I used to live in the southern-most part of New Jersey, just across the bridge from the state of Delaware. The people of that area had an interesting shopping habit, when they needed big ticket items or planned a large run for back-to-school or Christmas, they drove over the bridge to shop. Why? Because there’s no sales tax in Delaware. That meant huge savings for consumers but a loss of business for local New Jersey stores.
The internet is like Delaware. Mostly, you can shop tax free if you buy online. That means that large sites like Amazon can undercut prices even more than a brick and mortar store, which led to the demise of chains such as Borders Books and many mom and pop locations.
Now, it looks like those tax free days are coming to an end for online and that’s good news and bad news for both buyers and sellers.
According to the Wall Street Journal, there’s been a massive shift in support for online taxation and even Amazon is ready to admit defeat. The reason for the change of heart is Amazon’s desire to speed up shipping to its customers. In order to do that, they have to build more distribution centers in places like New Jersey and Florida. Since the facilities will bring jobs into the state, New Jersey Gov. Chris Christie has agreed to allow Amazon to postpone online sales tax collection for a year. WSJ says that Amazon made similar deals with three other states, but Florida told them it wouldn’t fly.
And as Amazon goes, so goes the rest of the online world. That’s good news for states who are poised to pull in an additional $23 billion a year in online sales tax. For consumers, this means a probable hike in online prices to cover the cost of tax collection, plus the applicable taxes on every sale. The big loser, sadly, will be the small online store owners who will have to implement a potentially sticky tax plan. As an ebay seller, I have to wonder how this issue will effect those sales, too.
Brick and mortar owners could be the big winners in the online tax war. The levy of an online tax will help keep prices more competitive and might drive customers back to local stores where they don’t have to wait for delivery.
Will an online sales tax take a big bite out of online shopping? Not likely. We’ve become too accustomed to the ease and the 24/7 availability. The tax could lower the average total sale if consumers choose to buy one less item in order to keep their final total within budget. Best estimate? We’ll see those stats in under two years.
How do you feel about the online sales tax? A good thing, a bad thing, or something we’ll just have to get use to?