Jupiter: Sales Tax Won’t Impede E-Retail

Collecting sales taxes on Internet retail transactions conducted across state lines would not impede the growth of online retail, Jupiter Research claimed in a statement released yesterday.

Most online shoppers either are unaware that sales taxes can be avoided by searching among multiple merchants, or don't see it as a reason to choose one merchant over another, Jupiter said in its report, “Sales Tax: Avoidance Is Imperative to Few Online Retailers and Ultimately Futile for All.”

In a survey conducted in November, 46 percent of consumers said they were aware they could avoid sales taxes on online purchases by comparison shopping, according to Jupiter. Of those who said they knew, 61 percent do not go out of their way to find online retailers that don't charge sales taxes, Jupiter said.

Thirty percent of the “aware” group said they sometimes look for online merchants that do not charge sales taxes, and 9 percent said they always look for merchants that do not charge sales taxes.

Currently, only sellers with a physical presence, or “nexus,” in the same state as the buyer are required to collect the taxes, according to a 1992 Supreme Court ruling, because the thousands of tax jurisdictions nationwide are too burdensome to keep track of.

But the Streamlined Sales Tax Project, a group consisting of representatives from about 40 states, is working to implement a simplified sales tax system that could require companies to collect sales taxes from all customers.

Once 10 states making up at least 20 percent of the population of all states that collect sales taxes comply with the project agreement, the SSTP plans to work with Congress to craft legislation that would not violate the 1992 Supreme Court decision.

The movement also has the backing of the National Governors Association and the U.S. Conference of Mayors. A report in the Detroit News recently said Sen. Byron Dorgan, D-ND, and other members of Congress are considering legislation this year that would mandate the collection of sales tax on Internet sales.

Marc Micali, vice president, government affairs at the Direct Marketing Association, said DMers need to watch Congress closely.

“The real battle is what will happen in Congress,” he said. “They are the ones with the authority to make any sweeping legislation in regards to remote-sales tax collection.”

Calling the collection of sales taxes online “no longer an if but a when,” Ken Cassar, senior analyst at Jupiter Research, said, “Fortunately for online retailers, only a minority of their customers are aware of the fact that they can avoid sales tax by shopping around. … The benefits of multichannel integration overwhelmingly outweigh the importance of sales tax avoidance.”

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