Online Spending for the Holiday Up 15.4%



Now that Christmas 2010 is behind us it’s time to look at just how well the holiday shopping season was for the online crowd. If we are to believe the numbers reported by the Wall Street Journal and MasterCard Advisors it was very merry indeed.

According to a WSJ article there are more than one source reporting an increase

The current year’s increase is “a very healthy growth rate and one of the positive stories of 2010,” said Michael MacNamara, vice president of research and analysis at SpendingPulse.

Sales over the Internet now account for about 10% of all retail sales, excluding purchases of automobiles and gas, according to SpendingPulse.

Other surveys of Internet sales in the holiday period show big gains as well. ComScore Inc., which looks at individuals’ purchases rather than stores’ sales, said Internet buying grew 12% through December 19, to $28.6 billion.

This is good news for the online world, which has shown strong holiday growth over time and is likely to continue the trend as people look for deals and convenience through the online channel.

While there is plenty to celebrate there is also some legitimate concern around the issues of sales taxes and online purchases. While reports of online sales may sound nice, state and local governments had a very bad 2010 and are looking for revenue from anywhere they can get it. Since online sales tax has always been a sticking point so don’t think it’s going to go away in 2011. In fact, be prepared to see the battle for more tax dollars heat up considerably, especially after the growth in online business continues to go up rather than slow down.

While we are on the subject what is your take on the future of the online purchase that is currently untaxed? Is that a thing of the past or will it survive these tough times? What kind of impact do you feel it would have if current purchases that do not get taxed are no longer available? Does convenience outweigh the additional dollars that the online purchase would then cost?

  • mike

    To clarify – online purchases are currently taxed. Just because the online-only retailer doesn’t collect it, doesn’t mean it is not due from the consumer. All states that impose sales tax require consumers to remit use tax directly to the state when a retailer doesn’t collect it (e.g. online-only sellers). Of course “brick and mortar” retailers (and their e-commerce sites) take care of this burden for consumers by collecting the tax at point of sale and remitting to the state on your behalf. The online-only seller shifts that burden to the consumer to track, self-report and pay state directly…which few consumers do but would be liable for in an audit. In terms of fairness, all sellers should have to collect, including online – otherwise states will impose or raise new taxes to make up for the lost revenue.