Currently, online sellers are only required by law to collect tax on the states they have a physical presence in. Online only businesses are not required to charge sales tax and consumers who don’t pay sales tax on purchases they make online are supposed to pay that tax to their state. But, that rarely happens. Only 1% of consumers actually follow that law and the rest get away with it.
Consumers enjoy the concept of buying online to avoid tax and this may be coming to an end soon if the bill for internet sales tax law is passed. Some say, that the bill passing will be an early Christmas for Retailers that have a physical presence. In a survey taken by an advisory firm (Alix Partners), 30% of online shoppers said they would stop shopping online and shop more at retail stores that have a physical location if all online business started taxing. The other half of the people surveyed said the sales tax would not affect their online shopping habits. Management for retailers need to figure out the pros and cons of the sales tax online. Some will be affected while others will not be.
Companies like Amazon were against the online sales tax bill passing at first. After years of opposition, Amazon also is supporting the bill because they are already collecting sales tax in nine of the states where it has warehouses. While Amazon is supporting the bill now, many other online retailers are opposing the bill saying that it would hurt their business and it would be an administrative nightmare because they would have to manage to determine tax rates for different states and locations at checkout. EBay another large online retailer like Amazon, has a slightly different opinion on the tax law. John Donahoe, the CEO of EBay says that if congress does pass the online sales legislation, small businesses with less than 50 employees or less than $10 million in annual out of state sales should be exempt from the sales tax law nationwide. EBay is not completely opposing the legislation, but they are saying that it should have some exemptions to it. Americans for Tax Reform, an anti-tax group also strongly opposed the bill as well as other online retailers.
The law would only apply to online sellers that have at least $1 million in sales and do not have a physical store or warehouse. If the bill is passes it is estimated that more than $12 billion in additional sales taxes will be collected from online purchases each year. The only concern of the bill passing is its affect on online businesses. This could be a possible nightmare for them and really hurt their business. The bill has the full support of retailers including Best Buy, Target, Wal-Mart, and Barnes and Noble because they already are required to charge tax online because they have physical presence in most states.
What could be possible techniques for online business to keep running despite them charging online tax? Do you think that retailers with physical presence will benefit from this bill passing?
Is buying in bulk really more cost efficient? Yes and no. Whole sellers like Costco and Sam’s club sell their products in bulks to their customers. Both Costco and Sam’s club give out the idea to the public that if they buy in bulk, they are saving money. This is not necessarily true. It depends on what you are buying.
For example, Produce is a “do not buy” in bulks for obvious reasons of course. How long would it last you? It would go bad and end up in the trash if you don’t use it up quick. But frozen foods and meats are products that you should buy in bulks. It is more cost efficient to buy them in large quantities and it will last you long. The disadvantages of buying in bulk and being apart of the wholesale clubs is the annual membership fees. It also easy to get carried away and go over your budget when you are buying in bulk. Expired shelf life can also be a disadvantage. But despite the disadvantages, whole sellers manage to attract people to them. This is because of the savings in buying in large quantities and having to make less shopping trips, which overall saves you time and transportation costs. The savings are the main reason as to why Costco and Sam’s club are so successful.
Now whether Sam’s club is a better whole seller or Costco is the question. Each of them have different management techniques.
One of the critical decisions in Operations management is the location. Sam’s club is located in areas where people have to budget shop while Costco tends to be located in the wealthier suburbs. In terms of managing quality is concerned, Costco provides better quality and less selection in their management techniques while Sam’s club offers more selection in their products but with lower quality. Hence, why Sam’s club is a better place for most everyday necessities such as toilet paper and water bottles in which brand name does not matter. But, Costco is better for those looking for better brand names such as in clothing. It is also proven that Sam’s club membership fee is cheaper than Costco’s. Costco pays their employees more and that actually effects the environment in the store. If the employees are getting paid well, they will have a better work environment with less stress; therefore providing better customer service.
Overall, I prefer Costco over Sam’s club. This is because of the excellent customer service they provide. Management is excellent at choosing their employees and providing a good environment. The greeting workers that provide samples of products during the shopping experience is a plus point for Costco. Although the membership may be a little more pricey then Sam’s club, the products at Costco are much better in quality which is more important to me.
Would you prefer to have a membership at Costco or Sams club and why? Overall, is it better to buy in bulks?