.3% to 0.5% tax on digital companies with worldwide annual turnover of at least EUR 250 million (approximately USD 304 million). The Commission hopes that the digital levy will capture companies who benefited from the coronavirus crisis, and raise bloc-wide revenue.

United States news

Tennessee Department of Revenue issues private letter ruling finding an online marketplace to not be a marketplace facilitator responsible for sales tax collection

  • The Tennessee Department of Revenue recently published Letter Ruling No. 21-05 (dated April 28, 2021) determining that an online marketplace was not a marketplace facilitator responsible for sales tax collection because it did not process payments. The taxpayer is creating an online platform that allows a network of independent dealers across the country to make business-to-business sales of equipment, manufactured by the taxpayer’s affiliates, that is in the dealer’s inventory. The taxpayer can charge the dealers for use of the platform, and the taxpayer will also receive a percentage of the dealers’ sales made through the platform. However the taxpayer will not collect payments from the dealers’ customers. Purchasers pay for their selected inventory in one of two ways: (i) dealer accounts or (ii) by credit card. The taxpayer’s role with both types of is just communicating the dealer’s preliminary order approval or rejection with the purchaser. Under Tennessee law, marketplace facilitators are responsible for collecting and remitting sales and use tax on sales made through its marketplace if Tennessee sales exceed $100,000 during the previous 12-month period. The Department of Revenue found that while the taxpayer was providing an electronic marketplace for the dealers, it was not a marketplace facilitator because the taxpayer only provides the electronic display of the Dealer User’s inventory and communicates the preliminary order approval or rejection, but is not involved in collecting or transmitting the payments.