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E-commerce and tax
Te tauhokohoko a-rorohiko me te take

Example A

A New Zealand business sets up a website hosted by an ISP in New Zealand.

Selling tangible products

Selling tangable products

Scenario

A New Zealand book publisher sets up a website to promote their products on the internet. The website is hosted by an internet service provider (ISP) in New Zealand. On the website customers can:

  • identify products
  • place orders, and
  • pay for purchases.

 

Delivery of the products is made through physical delivery channels.

What is the business's tax liability?

All profits, including those from sales to overseas customers over the internet or otherwise are liable for income tax in New Zealand.

Selling intangible products

Selling intangable products

 

Scenario

The New Zealand book publisher in the first scenario also sells intangible products - digital books. On the website customers can:

  • identify products
  • place orders, and
  • pay for purchases.

 

Instead of physical delivery of hard copy books, customers can download the digital books online.

Note

The copyright is not on-sold and the product is downloaded for the personal use of the customer.

The business activities in New Zealand include:

  • sourcing for content
  • promotion and advertising
  • arranging for delivery of the product, and
  • maintaining up-to-date information on the website.

 

So the website has various business functions such as:

  • responding to queries on its products and services
  • receiving due payments for purchases
  • delivering products and providing after-sale service.

 

What is the business's tax liability?

As the business operations are all carried out in New Zealand, all profits including profits from e-commerce activities are sourced in New Zealand. Consequently, the profits are liable for tax in New Zealand.

Selling tangible and intangible products

 


Date published: 03 Dec 2007

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