Taboo: "We Don't Collect Sales Tax"

seemingly the webs only taboo subject

[jsinger]

In the U.S., websites are required to collect sales tax only from states where the seller has a "presence." For most small sites, that is the one state where the seller is located. Some collect no sales tax at all. The seller may be in a state such as New Hampshire with no sales tax or the product is sales tax exempt. Pennsylvania has no sales tax on clothing, for example.

Websites aren't shy in giving reasons for shopping at them: Low prices, Free shipping, etc.

But rarely will a site mention sales tax advantages. Perhaps they don't won't to thump the noses of states who would love to reach that source of revenue.
Also the shipments aren't really exempt, because most state laws required the purchaser, himself, to remit sales tax to his home state (which almost never happens, except on large shipments to businesses)

Trumpeting the sales tax advantage, while a substantial selling point, seems to be taboo... maybe the web's only taboo :)

How do you mention sales tax on your site? Have you considered giving a discount in your home state to offset the tax cost to locals?

I just saw a site that had a big and rare "No Sales Tax Banner." That was done by giving locals a discount that exactly offset the state sales tax.

[jbinbpt]

I don't think that no sales tax is a big reason for someone purchasing products on the web. At best consumers see it as a wash. No tax vs shipping charges.

I do see this becoming an issue very soon and taxes will have to be collected. We already have one state we cannot ship to because they claim since we did a trade show there, we established a physical presence.

I think that there will be a federal government solution. Would you rather deal with the feds or every local, city and state tax offices?

jb

[CernyM]

How do you mention sales tax on your site? Have you considered giving a discount in your home state to offset the tax cost to locals?

In the state I operate out of, I'm fairly certain this isn't allowed.

I also can't have a sale where I pay the sales tax on behalf of the customer.

[CernyM]

I think that there will be a federal government solution.

It will be legally difficult for the Federal government to get involved in this issue due to our Federal system.

The only likely involvement the Federal government will have would be to try and legislate around a 1992 Supreme Court ruling that made it impossible for a State to force a business in another to collect sales taxes on their behalf. (Which will be difficult, since that decision is another outgrowth of our Federal system.)

[jsinger]

I don't think that no sales tax is a big reason for someone purchasing products on the web. At best consumers see it as a wash. No tax vs shipping charges.

On small high ticket items, sales tax far more than offsets shipping. Jewelry, for example. This is especially true for states such as TN, WA, LA and NY with high sales tax rates. Average Tennessee sales tax exceeds 9%.

The most populous states tend to have high sales tax rates: NY, TX, CA, IL. States without a sales tax have small populations: NH, DE, MT, OR.

[hannamyluv]

I think because no one wants to draw attention to it. Catalogs have the same advantage. As a matter of fact, catalogs work very hard to ensure that nexus is contained to one state, but I doubt you could find any catalog that touts the "No sales tax" thing on the cover or on the order form.

There is a huge struggle going on in Washington right now about sales tax. The DMA is throwing money at lobbiests as fast as they can to help keep the politicians off the sales tax scent. Especially now, when states' coffers are not so flush with money. Internet and catalog sales tax could be huge for a struggling state budget.

The other fact is that most consumers just don't think about it. I know that when I was at a catalog company they compared the response rate of customers who had to pay sales tax to those who did not and there was no difference in response rate.

Also, I think the sales tax thing has a tacky sterotype attached. you know, what you see in airports, on cruise ships and when passing state lines. Gigantic billboards touting huge savings on smokes, beer and perfume. Most big ticket sellers do not want to be associated with that type of marketing.

[jsinger]

compared the response rate of customers who had to pay sales tax to those who did not and there was no difference in response rate.

I did the same thing about 2 years ago. I broke down our online orders by states and adjusted for population. I wondered why we got far more orders from some states than others. We got more orders from nearby states than those farthest away (faster shipping maybe). I did look at local sales tax but it was hard to tell about the zero tax states because they had small populations.

What about our own highly taxed state? We certainly deliver quickly and are better known, a big advantage. But our state was far from being our best source of orders. Our sales tax disadvantage played a role I think.

Good point you made about catalogs