Sales Tax Won't Affect Online Retailers

  • by February 5, 2003
While it is likely within three to five years that tax will be charged for online transactions to residents of all states and localities that impose sales taxes on retail transactions, this will not be a significant impediment to the growth of the online retail channel. At least that's according to the results of a November 2002 consumer survey fielded by Jupiter Research, which found that most online shoppers are either unaware of the fact that sales tax can be avoided by searching across multiple online retailers or do not see it as cause to choose one retailer over another.

According to Ken Cassar, Senior Analyst at Jupiter Research, "With budget deficits on the horizon, state and local governments have stepped up their efforts to collect sales tax from online retailers. The collection of taxes is no longer an if but a when. Fortunately for online retailers, only a minority of their customers are aware of the fact that they can avoid sales tax by shopping around."

According to the survey, only 46% of consumers were aware of the fact that they could avoid sales tax by comparison shopping at many different retailers' websites. Of those aware, 61% do not go out of their way to find online retailers that don't charge sales tax. Thirty percent of this group sometimes looks for an online retailer that will not charge sales tax and only 9% always looks for a retailer that will not charge sales tax.

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Jupiter says that among those that are aware of the fact that sales tax can be avoided, only 9%, actually make merchant selection decisions based upon whether or not that retailer charges sales tax.

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