Online shoppers are indifferent to a sales tax on Internet purchases, with 74% saying they do not choose one online retailer over another to avoid sales tax for purchases under $50, says a new report from Jupiter Media Metrix.
"Many brick-and-mortar retail companies launched separate online businesses in order to compete with nimble Internet-only retailers sheltered under the Internet Tax Freedom Act," said Heather Dougherty, Jupiter analyst. "But times have changed: the Tax Freedom Act, which intended to protect nascent Internet companies and stimulate e-commerce, is set to expire; the threat of Internet-only retailers now is minuscule; and state and local governments are feeling the sting of lost tax dollars. With the end of the tax-free Internet approaching, retailers must merge their online and offline tax-calculation and -collection capabilities, as well as integrate their web and in-store functions to streamline customer service as well as overall business operations."
Under current legislation, state and local governments risk losing up to $7.7 billion in tax revenues from online sales in 2005, according to Jupiter analysts. This loss represents 7% of total sales tax revenue.
According to a March 2001 Jupiter Consumer Survey of U.S. online buyers that have abandoned a purchase, only 21% abandoned one retailer over another to avoid paying sales tax for purchases under $50. Jupiter Media Metrix says that its ratings data showing that six of the top 10 retail web sites according to unique visitors in March 2001 are multi-channel retailers that are already required to collect tax in certain markets underscores the negligible impact sales taxes have had on shopping over the Internet. Media Metrix reports the top three multi-channel retailers along with the number of unique visitors in March 2001 were Barnesandnoble.com with 4.9 million; Apple.com with 4.03 million; and HP.com with 4.02 million.