The rise in new online sales tax bills in states across the nation has been a top story within the e-commerce and business press over the course of the past year or so. It seems, however, that not everyone is reading those stories.
In a newly released survey sponsored by the International Council of Shopping Centers (ICSC), 64 percent of consumers in states that have enacted new internet taxation laws either don’t know or do not believe that they’re required to remit sales taxes on web purchases when a retailer does not collect them on their own.
“The results of this study point out that there are widespread consumer misperceptions about the requirement to pay sales tax on Internet purchases,” said Michael Kercheval, CEO and president of ICSC. “The data shows people are confused as to whether or not they are – or should be – paying tax on online purchases.”
While the study does not elaborate on why so many people are confused about the existence of the new taxes (we’ll get to that later), it does contain some other relevant important data.
For example, 93 percent of the 1,000 consumers polled said they would continue to shop online if taxes were collected at the point of purchase, and even in the event of 100 percent compliance on online sales tax collection among merchants, consumer online shopping behavior would not be materially or substantively impacted much.
Despite that, it would appear that online shopping has not completely made traditional shopping and retail storefronts obsolete just yet.
Nearly three quarters of the consumers believe brick and mortar stores have an “important role to play in the 21st century marketplace.” And in that vein, many of the respondents selected “choice” and “convenience” as key decision criteria, in addition to price, when contemplating a purchase. This indicates at least a continued partial reliance on brick and mortar shopping options.
From our vantage point, the ICSC seems to be supporting online sales taxes in order to level the playing field with brick and mortar retailers, which is to be expected given the scope of their work. The study’s press release openly touts the Main Street Fairness Act, which we’ve covered here before, calling it a first step toward establishing that marketplace for a new century.
Still, we can’t help but wonder if this study was more focused on the confusion surrounding new taxes or simply a way to beat the drum for brick and mortar retailers on the whole. Granted, the ICSC does adequately identify a problem here, citing low consumer compliance with tax rules for online purchases. And yes, the study does make the next logical connection: that such consumer misconceptions have led to an unfair advantage for online retailers over their brick and mortar counterparts.
But why does the ICSC then go on to tout mostly vague data about the importance of those brick and mortar stores rather than delving deeper into the obvious question that arises from this study (at least in our opinion): why are consumers confused about their online sales tax responsibilities? Is it a question of poor communication between lawmakers, regulators and their constituents? Are shoppers feigning ignorance? Are retailers not informing shoppers of their tax duty? Is the confusion a by-product of hastily written and implemented laws that don’t include adequate considerations for enforcement?
Now look, economists, we are not. But when nearly two-thirds of the shoppers in states using online sales taxes are in the dark on the issue, it certainly begs the question: what’s the point of a tax if no one knows about it and thus, isn’t paying it? If online sales taxes are to fulfill the aim they’re designed for, then there needs to be a better analysis and reconciliation of this confusion that the ICSC says is rampant among shoppers.
What’s your take? Why are consumers confused about paying online sales taxes? Leave us a comment with your response.
