How would internet sales tax affect online marketers?
There are some issues that just will not go away, and the proposed law that would introduce an internet sales tax appears to be one of them. A number of U.S. lawmakers recently expressed their support for a new legislation that would allow individual states to place a sales tax on purchases made online. This is something we have been hearing about for a while, but it seems like it will eventually become a reality due to the fact that so many states across the country are struggling financially. A tax on internet purchases would not only have huge implications for consumers, but also online marketers.
Tax-Friendly Software a Must
The legislation lawmakers are pushing for would give state and local governments the power to collect tax money from all sales made within their jurisdiction. This essentially means that even if you do not operate within their borders, you would have to add a tax for their residents. Considering that there are more than 7,500 different tax jurisdictions in the U.S., each with its own rates and regulations, such a law might result in an instant headache, one that can only be soothed by a reliable piece of software. If this thing goes through, marketers will need a system that can effectively handle tax calculations and other related tasks. Something like this may be expensive, but the power of automation could prove to be a godsend in such a situation.
Good Record Keeping More Important
Should an internet sales tax become a part of official law, a good piece of software will definitely come in handy for calculations, filings, and general number crunching. Unfortunately, no amount of software sophistication will be able to eliminate the paperwork aspect due to the increased importance of record keeping the law would introduce. In order to be compliant, you would have to register your business in every state in which people who buy your products or services reside. This means that if your brand is pretty much nationwide, you will need to submit paperwork to the appropriate offices across the country, states, cities, counties, and all included. Needless to say, having a good record keeping system will be vital.
Potentially Less Revenue
Perhaps the biggest way an internet sales tax would affect online marketers is by eating into their profits. You have to keep in mind that while businesses will be required to include the tax, it is the consumer who will actually have to be pay it. This could lead to a scenario that sees consumers being even more conscious about how much they spend, which would likely result in smaller businesses slashing their prices to remain competitive and appeal to bargain seeking shoppers. While this may not be an issue for some brands, it could be an eventual death sentence for marketers who have to make up for those losses by cutting costs in other crucial areas of their business.
Right now, the overall consensus from the online community is that an internet sales tax would be detrimental for small businesses, yet beneficial for big brands. Tod Cohen, Vice President at eBay, which opposes the tax, encouraged lawmakers to create an exemption that protects the little guys, but there is no telling what, if any impact that encouragement will have on what looks to be an inevitable legislation.
Author: Edith Li is an online marketing specialist for an email marketing software provider.