This paper argues that digitization propelled international trade is eroding the fiscal sovereignty of states. Unilateral attempts to fix this problem will lead either to tax erosion or to double taxation. Digitized trade, or the trade in goods and services aided by the Internet and related channels, has made it easy to penetrate foreign markets, without the need for physical presence in a foreign country. This has generated major debates on international taxation, on the salience of source versus residence based taxation, and, the definition of what should constitute permanent establishment.