As if the e-commerce sector weren’t worried enough about the prospect of e-commerce taxes, along came Active Research on Wednesday to say that most Americans would cut back online spending if they had to pay taxes.
The news quickly wiped away any optimism that sprung up after Senator Joseph Lieberman (D-Connecticut), the Democratic candidate for vice president, assured tech execs that a Democratic win would mean certain extension of the current sales tax moratorium.
But get this: Both bits of news are all but irrelevant. It may not happen now or next year, but online purchases will be taxed soon. And despite what shoppers told the folks at Active Research, it isn’t going to be lights out for online shopping.
In fact, fear of the sales tax monster may be worse than the taxes themselves.
So far, e-commerce has basically avoided the sales tax blues. The main reason, sometimes stated, sometimes implied, is that no one wants to snuff out the growing industry. That’s understandable.
Meanwhile, though less than 1 percent of retail purchases in the U.S. are made online, that number is certain to grow during the three- to five-year life of the proposed moratorium extension.
In other words, more and more shoppers are getting used to tax-free buying on the Web every day. It’s becoming an expected part of the bargain.
But just how long does e-commerce get to grow unfettered by taxes? Real-world retailers are demanding answers to that question, and for good reason.
Everyone Wants Protection
As online shopping becomes more mainstream, more savvy shoppers will skip the local mall and save a few dollars by buying off the Internet.
Talk about an uneven playing field. E-tailers strut around like peacocks full of pride over double-digit growth and record-setting holiday seasons. But that’s like the Mets boasting that they beat the Yankees by twenty runs without mentioning that the Yankees only had one outfielder.
The lack of sales tax is an unfair advantage, and it is eventually going to be taken away for just that reason.
Can the tax be delayed? Sure. More studies will be commissioned, extending the debate along with the moratorium.
But as that happens, the evidence will pile up. Each subsequent study will show that real-world retailers are being hurt, that states are in turn losing millions of dollars and that social programs are suffering as a result.
So it will only be a matter of time before the push to levy some sort of national sales tax online is successful. Then there will be much gnashing of teeth, and the fulfillment of many dire predictions. A sudden intrusion of sales tax would, without doubt, send some shoppers elsewhere — for a while.
But not all of them. Shoppers might have good reason to stay away from the Web, but will every online shopper go back to buying at the mall? Of course not. And many of those who do leave are bound to come back.
In fact, the online shoppers of today are the bread-and-butter of tomorrow’s e-commerce landscape because they know the convenience of buying a book on impulse and having it land in their mailbox a day or two later. They like not searching for parking spots, dealing with crowds, and sitting in traffic.
E-commerce has those advantages and more. It’s time to put faith in them, to trust that they can ward off the evil spirits of taxation and government intrusion which are, to be certain, coming.
There are many potential pitfalls stalking e-commerce. But the bogeyman of sales tax isn’t as bad as everyone thinks. The e-commerce industry needs to bear in mind that the longer the tax moratorium is extended, the bigger that one time hit is going to be for e-commerce and the larger economy.
In fact, once it’s brought out into the light and the fears are faced head-on, it won’t seem so scary any more.