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The article analyses the crucial impact that the digital economy is having on international taxation and argues that the traditional taxing rules are inadequate to address the way that multinational enterprises are conducting business on the Internet and how value is created on the Web. The cornerstone of this analysis consists of the observation that, while the power of the states to tax is intrinsically connected to territory (thus, to a physical element), the Internet economy is not as it takes places in a virtual space (a Terra Incognita) which is, in legal terms, still uncharted. This situation is challenging the intimate connection between the power to tax and the territory state Sovereignty can be exercised on, superiorem non recognoscens. This is the Westphalian Principle, as commonly understood in History, and it is the pillar states have been built on since the mid-seventeenth century, in Europe. This article eventually considers the most recent development to overtake this empasse, in particular, the digital tax proposal as suggested by the European Commission in 2018. In this respect, it concludes that, while the European strategy is positive in terms of policy, in a purely legal perspective, it might initiate possible retaliation from qualified international stakeholders (including States such as the US) that would see their potential taxable base eroded by foreign unilateral measures and without any previous agreement in this sense. e-commerce, digital taxation, territoriality, income taxation, net neutrality, double taxation, tax competition, sovereignty, base erosion, BEPS.