It’s High Time Web Sales Were Taxed

How 'showrooming' wrecks American business and destroys American communities

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, 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.

Denny Hatch is the author of six books on marketing and four novels, and is a direct marketing writer, designer and consultant. His latest book is “Write Everything Right!” Visit him at

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  • Fred Lederman

    Denny- You sure generated a storm of opinions with this article. Good for you! I believe that Rob Trube expresses a point of view that is rationale, logical and meaningful to consumers. If you want value added services….like education on the use of the product you buy, assistance in setting it up, maximizing its usefulness and/or having a local source of contact for your business or hobby….you buy locally. If you want generic "stuff"….you can get your books, DVDs and similar items at any of the "fast food" business model Internet purveyors of "stuff". In the long run, you do get what you pay for

    What most consumers do not understand is that opening up taxation to states and local municipalities that are generally overspending their budgets year after year, with virtually no third party controls, is absolutely dangerous. Consider New York City….they have a mayor who is a proven business executive but doesn’t seem even remotely capable of balancing his city’s budget. No problem….just tax the rich. Now he is looking to tax grocers and/or their customers for using plastic bags. What next, raise the tolls on bridges and tunnels? Done. Charge fees (aka taxes) for "free" city sponsored events? In process. Charge incremental food and alcoholic beverage tax? In process. Outdoor event license (tax)? Done. City surtax on taxi fares, gasoline, cigarettes and theatres/movies? Partially done. What’s next? Proof of purchase and tax payment for the contents of non-commercial vehicles (commercial vehicles are already taxed) coming into or through NYC? What about home searches by a new revenue police force to make sure that New York City dwellers pay their unfair share to the "King of Spenders"? Haven’t we learned yet that once the "revenuers" get their pitbull teeth into your butt, they never let go? Carpe moola!

  • Barry Dennis

    Killing the messenger won’t change the message; Online shopping is here to stay, growing rapidly, and will replace everyday retail for commodity items and brands in a generation. Other than the "social" rewards of shopping, the opportunity to multi-task( "let’s shop and get a sandwich, maybe see what’s new at…..") the negatives, driving, parking, gas, time spent have been on the verge of consciousness for awhile.
    Just as is coming in Education, Health Care, and work-at-home (See "Welcome To Your New Home Office"), the Internet logically offers "creative destruction" of traditional ways of doing things, more conveniently and less expensively (for many/most things)
    The Consumer’s need for "hand-holding" and touching products is mitigated/eliminated by exchange and refund policies and better quality (good luck with the Customer Service aspect of solving a problem, at least so far) products. Since Services continue to grow more rapidly that retailing of goods, they, too, lend themselves to Online commerce.
    All-in-all I’d venture that we won’t have many Mom n’ Pop choices for very much longer. Shoppers cause their own problems by demanding a value-package dominated by price, although some would speculate that the trade-off is worth it for many, many items other than food and personal care items like clothing. Even commodity packaged food items can get traction when Online retailers offer free shipping or Guaranteed Refunds/Exchanges to offset the cost of retail shopping.

  • Barry Dennis

    Denny, after I posted, I read the rest of the posts. You seem to be a minority on this issue. I too value the "atmosphere," the ambience, the feel of small towns and local faces, interesting ideas and thoughtful places, but, but, the socialization possible through the acceleration of Cloud collaboration might/will make up for the tactile sense of touch and feel (and BO, perfume, and farts) that are part of the experience you lament losing.
    Maybe it’s a gnerational thing, and our generation will value what’s left of tradition, maybe not. But newer generations embrace all the opportunity and choices that Internet commere, and communications, and education, work-at-home(See "Welcome to Your New Home Office"),and health, and….and…offer. On balance, I’m lovin’ the prospects.

  • Scaramanger

    Even here in Australia the retail sector is feeling the pinch from Amazon. In many cases it’s cheaper to buy at Amazon USA or Amazon UK and have delivered to Australia than purchase locally. The Australian Government hasn’t worked it out yet – lost sales tax, stores closing, loss of jobs….the list goes on.
    Hey, I’m guilty here to, money is tight at the moment. We have to watch the pennies and it’s hard to resist buying a pair of runners from Amazon USA for $110 delivered when the local store here in Melbourne is selling them for $180 + 10% Sales and Goods Tax. BUT what’s the answer……I really don’t know. People all over the world are doing it tough right now and the price of goods is a BIG factor. I hear Amazon is going to set-up a distribution arm here as so much business is flowing in from Australia. It’s only a matter of time before more local stores feel the Bezos effect.

