Wednesday, April 23, 2014

Online Retailers Get an Edge by Not Collecting Sales Tax

Two independent studies of online sales using two very different approaches reached the same conclusion: some online retailers have an advantage over traditional brick-and-mortar stores.

The studies find evidence from investors, analysts and consumers themselves that suggest online stores have a competitive edge when they don’t have to collect sales tax from shoppers.

Both studies were conducted by researchers at the Fisher College of Business at The Ohio State University and their colleagues.

One study found that sales fell 9.5 percent at in five states when the online retailer began collecting taxes on online purchases.

The other study found that the stock prices of online retailers dropped when news broke about possible legislation that would require them to collect sales tax.

Overall, the two studies show that consumers spend less at online retailers when they have to pay sales tax – and investors are quite aware of the threat these firms face from new tax-collection laws.

Sources: Fisher College of Business
The Ohio State University  University Communications

Artwork: Artisoo Cash Register by Amadeo de Souza-Cardoso
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