Posted by: twotrees | September 15, 2012

A win for brick and mortar

Effective today, internet shopping for Californians means paying sales tax.  It’s about time.  For many years, internet sales have had an unfair advantage over local stores throughout the land in that they didn’t have to collect sales tax.  This difference, often 7-9% meant real price differentials for consumers, who often don’t value local retailers as much as they did saving $$.  But the reality was that those savings changed the equation for local municipalities, who needed those tax dollars to pave streets, paint schools and hire cops.

In California, where a very large share of internet purchasing is generated, this menat that hundreds of millions of potential tax dollars were not generated. And that profits from sales made by companies in other states and beyond, didn’t stay in our community.  Buying from Washington state based Amazon meant that founder Jeff Bezos and his shareholders would benefit from those profits far more than California residents ever could.  And the much lower warehousing costs for merchandise in North Dakota helps create jobs there, but is difficult to match here in California.  These are important points often lost to the average consumer.

There was a time when general merchandise profits ranged from 20-40%.  But in the hyper-competitive world market we now live, I know retailers who eek out a living on less than ten percent profit.  And for many, it’s hard to compete with the free delivery, no sales tax, liberal exchange policies that many online retailers offer.

During its nascent years, the internet needed some help to establish itself.  As I recall, Amazon lost money its first six years, big money.  But the idea was sound and more people started buying online.  So too with thousands of other sites (eBay, Overstock, etc…).  Now these companies are very much in the black and don’t need the unfair advantage they have enjoyed the past decade.  It’s about time…

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