Legal Issues
Legal Environment
The unique nature of the Internet brings it into uncharted legal
and political territory in regards to a number of different issues,
among which copyright is just one. Because the Internet is not constrained
by political boundaries, electronic commerce is not adequately defined
by existing laws or regulated by one government entity. For example,
as commerce over the Internet increases, city and state governments
are seeking ways to collect and remit sales taxes on Internet transactions.
But a 1992 court case held that for a state to collect taxes on sales,
the vendor must have significant sales operations within the state.
Because many Internet operations have highly dispersed personnel, little
inventory, and no showrooms, at this time it is not clear whether states
and local governments have a legal right to collect taxes on their sales.
The issue regarding retail sales taxes in the electronic marketplace,
while just one of many, illustrates how the legal and economic systems
must evolve to accommodate the new electronic medium. Because authorities
can control points of sales through requirements and permits, sales
taxes are a reasonable method used to augment local revenues. But this
practice becomes untenable in a boundless marketplace. The same problem
is foreseen with tariffs and international trade. The question is whether
governments should impose control measures such as permits, requirements,
and regulations so that they can extend their locus of control over
Internet commerce, or they should give special treatment to electronic
commerce and look for other venues for tax. Each choice will have a
substantially different effect on the future development of electronic
commerce. To open a business of any kind, one needs to obtain a sales
tax permit and register business names with counties in which one intends
to operate. Necessary permits must be obtained depending on the type
of product handled. Financial and accounting records must be kept and
sales taxes must be reported periodically. To open an Internet business,
however, one only needs to get an Internet account through an ISP (Internet
Service Provider), and
open up a web page announcing business. Although one can register a
domain name, a sort of store name, it is not required. In fact, Internet
domain names have been given out on a "first-come, first-served" basis.
Legal issues in terms of trademarks are just beginning to be contested.
And what are the procedures for recording and reporting sales and accounting
figures? How do accounting firms audit electronic transaction records?
For such aspects of business, public policymaking, as well as private
entrepreneurial solutions needs to be explored. The nature of Internet
communication also compounds many legislative and legal efforts going
on at the national and international level to adapt to the new electronic
environment. The primary concern about copyrights is linked to the sellers'
and buyers' access to the same production technologies that enable mass
reproduction and mass distribution of any digital product without quality
degradation. Prohibiting or limiting the use of the technology is clearly
not the solution. Rather, every aspect of production, sales, and distribution
has to be analyzed and redefined before a proper and effective legal
framework can be created.