What Could E-Tail Sales Tax Mean for eCommerce?
It seems that the effort to force online retailers to collect sales tax is gaining more momentum in Congress as brick and mortar companies continue to finance these federal legislation efforts. If the measure passes, it would allow states to collect sales tax from orders shipped to the state from out-of-state online stores, a move that would have fairly large ramifications for the eCommerce industry as a whole. As the Marketing Pilgrim notes, there are two main issues that this piece of legislation will bring to the table:
Not only do the rates tend to change across a county’s lines, but a product’s classification can vary from county to county. Do most online retailers have the resources to calculate these figures? And if not, exactly how much money do retailers stand to lose when they either pass the cost onto their customers (causing higher prices and possibly alienating shoppers) or simply accepting the loss?
Contact your representatives to let them know how you feel about this legislation today. Do you think this will pass? What impact might it have on your store? Share your thoughts in the comments.
Posted by Chris | September 26, 2007
Kevin Hillstrom September 26th, 2007
When I worked at Nordstrom and Eddie Bauer, we opened stores in new markets. When we opened stores in those markets, we were required to collect sales tax, because we had a physical presence in those states.
We analyzed our catalog and e-commerce results, pre and post sales tax collection. We seldom saw anything more than a one or two percent change in sales.
I wouldn’t spend a lot of time worrying about the impact on e-commerce. That’s a good thing!
GadgetGadget.info - Gadgets on the web » What Could E-Tail Sales Tax Mean for eCommerce? September 26th, 2007
[…] David Howells wrote an interesting post today!.Here’s a quick excerptIt seems that the effort to force online retailers to collect sales tax is gaining more momentum in Congress as brick and mortar companies continue to finance these federal legislation efforts. If the measure passes, it would allow … […]
David Rooker September 26th, 2007
There is a very simple solution to all of this, which won’t likely satisfy those states with high taxes. Sales tax should be collected in and paid to the state where the merchant resides. My brick & mortar store doesn’t’ ask customers where they live, and only tax Texas residents when an item is purchased here. We collect tax from everyone, and submit to our state.
If that system were in place for the internet, the process would be straight-forward, with a level playing field for everyone in a given area. If you wanted a competitive advantage, tax-wise, you would have to move to a sales tax friendly state.
Any other system requires too much record keeping and overhead for the merchant - so that is undoubtedly what our government will do.
Shannon September 26th, 2007
David,
Fantastic point!
Nate Odell October 3rd, 2007
There are over 12,500 sales tax regions in the U. S. These include states, counties and municipalities. Ecommerce merchants, those who sell products nationwide, potentially can owe sales taxes to any or all of these tax regions.
The Streamlined Sales Tax Project (SSTP) is comprised of 21 states at present. It’s a nonprofit entity whose mission is to simplify the collection and administration of sales taxes through policy changes and technology services. States and other taxing regions lose billions of dollars each year in uncollected sales taxes, and the SSTP is trying to help.
It is estimated that by the end of 2008 states will lose a staggering $30 Billion in lost sales tax revenue. The majority of this is from online sales. So, considering there is $30 Billion available for roads, teachers, fire stations, general infrastructure, etc., I believe this will be closely scrutinized by the government and ecommerce stores will need to be compliant. I reccomend going to http://www.streamlinedsalestax.org/.