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It’s High Time Web Sales Were Taxed

How 'showrooming' wrecks American business and destroys American communities

May 8, 2012 By Denny Hatch
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According to Technopedia, "showrooming" is when a shopper visits a store to check out a product, but then purchases the product online from home. This occurs because, while many people still prefer seeing and touching the merchandise they buy, many items are available at lower prices through online vendors. As such, local stores essentially become showrooms for online shoppers.

Someone once told me the story of a woman who owned a bookstore in a small, upmarket commuter town in Bucks County, Pa. She worked 12 hours a day for years to keep the place going—author lectures and book signings, children's reading programs, book fairs at local schools, etc. Life for her was a nightmare in the face of vicious price competition from deep discounters Amazon.com, Borders and Barnes & Noble. At the time, the ultimate bookstore killer—e-books—were maybe a gleam in Jeff Bezos' eye.

One afternoon while an author was at the signing table, the owner wandered along the line of customers with books waiting to get an autograph and exchange a word or two with the author. As she eased down the line the she overheard one woman say to another woman, "Actually I bought my copy from Amazon. I couldn't resist the price."

This was the final fist in the gut.

The store closed the following week.

The losers:
• The town (no author lectures and book signings).
• The children (no more after-school reading programs).
• The schools (no more book fairs).
• Adult readers (no knowledgeable sales people to discuss books, plus the nearest bookstore—Barnes & Noble—was 12.9 miles away).
• A team of knowledgeable, literate sales personnel was thrown out of work.
• The state of Pennsylvania lost out on: 1) 6 percent state sales tax on the book purchased from Amazon, say $1.50 on a $30 book, and 2) unemployment insurance for the laid-off workers.

The winner:
Amazon's rapacious Jeff Bezos, whose corporate tactics eliminate competing bricks-and-mortar bookstores (thereby gaining a monopoly on retail bookselling). In addition, Amazon has turned thousands of other retailers into showrooms so that the giant e-retailer can sell appliances, clothing, electronics, toys and a gazillion other items at such deep discounts that everyone from big chains to mom-'n'-pop businesses will ultimately fold up their tents.

Takeaways to Consider
  • All state governors and attorneys general owe it to their constituencies to collect sales taxes from pure-play Internet retailers on merchandise delivered into their states.
  • This action will bring in tax money, help level the retail playing field, deter “showroom” businesses from closing (because they are no longer pure showrooms), save jobs and unemployment insurance payments, and enhance the quality of life in communities by keeping businesses open rather than promoting abandoned buildings and empty malls.
  • A campaign should be launched whereby the National Association of Manufacturers and the National Retail Federation join forces to persuade their vast memberships to follow the EDC beacon and pull their merchandise from Amazon—and all other pure-play Internet retailers—to keep them from selling online on the cheap, thus mauling their basic bricks-and-mortar customers—the local retailers who stock and sell their products.
  • According to the U.S. Census Bureau (PDF), e-commerce currently accounts for roughly 5.5 percent of all retail sales. This is relative peanuts, but it is growing exponentially—an increase of 16.1 percent over 2010. Now is the time to halt the coming devastation.
  • If this merchandise were not available online, buyers would be forced into retail stores—good for local economies, communities, tax revenues and jobs.
  • Under this plan, paid-for digital deliveries should also be taxed—e-books, e-subscriptions to magazines and newspapers, special reports, white papers, etc.
 
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