  • Scaramanger

    Oh, what I forgot to say is….surely business and commerce has and always will be ‘Darwinian’…….survival of the fittest…..bricks and mortar businesses have had it good for so long……however, a better, leaner, fitter and more hungry retail model has now evolved in the form of online business. To be quite frank I can only conclude that Amazon has built a better mousetrap.

  • lnuzzo

    So, are you still using your Kindle? Or have you switched to a Nook?

    I’d switch, but don’t want to go through the aggravating process of changing all my books over to the other format.

  • Jerry

    It’s ironic that you slam Amazon yet when I hit the link to your website, I immeidately see that your latest novel is available for Kindle on Talking out both sides of your mouth??? I think so,. Also, FYI, whenever I buy from Amazon they add PA sales tax. You’re a joke!

  • Mark

    The problem is it doesn’t level the playing field. B&M Retailers would have to file taxes for only one location where their store is located. An small online retailer would have to file not on his location, but on the location of each customer. A small company would have trouble keeping up with the rules of Chandler AZ, or some parish in Louisiana, much less filing returns in each one. I’ve worked for a multi-channel retailer that did have to file returns in each state (along with many of their localities). The localities created an amazing amount of work, only to remit amounts that sometimes were less than the postage it cost to mail the return.

  • Bill M.

    Is Denny Hatch on crack?

    The only bright spot in America’s economy is the Internet. And he wants to tax it so that chucklehead local retailers can go back to doing business as usual?!??!

    Local stores failed because they tried to hold onto 1990s business models. Our local book store refused to discount books, refused to enact a frequent buyer program, continued to cut back on stock, forgot how to offer helpful customer service…and then complains about "the Internet" or "that damn Amazon" taking away its business.

    B.S. It wasn’t Amazon. It was stupidity and short sightedness.

    Who paid Denny Hatch to write this article — some local retail association? Was he threatened by thugs who made him an offer he couldn’t refuse?

    Look, Denny. Here’s how the market works: You create a killer product, offer it at a reasonable price, and people will buy it.

    What you don’t do is this: "If this merchandise were not available online, buyers would be forced into retail stores—good for local economies, communities, tax revenues and jobs." You don’t restrict people’s choices and "force" them to do anything. That’s about as Draconian as anything Darth Vader ever did when he was destroying worlds with his Death Star.

    The reason why local stores (especially book stores) are drying up (in addition to their outdated business models and lousy customer service) is because of the Internet itself. Everyone is a writer these days. Every Joe Sixpack or Sally Lunchpail has a blog. Or a web site. Or posts frequently to other web sites and blogs. So it’s not that adults aren’t reading any more. It’s that they’re constantly reading!

    In addition, everybody can write a "book," turn it into an eBook, and offer it for sale. So publishers aren’t needed. Middle-men aren’t needed. And that means book stores aren’t needed. Like the music industry, the publishing industry has been forever changed by the Internet. Today, musicians/writers can sell directly to their customers and fans. No need to get ripped off by unscrupulous publishing houses or record labels.

    In addition, this glut of content (be it music or books) causes customers to have to sort through a lot of dreck. They literally have too many choices. And a lot of it is pure crap. So they have to be more discerning. They have to be more concerned about how they spend their money. (With the price of books and CDs skyrocketing, can you blame them? Especially in this economy?!?!?)

    The only way to go back to the alleged good old days, Denny, is to shut off the Internet completely and roll back the calendar some 15 years.

    Gee whiz, dude. I used to worship the ground you walked on. But this article is the most short-sighted, backwards-thinking, potentially economically devastating thing I’ve read in years. And from a guy who’s supposed to be a marketing guru.

    By the way, what do you think governments will do with the massive influx of tax revenues? You guess it: waste more. Create more wars. Spend more on slush funds and pet projects. The last thing we need to do is feed the monster that is government more "food" in the form of tax revenue!

