Two-Thirds of Consumers are Confused by Online Sales-Tax Compliance

Jul 25, 2011, 17:41 ET from International Council of Shopping Centers

Fair and Equitable Marketplace Supports Consumers' Desire for Choice, Convenience

WASHINGTON, July 25, 2011 /PRNewswire-USNewswire/ -- Sixty-four percent of U.S. consumers in states that require their residents to pay a sales tax on purchases either do not know or do not believe they are required to pay sales tax on Internet purchases if not collected by the vendor, according to a new survey by the International Council of Shopping Centers (ICSC).  The survey was conducted by Opinion Research Corporation among 1,000 consumers polled nationally to gain insight into consumer beliefs about online and traditional retail spending.

"The results of this study point out that there are widespread consumer misperceptions about the requirement to pay sales tax on Internet purchases," said Michael Kercheval, president and CEO of ICSC. "The data shows people are confused as to whether or not they are – or should be – paying tax on online purchases."

The ICSC study identified a number of key findings, including:

  • 93% of consumers would continue to shop online if taxes were collected at the point of purchase.
  • More than 50% of respondents cited "price" as the most important factor when making a purchase - both online and at a local store.
  • Nearly 75% of consumers believe that brick-and-mortar stores have an important role to play in the 21st century marketplace.

The study also found that:

Collecting online sales tax would not deter shoppers.  The data reveals that if there was 100 percent compliance with vendor collection of sales taxes on online purchases, consumer shopping behavior on the Internet would not be materially or substantively impacted.

Consumer choice, convenience and price are key decision criteria in the purchase decision. Whether buying online or in stores, "convenience" and "choice" are important factors in addition to price.  

Americans want local retail. Most Americans place continued importance on traditional brick-and-mortar retail. However, local businesses have been at risk from pure online retailers, which do not collect sales tax because they do not have any physical presence in the state in which merchandise is shipped and hope that the consumer will comply with the states' sales and use taxes.  

However, consumer compliance with the use tax payment on online purchases is generally low.  A key reason for this, as the ICSC study found, is that consumers expect the vendor to collect sales taxes if they owe them.  This consumer misperception has led to an unfair tax loophole that gives pure online vendors a tremendous advantage over local businesses and harms local communities that depend on sales taxes as a key revenue source to fund services for its residents.

The creation of a sales tax collection system that is vibrant, viable and equitable for all retailers is critical to ensuring that local retail can flourish.  "Exacting sales tax on goods and services sold over the Internet is not creating a new tax," said Dr. William F. Fox, director of the Center for Business and Economic Research at the University of Tennessee. "Rather, it is a means for states to collect revenue already due at the point of purchase to fund essential public services. Without a simple and fair system to collect taxes on remote sales, cities and states looking for alternatives to close budget gaps must evaluate higher business, income and property taxes."

The Main Street Fairness Act is the first step toward establishing a marketplace for the 21st century – one that accommodates both traditional and online retail.  Closing the online sales tax loophole would give Main Street stores a chance to compete on level ground with e-retailers around the country.

About ICSC

Founded in 1957, ICSC is the premier global trade association of the shopping center industry. Its more than 55,000 members in over 90 countries include shopping center owners, developers, managers, marketing specialists, investors, retailers and brokers, as well as academics and public officials. As the global industry trade association, ICSC links with more than 25 national and regional shopping center councils throughout the world. For more information, visit

About the Survey

This survey was conducted on behalf of ICSC by Opinion Research Corporation (ORC) using a computer assisted telephone interviewing (CATI) system randomly selected from a national probability sample of 1,012 adults comprising 504 men and 508 women 18 years of age and older, living in private households in the continental United States.  Interviewing for this survey was completed during the period July 14-17, 2011.

SOURCE International Council of Shopping Centers