Agentic commerce represents a new, shortened shopping journey. AI-agents that hold the “position” of “decision-maker” do the shopping on behalf of the actual buyer. AI agents operate under instructions predefined by the buyer.
They embark on the shopping process through searching, comparing, and ordering the product/service on behalf of the recipient. The story of the Agentic commerce journey is much more. AI-agents don’t merely suggest products, they can be “configured” to make decisions and process the order, as well as related payment on behalf of the actual buyer.
Autonomous buying is exponentially moving from theory to checkout. The fast pace at which the AI-driven commerce is growing shows that “well-instructed” AI-agents have the “capability” to select suppliers, negotiate terms, complete orders and payment, with minimal human involvement.
From the indirect tax perspective, this unquestionably raises more than a few questions, but let’s start with the elementary two: who is responsible for VAT, and where is the place of supply?
Is the AI-agent responsible for charging, collecting, and remitting VAT on behalf of the original buyer?
Background
The strong emergence of online commerce at the global level in the previous years called upon tax authorities to redesign their regulatory framework. In the EU, the adoption of the E-Commerce package on July 1, 2021, represented the major overhaul of the regulatory framework previously in place, which couldn’t follow the pace of the rising e-commerce business models that have rapidly grown.
The abolishment of the fragmented distance selling thresholds, and replacement with the EU-wide intra-EU threshold of EUR 10 000, introduction of the simplified reporting and payment schemes under the OSS system.
The regulatory redesign by tax authorities also covered platform economy rules. The OECD reviewed the business and regulatory landscape and concluded that digital platform operators(as deemed suppliers) could have a major role in tax compliance. This is primarily visible in the gig and sharing economy.
AI-driven commerce represents a new challenge for tax authorities. To what extent does the participation of the AI agent influence the distribution of the tax responsibilities in the shopping journey? Can the AI-agent bear the tax responsibility?
AI Agentic Commerce Model
The AI agentic commerce model could be quite complex for understanding, not only from the business perspective, but even more from the tax point. Quite often, this model is established upon the technical connection of three or four different entities:
- Buyer(natural person or business)
- AI Agent
- Principal Seller
- Digital platform(marketplace, platform operator, payment service provider, app store)
The generic model instantly shows quite a challenge for proper understanding of who bears tax responsibilities, and to what extent. Let’s illustrate the operative flow of the AI-agentic shopping experience through one example:
A buyer(resident in Italy) instructs an AI-agent(digital service from the platform Y with a permanent establishment in Slovenia) to acquire the most affordable computer within the EU, which is compliant with predefined terms. The AI agent compares the prices, sellers, reviews, and pays using a digital wallet, and arranges delivery. The product is part of the stock of an online vendor VAT-registered in BE, and the vendor uses the Amazon FBA domain.
The principal VAT questions that come by default are: where is the customer located? Who is the supplier? Is the marketplace a deemed supplier? What are the audit trails to confirm these decisions?
AI agents that are part of the online commerce journey hold a very important role in tax logic, and as such, they should be configured to collect and store relevant tax information throughout the decision-making process. Their role should be embedded in the decision-making process upstream, properly configured, and adequately stored, as supporting evidence for internal records, as well as for any potential tax audit.
Indirect Tax Framework
EU Rules
EU VAT law provisions, which are part of the E-Commerce package, could be a source of great relevance in further shaping VAT rules for AI agents that are part of the AI-driven online shopping journey. The concept of the deemed supplier could potentially be of particular interest.
Under E-commerce rules, digital platform operators or e-commerce marketplaces could be held accountable for VAT, not only for their direct sales, but also for supplies made by third parties. When the AI-agent becomes a part of the commerce journey, its tax responsibility could extend from a “mere” participant to a deemed supplier, who facilitates the supply, sets terms and conditions, and orchestrates the payment.
US Rules
The US sales tax system is quite different from the EU’s. In the US, the sales tax system is fragmented and separately regulated by Revenue authorities at the state level. The existence of the state’s based sales tax, with different local tax rates, different product taxability rules, economic nexus, and marketplace facilitator laws, makes the tax equation even more complex.
Most probably, the marketplace facilitator laws hold the “highest level of importance” for future regulatory shaping of tax responsibilities of the AI agents in the e-commerce journey,
The US sales tax framework is different because there is no federal VAT. Instead, businesses must manage state-level sales tax, local rates, product taxability, exemptions, economic nexus, and marketplace facilitator rules.
From the perspective of the marketplace facilitator, tax laws, the following question(and connected answer) could be of peculiar relevance: When does an AI shopping agent become more than a software tool?
In the cases when the software tool arranges orders, controls payment flow, and stores customer information, could the AI agent be treated as the marketplace facilitator? The answers would most likely be different between states; this is to be interpreted on a case-by-case basis.
Conclusion
The inevitable expansion of the agentic commerce will trigger regulatory changes when it comes to taxability rules established around the new environment. The tax authorities, as well as the developers of these solutions, will need to develop the systems that clearly indicate who is a part of the decision-making process, to what extent, where it is based, and much beyond.
In the EU, most probably, new rules will be shaped around the provisions of OSS, deemed supplier rules, ViDA, and AI policies. In the US, probably the marketplace facilitator laws will hold a central position for this regulatory quest.