  • DeVerne Chapman

    I tend to browse online and shop local when possible. Sometimes the selection is better online. I’m not opposed to paying sales tax for my purchases.

    With that in mind, I work for an internet retailer. We sell online and collect sales tax for the sales in New York State. There are 932 towns and 62 cities in New York. Each has there own tax rate, and they change all the time. I can’t imagine having to keep track of thousands of tax rates nationwide. If web sales are to be taxed, there needs to be a significant simplification in tax rates for it to work.

  • Carolynn Van Namen

    This is precisely the same argument and lament offered up by privately-held, small retail businesses who were forced to close their doors when the retail Goliath, Wal-Mart, moved into the small communities previously served by mom and pop stores. Loss of jobs, loss of relationships, loss of a personal connection among members of the community–all experienced at the hands of Wal-Mart, the relentless retail predator overtaking small businesses across the U.S. It’s sad, I agree. The more we do online, whether as consumers or friends or colleagues, the less we do in person, face-to-face, one human being to another. It is a frightening but all too real fact of life as we now live it online. There is much more at stake here than jobs and taxes; we are at risk of losing our very souls, our humanity, to the omnipresent pseudo-life of our online personas. Greet the future–and weep.

  • Rob Trube

    There are a lot of pieces to this puzzle. Granted Amazon is the 800lb Gorilla, and can certainly wreak havoc.

    With that said, look at what Amazon and eBay have done for local businesses. Look at the retailers that are now able to list their products, and compete on an international scale. It’s not the same as strong, local retail, but, in many cases, they can compete, profitably.

    Now, with that said, there is a fairly easy solution for the likes of Best Buy vs Amazon or whoever when it comes to large ticket items. MSRP. I have an immediate, fairly expensive example.

    I am looking at geting a new DSLR digital camera. I have narrowed it down between 2 brands, each one has a model in the $699 range. I have physically been to Best Buy, Sam’s Club, Walmart, Norman Camera, and looked online at Amazon,, and a couple of others, Guess what? The price for the camera – at all locations, online, or offline – is the same. THE SAME! The manufacturer – read that again, THE MANUFACTURER is requiring a certain price to be charged for the product – or they will no longer be able to sell their brand.

    It ain’t rocket science folks. Everyone is looking for a deal. The "deal" becomes the added service and knowledge of experienced people that are vested in having you as a customer. If you want that – buy at retail. If it’s not important to you – buy it from where you feel comfortable.

    So you may be asking – "Where did I buy the camera?" I am going to buy it at a retail store, not online. I want the help, I want the service, and I want the store to be there for my other product needs in the future.

    Amazon is not evil. They are a business. They are in business to make money, and Jeff Bezos is good at it. The examples that you gave, Borders and others – were in trouble when Amazon came onto the scene. Look – if business were easy, there wouldn’t be so many people in government….(cheap shot, sorry). The real problem is the hypocracy and double standards. Everyone wants it all, low price, immediate availability and great service. You might get it sometimes, but usually, you get to pick one. They want the cute, local shops, and they want the discounted online price. If you can’t balance, if you can’t support local business and take advantage of online deals, then you need to try harder until you can balance – or you won’t have that option in the future (and you will complain about it – trust me…)

    I have made money from my book sales on Amazon – something I would NEVER have been able to do without Amazon – and guess what – that’s how I am paying for my camera….at a local retailer.

  • Mick

    I’m no fan of huge businesses and monopolies, but fair’s fair here. Amazon is not gaining anything by not charging state taxes. They would only be responsible for the collection and passing on of state revenues. Collecting tax ultimately wouldn’t affect their bottom line because it is the customer who pays. In order to buy from amazon I have to own a computer (on which I paid state sales tax) and I need internet service (through my phone company, and on which I also pay a hefty state tax) so the state is not exactly devoid of income. I also pay postage which goes to the Federal government. Where amazon is able to provide savings is by avoiding the astronomical (and rising, despite recession) cost of commercial real estate rent. If the land barons and mall owners (who receive incredible tax breaks from the state) could be persuaded to charge more realistic rent, perhaps more small, independent retail businesses could afford to stay open. Let’s remember too that it’s not just small businesses who have been affected: the 2 big bookstore chains have also closed many of their retail outlets – indicating perhaps that this issue is more a sign of the changing times and consumer preference (ease of purchase and more choice) than anything.

