Online Retailers Shouldn’t Fear a Sales Tax
(Bloomberg Opinion) -- Old-school retailers were doing the press-release version of a touchdown dance on Thursday after the Supreme Court ruled that state governments can require internet retailers to collect sales taxes even if they don't have a physical presence in that state.
Matthew Shay, the CEO of the National Retail Federation, said in a statement that retailers “have been waiting for this day for more than two decades” because, in their view, it creates a more level playing field for both traditional stores and digital upstarts.
In other words, brick-and-mortar stores consider this a big victory. So it’s a big loss for the chief digital disruptors, right? Well, not so fast.
Amazon.com Inc., for example, has already been collecting sales taxes in all states that have them on the items that it sells directly. Thursday's decision will affect some of its third-party merchants, which may not have been collecting the taxes. Those merchants account for a significant portion of Amazon’s sales.
But here's the thing: Increasingly, Amazon’s value proposition to shoppers is as much — if not more — about its vast selection and its speedy delivery than it is about rock-bottom prices. This decision does nothing to alter the convenience of shopping at Amazon, meaning it leaves Amazon's most important advantage intact.
I'd make a similar argument about Wayfair Inc., the fast-growing home furnishings website. Wayfair has been gobbling up market share, apparently at the expense of struggling chains such as Bed Bath & Beyond Inc. and Pier 1 Imports Inc. And it shows in the upstart's soaring stock price.
But I don't think Wayfair has been succeeding primarily because of its prices. Wayfair's sales are booming because it has an outstanding user interface, huge assortment of merchandise and a supply chain designed for delivering bulky goods. Charging sales tax isn’t going to throw its progress off course.
The Supreme Court is right that collecting sales tax only in states where a retailer has a physical presence is an antiquated framework. It didn't appropriately reflect the way today's consumer economy works.
And I'm glad states will be bringing more tax revenue into their coffers. (Hey, maybe then Domino's Pizza Inc. won't have to fill our potholes.)
But Thursday's decision won't fundamentally alter the showdown in the retail industry. Shoppers will keep shifting their spending into digital channels, and players old and new will have to figure out how to court them.
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