Report: Online Retailers Opening Stores May See Sales Drop
Cambridge, Mass. Online retailers who open a bricks-and-mortar location during the holiday shopping season could see more than a 15% decrease in online sales, according to research by professors at MIT Sloan School of Management.
The opening of stores triggers the requirement to charge sales tax, which affects online sales as customers start to research alternative options to avoid the tax, the professors found in a white paper titled, "How does an Obligation to Collect Sales Tax Affect Consumer and Firm Behavior?”
The report also found that U.S. state sales-tax laws have a significant impact on both customer and retailer behavior, providing a disincentive for retailers to establish a physical presence in high-tax states as well as a disincentive for customers to make online purchases when sales tax is charged.
Retail sites are required to charge state sales tax once they establish a presence in a state, such as a retail store, warehouse or office.