Abstract
The taxation of cross-border transactions within federal or common markets presents significant challenges to the efficient and fair application of VAT. This article discusses the interstate tax jurisdiction and collection rules applied in the European Union, the United States and Canada. The analysis finds that while the destination principle is dominant, there are very important differences in law and in practice between the three jurisdictions. In the EU, the cost of following the destination principle appears to be significant complexity and fraud. In the US, the absence of a VAT places a significant barrier to achieving the principle since the use tax is unable to effectively fix the problems. In contrast, the system in place in Canada, while complex, seems to do a good job at protecting the sales tax base in relation to interprovincial cross-border transactions.