Heads up, entrepreneurs! There’s increasing political interest for an Internet sales tax. Although we’ve seen calls for this in the past, the topic has seen a resounding resurgence amidst budget deficits in almost all 50 states. This deficit crisis has presented many lawmakers with a golden opportunity to recoup some revenue by collecting tax on online purchases.
Venturebeat reports on five major implications you would face if you do business online.
Need for additional software:
Since there are over 7,500 independent tax jurisdictions with varying regulations, you’ll need to invest in software that can automate tax calculations, collections and filings for you. Managing differences across these jurisdictions would be impossible without drowning in maps and numbers.
A big push in paperwork:
An Internet sales tax will require you to place an extra emphasis on record keeping and form filing. To begin your new path to tax compliance, you must register in every state in which your business sells. Thus, if you’re selling nationwide, you’ll have to submit business registration forms in all 50 states, and various cities, counties, boroughs, etc. , each of which have different requirements.
Inability to position on price:
In this current heyday of ecommerce, many marketing strategies are based on price. This is particularly true if you’re active in comparison shopping engines like Google Product Search. Online shopping trends, particularly during the economic downturn, demonstrate that customers are more price conscious than ever.
Unfortunately, price will always remain an issue, and smaller online businesses must remain competitive with their larger counterparts. So even though your customers will be the ones paying the tax, you’ll likely have to lower prices to compensate for this new surcharge and prevent prices from becoming astonishingly high. This will be particularly true for luxury items.
A shift toward local marketing:
An Internet sales tax will also require your business to take a more local approach in its marketing strategy. This includes an increased push toward local SEM, such as targeted PPC and local listings like Yellow Pages. While interstate e-commerce will continue to play an important role in any revenue stream, it will be much easier and convenient to sell within your own state.
Photo by ilco.