  • oldguy

    In Idaho, our esteemed leg declined to tax internet sales on the pretext that it did not want to impose "another tax." Gives short-sighted a whole new meaing.

  • Bill Bendel

    Sorry, I get a better selection and service from Amazon.

  • Fred

    Dear Mr. Hatch –
    I always find your posts stimulating and very often agree with your position. Your May 8 piece on showrooming is an exception.
    Jeff Bezos is not the only winner by any means. Also winning are the millions of Amazon customers whose material lives are better because of Amazon’s lower prices, perhaps including the reading of more books because of the prices. They win again when their cost of living is lower because they are not taxed for Internet purchases (although in my state, California, residents are taxed for Internet purchases even if the seller is not in California).
    As you have often remarked in various contexts, the Internet is changing life in lots of ways. They include such “losses” as you itemize in the story of the Bucks County bookstore. I’m not clear why the end of the bookstore implies that authors could not come to town and lecture or that kids couldn’t have after-school reading programs, why the schools couldn’t hold book fairs or why adult readers would necessarily want to discuss books with a knowledgeable sales staff, but let’s say that all this did, is, or will come to pass. It’s cliché but pertinent to note that motor vehicles put buggy whip manufacturers out of business, or that line of business anyway.
    The point not being that the suffering of some is compensated by the gain of others or that it’s okay if individuals lose as long as society wins—it isn’t, in either case—but rather that change is a constant factor in a human society that isn’t stagnant. The same human quality of inventiveness that is superseding bookstores via the Internet is producing the e-book, a far more effective killer of bookstores than Amazon, as you write, and an innovation that as I recall you have been very positive about in past posts.

  • Marvin

    It seems that this is more about Jeff Bezos than it is lost revenue. In a capitalist society you have to get our of the way and let businesses compete…brick and mortar, e-commerce, whatever.

  • Tired of Denny

    I just don’t get it…first going after retargeting, now going after capitalism. Target Marketing is about to lose me. Just like the local bookstore that doesn’t deserve to survive. How about this…how about getting someone to write articles about common sense marketing that actually understands the myriad of options available versus direct mail, direct mail, direct mail, magazine ad, and oh yeah,…direct mail. 2 strikes…one more and bye bye.

  • Duane Brayboy

    People with this kind of approach to online retail will ALWAYS skip the customer and find the one rich guy in the room to demonize. In Denny’s case, Jeff Bezos is the head demon who is orchestrating a massive conspiracy against brick and mortar shops.
    Denny, the biggest winner in this entire equation is the CONSUMER as they now have more choices. The LOSERS are those brick and mortar shops that are downright too lazy or non-inventive to come up with better ways to attract customers. Using the tax system as a weapon to discourage the consumer from having these choices is foolish…raw foolishness.
    As a consumer, there are some goods and services that I prefer obtaining from a brick and mortar shop. When all I care about is cost, an online retailer will do. As a business owner, I have owned both a brick and mortar (BnM) and online retail.
    For the BnM, I was only there for my customers between the hours of 8 and 6 pm, Monday through Friday. For my online retail, I now can converse with my customers beyond those hours and even through the weekends as needed. As a result, my sales have skyrocketed.
    Your "losers" list unfortunately is extreemly short-sighted given today’s economy. Here are some quick responses to the examples you provided.
    >The children (no more after-school reading programs)
    ITunes offers FREE college-level courses that kids can listen to anytime
    Many eReader services (such as what is offered by most libraries) provide FREE ebooks
    >Adult readers (no knowledgeable sales people to discuss books, plus the nearest bookstore—Barnes & Noble—was 12.9 miles away)
    Not all customer sales reps are knowledgable. In fact, they are there to SELL books first. On the other hand, many online bookstores do provide a place for CUSTOMERS to give their thoughts and opinions on books. That helps the customer all around.
    > A team of knowledgeable, literate sales personnel was thrown out of work.
    Start a blog with that knowledge. Get some advertising. In the meantime, they should pursue other work just like the rest of us.
    Lastly, while you blast online retail and their ‘profits’, you say absolutely NOTHING about how our governement has a looooong history of wasting taxpayer dollars. Yet you trust them to simply "do something" here. It makes absolutely no sense at all.
    BnM shops who refuse to have any real presence online do so at their own demise. Busineses need to go where the customers are, not the other way around.

