E-commerce is defined as the purchase and selling of goods and services over an electronic platform, namely, the Internet. It requires the use of such services as an electronic funds transfer and online transaction processing. The modern system stereotypically makes use the World Wide Web for at least one process along its chain of transaction, but it may use other tools like an email. The term “electronic commerce” entails online trading of goods and other products such as information, all processes pertaining to trade, including online advertisement, purchasing, and delivery services. It also involves the provision of post-sale services and advice electronically, as well as electronic support of company partnership. E-commerce transforms important business processes by using the Internet technology. This vast business is growing day-by-day since most companies are now going e-way. E-commerce improves the general performance of a company by raising its profitability, expanding market share, and improving the customer service (Chaffey 13). It is becoming an important aspect of routine business processes. The current paper will examine e-commerce in terms of its impact on businesses and government revenues, as well as other legal and ethical issues associated with it using the utilitarian theory.

Synthesis of Literature

According to utilitarianism, the interest of many supersedes that of the few. In essence, it stipulates overlooking the interests of the latter and championing the welfare of the majority (Sullivan, Smith, and Esposito 1137). It can be applied in the case of e-commerce to prove that its adoption is ethical. According to utilitarianism, the side with many positive reviews succeeds in becoming ethical. From the literature review, the effect of e-commerce on local businesses and government revenue is lower than the one on the general population. The government should institute frameworks of collecting sales taxes from e-commerce to counterbalance the impacts. Local businesses should also step up into the Internet platform to compete evenly with big companies as this is the most ethical thing to do.

According to utilitarian ethics, any business activity has its moral implications. For instance, buying a particular good over the Internet or at a store can be considered ethical by one group or unethical by another. E-commerce (EC) has expanded rapidly since its foundation due to several factors that favor its operation mechanisms. Among them, there is a pricing advantage; the retailer who trades online has an advantage over his counterpart who runs a real store because he will not charge a sales tax. As a result, online prices will always be lower than the ones at local stores; hence, it will attract more consumers. Studies have estimated the price advantage of an online retailer, which ranges between seven and nine percent depending on the locality of the store (Chaffey 26). EC has also a reduced search cost, both monetary and the time used. By combining these aspects, continuous technological advancement and banking inventions, it is becoming more convenient to purchase goods online. The EC growth is also fueled further by the fact that the use of the Internet spread everywhere, and it has become a public medium. Many business entities view this as an opportunity to cut down their operation costs, increase revenue, marketing and entering new markets, as well as raising the quality of customer service and satisfaction by using the media that allow for an enquiry and quick feedbacks (Gunasekaran, Mcgaughey, and Mcneil 7). The growth has come with several ethical implications, which have different effects on people.

The Internet enables companies to access the global market instead of limiting their business to potential consumers within their physical location. Harmonizing the global market is factored by the fact that the Internet is open twenty-four hours a day, overcoming the issue of time differences between countries. Individuals do not have to wake up early or schedule their time to order products from countries with time differences. They can place orders any time of the day as they wish. E-commerce also helps businesses eliminate costs associated with intermediaries since they sell directly to the consumer rather than use services of a supplier. It can allow them sell products at a discounted price, and it is also the main reason why online prices are relatively lower in comparison with the ones offered by local retailers (“Tax-Free E-Commerce”).

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Customer satisfaction has been found to be higher in e-commerce than in actual physical businesses. An e-commerce website is an influential tool when it comes to customer loyalty if it is designed and used accordingly. Customers ask questions, browse and place an order, and keep track of it at their convenience. Companies can also track their customers by their location and favored products. It can help them alter the quality of their products and services accordingly to suit the regional market needs of their customers. Local businesses may decide to step up and compete online since the cost of personalizing a website is relatively low. Customers are also enabled to access a wide range of products, which otherwise would not have been available in local retail stores. For example, a book retail store in a locality will not be able to stock all types of books available worldwide (Colby). The arrival of the Internet and e-commerce followed by its explosive growth has produced many changes in the manner in which business is done. It has also demonstrated a potential for fast-tracking the growth rate and the improvement of the world economy.

On the other hand, the rapid growth of e-commerce has posed a serious challenge to the government and the local authorities in connection with the collection of sales taxes and other relevant taxes from specific businesses according to the law. Another concern is negative effects felt by local business entities. Other issues include the type of information that can be obtained from the Internet and the legality of transactions done. Consequently, there is a debate by policy-makers over how to regulate the Internet in a manner that caters for the interests of all parties. Analysis of this situation using utilitarian theory provides a scenario where the benefits of controlling the internet falls on the government rather than the people through taxes. The utility is more for the government implying that the issue of regulating the internet is unethical.

Most nations depend on and use revenues collected from sales taxes to fund government operations and service delivery. A decline in sales tax revenues is more harmful to nations that have their financial models designed upon the tax system than to countries that depend on other types of taxes, namely, income ones. Thus, stabilizing sales tax revenue is very critical for the economy of such nations. Tennessee is an example of the American state that has its financial model designed upon sales tax. It will be used as a case study for the purpose of this research and as an example of the e-commerce impacts on the economy (Internal Budget Office).

Consumer expenditures decrease with a reduction of household earnings. The resultant decline due to lost jobs and earnings will translate into another loss of millions of dollars of revenue from sales and use taxes. However, this can be balance by other taxes such as import tax since there will be an increase in the importation of goods as consumers will be ordering from the international market (Bruce and Fox 1380).

Fraud over the Internet is growing faster as it is getting more advanced. There is a higher possibility for a crime to happen over the Internet where both the seller and the buyer do not know each other and cannot meet. In the early years of e-commerce, many frauds were reported, and it resulted into popularity sites. The protection of intellectual property by the copyright laws is difficult in the e-commerce sphere. For example, copying material from the Internet is piracy, but it is very hard to regulate. It is very necessary for policy makers in the industry to educate the public about various issues related to buying online. The users of the Internet and e-commerce should also keep in mind that there are many ethical and legal factors to be considered.

Businesses face several ethical implications, which can be addressed if the ones have physical location. For example, selling alcohol to a minor over the Internet is difficult to regulate, but if the one walks into a bar, it will be regulated and considered both unethical and illegal. There are also moral and ethical challenges to be overcome, for example, in the case when a pharmaceutical retail store decides to use an e-commerce site, since products are used when required.

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The core concern of EC and the law entails its development, consumer role, and its regulation in the context of consumer protection. E-commerce is a new means of carrying out business activities through the Internet, which has become a significant way of buying goods across the world enhanced by the rapid progress of the Internet technology as seen over the past few years. While e-commerce has a huge impact on international trade, governments and local authorities should have a say on the growth of e-commerce by enacting necessary regulations. The regulation of EC is very critical as it can help bring sanity into the industry, as well as protect consumers in the online market (Asplin 136).


E-commerce is a new form of business that involves making purchases through the Internet, which are not limited to goods and services, but can also include information and legal advice. E-commerce improves the way companies do business, expands their market shares, and raises profitability. The entrance of e-commerce comes with serious challenges to the states and local authorities connected with the collection of sales and use taxes. It also affects the local business since online prices appear to be lower than that at local stores, and online sellers offer a wide range of products.  

The utility obtained through the Internet is huge considering the benefits it provides to businesses and consumers. Although there are several negative implications in the e-commerce sphere, the utilitarian theory suggests that if the benefits accrued are numerous, then the activity is morally upright.

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