There is definitely a competition between Internet and brick and mortar retailers. The click and mortar retailers look to play both sides of the fence when they can. While there are several factors that come into play when providing products to consumers, sales tax certainly is a high profile issue.
If an identical product can be purchased at a physical store and over the Internet, what are some defining factors in the sale? Convenience to the shopper, availability, reliability and consumer directed deliveries are very critical with price certainly a factor as well. An example would be a recent purchase I made from Circuitcity.com.
I live in Florida and my parents live in a remote location in Northern California. Every year it is always a challenge to select a nice Christmas present that will be useful. The next challenge is getting the package to them, especially if my family and I are not going to make it home for the holidays. This is one of those years that I will not be making the trip with my family to California.
I am employed by a company that is a large distributor of DVDs. One of the perks of the job is that I get free DVDs as I need to be familiar with the products that we are selling. I recently sent a batch of DVDs to my parents, as I thought it would be some selections they would like. To my surprise, they said the movies should be great but they do not own a DVD player. Fantastic, I now had a gift idea for my parents, two of the hardest people to find a gift for on the planet (like everyone’s parents must be).
I searched through some ads to look at prices and saw a lot of great sales. But I hated the idea of fighting the crowds after Thanksgiving and then standing in line at a UPS depot to have my package sent off. What I remembered is that several retailers are doing free shipping. At that point I knew I could go to several sites and try to find a deal. However, from past experience I knew I could find what I wanted quickly and easily at circuitcity.com.
Within a few minutes on circuitcity.com I found an affordable, portable DVD player at a pretty good price. The price was not at the bottom of the line, but I found a unit for under $100 that was a name brand and easy to transport. Since my parents spend several months of the year in a Southern California condominium, this was ideal.
I did pay sales tax on my purchase from circuitcity.com. However, I would have paid that at the local Circuit City brick and mortar store. Convenient shopping, quick processes, good price and free shipping with a gift message all worked in circuitcity.com’s favor. I also know my parents can return the gift at any Circuit City store if they have a problem, a benefit of their “click and mortar” existence. I was so pleased with the transaction that I went ahead with a second purchase for a replacement VHS player for myself. Payment of a sales tax never came into my decision process.
My personal experience actually supports other expert opinions. In a recent interview, Giga Information Group vice president and senior analyst Andrew Bartels told the E-Commerce Times that the argument that sales taxes will stifle the growth of online commerce is no longer valid. “You’re not going to kill e-commerce by treating all commerce equally,” he said (Regan, 2002).
When asked if collection of sales tax would kill e-commerce, GartnerG2 research director Mike McGuire replied, “That argument was valid for about the first six months. It just doesn’t hold water anymore” (Regan).
While some companies like Amazon.com locate their facilities to avoid collection of taxes, their real concern must be on enhanced performance. The “pure-play” view of e-commerce may not be the best solution. I believe consumers have no more reluctance to pay taxes on the Internet than they do to pay the taxes at a local store.
My daughter recently purchased a doll with allowance money she had saved. She carefully had watched the price and knew exactly how much she needed. I reminded her that in addition to the price on the product she had to pay an additional 6 percent in sales taxes. Her innocent reply was simply “That’s crummy”. I tried to explain the benefits of the taxes, but it only went so far with her eight year old mindset. It’s not that people are trying to avoid paying taxes on the Internet; people just don’t want to pay taxes!