Guest Post – Megan Totka
Some Internet sales regulations, and subsequently sales tactics, may be about to change. Is this a good change or a bad change? It really depends on who you ask.
For quite some time now, most online retailers have been able to avoid charging sales tax to customers that are located outside of the state that the company’s headquarters are located in. Online shoppers use commerce sites to find better bargains than can often be found in brick and mortar stores. Even holiday season shopping has been changed by internet sales. This is because of the lack of sales tax, and often, free shipping.
Many states, however, are now starting to wise up when it comes to shoppers taking their business to online-only companies. Because most states are still feeling a big pinch from the ongoing economic recession, they are noticing the loss of revenue from these uncollected taxes.
The state of New York is pushing the hardest to be able to collect taxes on online sales. Amazon, likely the biggest online retailer, is actually suing the state. New York has passed a new requirement that online companies must charge sales tax on any sales that are shipped to consumers located in the state. The governor of New York even wants to tax internet downloads, such as those from iTunes.
Many people are turning to the Internet more and more for not only specialty products, but everyday goods as well. If you own a brick and mortar store, you may be thinking, how can I compete with that? The first step is to start your business online. Did you know that Amazon will ship toilet paper and snack products alongside your Kindle downloads and electronic orders? Some people certainly do, and these purchases are exactly what is up for debate as far as charging sales tax.
So how will this effect online sales tactics? Well, it could and should encourage online companies to lower their prices, if at all possible. However, many online shops are already undercutting their physical-location counterparts. Should they be expected to lower costs even more? Is that even possible?
The other way that companies could combat having to charge sales tax would be to offer free shipping all the time. Some online retailers already do this with a purchase over a certain amount of money. Amazon offers their Prime membership, where for $79 a year, a shopper gets unlimited 2 day shipping. Again though, this may cut into a company’s bottom line. Probably the best answer at this point? Wait it out. New legislation regulating what online purchases can or cannot be taxed is likely forthcoming. When the decision is made, you can talk with a tax consultant to see what the best move for your company is. In the meantime, research what products would continue to be less expensive to purchase online, even with the addition of tax, and see what you can do to have consumers buy from you instead.
Megan Totka is the Chief Editor for ChamberofCommerce.com. She specializes on the topic of sales. ChamberofCommerce.com helps small businesses grow their business on the web and facilitates connectivity between local businesses and more than 7,000 Chambers of Commerce worldwide.