The Catch Of E-Commerce

Retail sales online continue to grow faster than sales at brick and mortar stores, according to a recent Wall Street Journal story. In 2009, e-commerce grew 11 percent in the United States, and additional research predicts it will grow another 11 percent this year.

However, e-commerce still only accounts for 7 percent of all U.S. shopping (excluding auto, travel and prescription drugs), according to the story. And retailers need to carefully consider the pros and cons of an e-commerce presence.

State laws dictate the tax liability for retailers, and a lot of times it’s not favorable to small businesses. For example, many states require customers who are in the same state as the business to pay sales tax on items they purchase online.

Meanwhile, major online retailers like Amazon.com can avoid charging those taxes for a majority of its customers, which makes it a more favorable site to shop. Some states have challenged Amazon’s tax-free reign, saying many of the retailers who sell goods through the Internet giant are from their state.

However, the free ride could soon be over, according to an article on allbusiness.com, which says many states are lobbying for an Internet sales tax to level the playing field. States say that’s millions of dollars of tax revenue lost, while the retailers charge online sellers have an unfair advantage.

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