Where is the store, I asked?
Sales taxes are paid by stores to cover local services. Vancouver, Washington has the unfortunate nickname of "East Berlin" because its state collects taxes while Oregon, across the river, does not.
But states have now succeeded in convincing legislators that when you go online you become a store. Your mailbox creates a nexus to the warehouse. So Oregonians can buy online from Amazon and pay no tax, while a UPS truck in Vancouver creates a nexus.
Unfair? Sure. But the need to subsidize Internet commerce with local tax revenue is over.
Amazon is now a better investment than mighty WalMart. That's not because WalMart collects sales tax and Amazon shoppers evade it. Amazon's data systems and fulfillment are simply more efficient. It provides a better online shopping experience than WalMart, and shoppers prefer delivery to wandering aisles. I know I do.
The reaction of Amazon, Overstock and Blue Nile to turning their customers' homes into stores is like the famous National Lampoon cover. They're shooting dogs.
In this case the dogs are thousands of small "affiliate" merchants who they encouraged to market through them and whose homes thus do have real business nexus on which taxation can't be questioned. They're cutting off these small merchants in an attempt to eliminate the nexus, which is stupid because the nexus is now with the customer, not the merchant.
Besides, whose dog is it? It's Overstock's dog. And it was a very loyal dog. Killing those dogs is doing only marginal damage to the states, however, and the affiliates aren't as angry at their government as at the businesses which killed them to prove a political point.
I found the solution to this problem during my recent trip to China and Japan.
Get the customer's location as soon as they open a shopping cart, and display the real cost of each item, not the sales price, as they shop.
This is no more technically difficult than calculating taxes on all customer locations. Which is to say it's no longer that difficult at all.
If we have established that your home is a store when you go online, under the law, display my price when I shop. Add the delivery charge too.
Then, when it's time to check-out, you might be able to offer me a deal, reducing or eliminating that charge, and actually show me a lower price as I prepare to click the buy button.
If you want to be sneaky, you can offer delivery to a lower-tax location nearby. It's a database look-up.
Now, instead of raising prices as I prepare to check out, you're lowering prices. You're eliminating one of the main causes of abandoned shopping carts, hidden fees tacked on at the last moment.
And the same should be true for all merchants. Raise your prices to reflect local sales taxes. Show me the price I will pay, and charge me that price at the register. If the local rate is 8% you might even be able to raise prices 10% and I'll never be the wiser.
This post was originally published on Smartplanet.com