Does Internet Sales Tax really level the playing field between clicks and bricks? The US Senate has passed the Internet Sales Tax law that will force online retailers to collect sales tax for the shipping destination state. Initial plans are to have Internet retailers with over $1 Million sales to collect the state sales tax for all transactions. The sales tax for each state is different and five states viz. Alaska, Delaware, Montana, New Hampshire and Oregon do not have Sales Tax.
In the second half of the video alongside a brick retailer representative is arguing that "no sales tax" gives an advantage to the online retailer. She mentions the phenomena of "showrooming" that adds insult to injury for the brick businesses as customers come in to understand the product, touch and feel it -and then search online for a better price!
The question of whether adding the burden of sales tax will slow down online retailers is a matter that will be addressed at the House of Representatives where the bill is now headed. If passed, the new law will over ride a 1992 US Supreme Court decision that a business without a presence in a State will not be required to collect sales tax.In other words, businesses will be required to collect sales tax for whichever state your customer is within the US.
States and city tax revenue lost due to online sales is estimated at $23 billion for 2012. Brick retailers are in the community and provide employment at the local level which makes them really important for main street America.
But the question from this blog's point of view is whether an average tax of 9% really deter online competition for brick businesses? Will customers stop "showrooming" because the 9% price difference and shipping will be an avoidable no brainer for online shopping? Or will lower overheads and better inventory and logistics by online retailers continue to keep pure brick businesses in trouble.
A better option for the brick businesses is to perhaps open their own online division because they have deep knowledge of (1) customers (2) products and (3) supply sources and they should be able to serve both domestic and international markets. Staying pure bricks is no longer an option for businesses of any size. And opening an online global branch of an existing local bricks business is rather simple today. Contact StratoServe.