EU Internet taxes In the US, (sales) tax on purchases need to be collected by the vendor if it has nexus in that state. Nexus can mean as little as one part-time employee. If the vendor has no nexus in the state, it's up to the buyer to report the purchase on his tax forms and pay the tax then. In practise no one does this (you can try this at home -- ask someone what the "use" tax is)

Europe has decided to apply VAT to software downloads. This would let European governments soak the foreign (read American) companies that make most digital goods. Within Europe, customers pay the download VAT rate in the vendor's country, not theirs. This is why all the servers are in Luxembourg.