Sales Tax Would Harm E-Commerce

Nearly 60 percent of consumers would make fewer purchases if they had to pay a sales tax on all Internet purchases, according to a survey by BizRate.com.

The tax/tariffs issue would have a greater negative impact on foreign merchants, according to the survey. Thirty percent of consumers said they would never buy from an online foreign merchant if they had to pay tariffs on such online purchases. More than 50 percent of online buyers said they would make fewer purchases from foreign merchants.

The BizRate Flash Survey™ compiled feedback from nearly 17,000 online buyers at the online point-of-sale as part of a partnership between BizRate.com and the Association for Interactive Media (AIM). The survey is the third in a series of taxation studies to gauge consumer buying behavior and awareness surrounding online Internet tax policy development.

“The BizRate.com data clearly shows that Internet consumers are tax conscious and want the choice whether or not to pay the tax at the point of purchase,” said Ben Isaacson, executive director for AIM. “If the Internet is to maintain its increasing contribution to the state and federal economies, legislators must listen to consumer response.”

Survey results indicate that income, age, gender and even experience with Internet shopping would be factors in how shoppers would tailor their online spending habits if a tax were to be imposed.

According to the survey, buyers with incomes under $20,000 are less likely to make online purchases if a sales tax is imposed. Buyers under the age of 35 (63 percent) are also more likely to reduce their online purchases due to a sales tax than older buyers (57 percent). Men (65 percent) are more likely than women (53 percent) to make fewer purchases if faced with a sales tax. Experienced online buyers (60 percent) said they would be more likely to reduce online purchases due to a sales tax than first-time buyers (50 percent) would.

Other key findings:

  • Only 3 percent of respondents said they would never buy online if they had to pay a domestic sales tax on all online purchases
  • Approximately 87 percent of online buyers said they do not purchase goods online solely to avoid a sales tax.
  • Computer and entertainment product buyers will be least likely to buy online if a sales tax is associated with the purchase
  • Gift buyers are least likely to react adversely to an online sales tax.

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