  • Denny Hatch

    Many thanks to all of you who commented, and to Ken Magill for the mention in: “Crap on the Part of the Economy That’s Working? Come on, Man”

    From yesterday’s New York Times:

    "The online retailer [] is happily losing hundreds of millions of dollars a year on free shipping — and, on apparel, even free returns — to keep its shoppers coming back."

    Wall Street has not figured out this massive scheme, but here’s the skinny: Bezos, with 5+ billion in cash, is positioning himself to be the last retailer standing—to do away with all non-food and non-drug retailers nationwide—so that two companies can take over American retailing: and UPS (and maybe the USPS which, Lord knows, needs all the help it can get).

    In international trade, this is called “dumping” (e.g., China dumping cheap steel into the U.S. market in order to achieve monopoly).

    Dumping, of course, is illegal and unfair. The federal government levels import duties on dumped products to keep the playing field level for domestic producers.

    An aside: the U.S. Government prosecutes, fines and jails American entrepreneurs and corporations for paying bribes to foreign officials in order to get business overseas. Yet lobbyists in this country are free to bribe government officials (senators and representatives) with massive payments to their private PACs and campaign funds) to get their way with favorable legislation. Go figure.

    Check out these obscene payments to Congress on

    BTW, I’m not alone in decrying the Amazon behemoth. From yesterday.

    The response to my piece has been high volume—and angry. The old rule: Everybody listens to W-I-I FM (What’s in it for me) is alive and well.

    David Ogilvy’s line is operative here. “You can’t bore people into buying anything.”

    You gotta love the debate!

    Thanks again for the comments.

    Denny Hatch

  • Ron the Realist

    Whenever I read such doom-filled ramblings, I wonder why the authors look at things with such defeatism. You describe a problem of cumbersome brick and mortar stores failing to stay lean and agile and see the only solution is to punish the young and innovative upstart competitor.

    It isn’t the responsibility of the retailer to pay sales taxes. It is the debt of the purchaser. The store is acting as an agent on behalf of the government to collect the tax from the citizen and to remit it on behalf of the citizen to the government. It isn’t the store which is avoiding taxes – it is the state’s citizens. Maybe citizens object to intrusive taxation.

    You could have suggested that a state should eliminate sales taxes altogether. That would certainly level the conditions you deplore. It would also serve to act as a magnet to citizens of surrounding states who would come to the tax-free state’s brick and mortar stores to do some shopping. That would increase the need for employees. More employees would earn more income. Income is taxable.

    Or government could pare down its voracious appetite for ever larger gulps of the economy.

    A question for you, Denny. Why are your missives served-up via the internet? Surely you realize the USPS is in dire circumstances now. They recently declared another loss of some $3 billion last quarter. As you know, the USPS is the only business lawfully able to deliver non-critical mail to a citizen’s domicile. Yet with full knowledge of the damage your internet mailings are doing to the USPS, you persist in avoiding paying your fair share by failing to utilize the lawful service of the nation’s oldest service agency. Maybe Congress should consider requiring internet newsletter writers to pay a tax equivalent to the cost of first-class postage, calculated times the number of recipients of said newsletter.

    It’s only fair, after all.

  • Liz – Amazon got it right

    Amazon has made it possible for me to earn money on the side with their affiliate prorams – which then makes it possible for me to purchase things from local stores and *gasp* help the economy. I also work in a super small niche for business where companies being pushed out of the way by big box stores/businesses need to get creative and diversify – it’s those businesses that I’ve seen stay in business (and grow). The ones who don’t change and just point the finger as Denny does, will go out of business.

    If i had a retail bookstore I’d darn right make sure I had an online store too – even if through Amazon as an Amazon merchant.

    Amazon has amazing service and has never disappointed me. They put the customer first with their services and products. It’s America – you don’t like Amazon – don’t use them, start your own competition, or get over it. Getting Gov’t involved by collecting taxes and adding more regulation is not the answer.