Anticipated Effects of Interstate Sales Tax by Howard Kier, MBA, ABI, CPP

Sooner or later, states will be able to collect sales tax on interstate internet transactions.  The time is ripe for such a law to pass.  Major retailers are in trouble and states need more income.  Income that is lost to internet sales.  Inevitably, the law will pass.  What will happen afterwards?

Brick and mortar stores will have gained a level playing field.  But is it truly a level playing field?  Internet retailers had the advantage of price and selection.  Their storefront was the web.  While not subject to real estate costs for a physical location, the Internet store does have to have a warehouse and distribution system to get product to the customer.  Customers do not have the ability to hold the merchandise in their hands.  Finally, except in a few special cases, Internet retailers are open for business 24/7 all year round.  Something few brick and mortar retailers are capable of matching.

Meanwhile, the physical store which was once the show room for the internet (ie. Best Buy), will be able to compete on price.  Brick and mortar stores will have an advantage based on customer service.  However, the customer service will not be based on what we normally thought of as customer service.  In the new environment, customer service will be a knowledgeable sales person capable of diagnosing the customers' needs and determining the best solution for the customer.  They will also be available to educate the customer on their purchase and be there when a problem occurs. 

These days consumers are smarter than ever.  They have more information available to assist them with their purchases than ever before.   With the pricing playing field leveled, the consumer will utilize other factors to determine where to make their purchases.  The most obvious, value.  Consumers will look for the best value.  Value will include more than just the merchandise itself.  It will include ease of purchase, ability to return, knowledge of the sales people and much more.

The brick and mortar stores have been given a level playing field.  It is up to them to provide value and customer service to the consumer if they expect to survive in the competitive retail market place.