Profit Minded

Would an Internet Sales Tax cost or win you customers?

If you buy or sell over the Internet, you likely have an opinion on The Marketplace Fairness Act. And if you’re like most Americans surveyed earlier this month, you don’t like it one bit.

The proposed law, which passed the Senate 10 days ago and now awaits vote in the House, would permit states to require some online retailers to collect appropriate local and state sales taxes. The law would only apply to sellers with at least $1 million in sales in states where they don’t have physical operations. And it would only apply to purchases made by customers in states where sales tax is already collected on similar purchases from non-online retailers.

In fact, by law, consumers are already required to pay state sales tax on their online purchases. But when online retailers don’t collect, most consumers don’t voluntarily pay, and states have a hard time enforcing the law. The argument of those who support The Marketplace Fairness Act is that passing a bill allowing states to require retailers to collect the tax at point of sale would make it easier for consumers to pay sales tax while leveling the playing field between online and brick-and-mortar retailers and letting states collect taxes they’re losing out on when their citizens fail to pay sales tax on online purchases.

But 61 percent of Americans do not want to see the bill enacted. Endicia a provider of e-commerce shipping services and technologies, asked 1,095 people, “Do you agree or disagree with the Marketplace Fairness Act?” They surveyed a representative sample of the U.S. population by age, race, gender, income, education, and geography. By political party affiliation, the survey group consisted of 37 percent Democrats, 37 percent Republicans and 26 percent “independent or other.”

Not only does the majority oppose the bill, but 60 percent also say they will change their online shopping behaviors if the bill passes.

Those who agree that such a bill should be passed say that state and local governments need the money, and it’s only fair to brick-and-mortar stores. So why are so many people opposed to a bill that would make it easier for states to collect sales tax that is already by law due? Many say any Internet sales tax is bad for the economy, according to the Endicia survey. Others see it as an unfair tax hike.

Still, tax or no, online shopping might be too convenient for many to resist: 40 percent say that if the bill passes it will have no impact on their shopping behaviors.

But 44 percent say they will buy less online, and among respondents aged 18-25, a whopping 75 percent say they’ll buy less online and more in-store. Ironically, internet retailers themselves also promise to change their shopping habits in response to the law: 76 percent say they’ll shop more in-store and less online.

Brick and mortar shopkeepers might be encouraged by this. But it’s hard to believe that online shoppers are primarily motivated by avoiding a 5–10 percent sales tax. Will the pain of paying that tax be enough to incite consumers to get on their bikes, in their cars, or on the bus to travel to a store to make a purchase where they will also pay sales tax? Mom and pop shops probably shouldn’t count on it.

Loading...

Popular Blog Posts

Friend's Activity