This study investigated the relationship between digital taxation and e-commerce growth among Kasita traders in Kampala, Uganda. The increasing digitalization of commerce has prompted governments across developing nations to introduce digital tax regimes, yet limited empirical evidence exists on how such policies affect micro and small traders in informal urban markets. Using a cross-sectional survey design, data were collected from 180 traders in Kasita market through structured questionnaires. Descriptive statistics, Pearson correlation, and multiple linear regression were employed for data analysis using SPSS version 25. Findings revealed that digital tax awareness (r = 0.512, p < 0.01), tax compliance systems (r = 0.467, p < 0.01), and digital payment infrastructure (r = 0.543, p < 0.01) were all significantly and positively correlated with e-commerce growth. Regression results indicated that digital payment infrastructure was the strongest predictor of e-commerce growth (β = 0.381, p < 0.01), followed by tax compliance systems (β = 0.274, p < 0.05) and digital tax awareness (β = 0.221, p < 0.05). The model explained 54.3% of the variance in e-commerce growth (R² = 0.543, F = 34.67, p < 0.001). The study concludes that strategic investment in digital payment infrastructure and targeted taxpayer education can significantly stimulate e-commerce growth. Policy recommendations include government subsidies on digital payment devices, simplified digital tax filing platforms, and market-based trader sensitization programs.