Online sales taxes?

Looks like they are coming. Too many taxing jurisdictions are losing revenue.

Of course placing a brand new tax burden on a still-growing retail sector and hitting consumers directly in the wallet sounds pretty counterproductive in a severe economic downturn. A downturn that has no horizon at the moment.

Hopefully most e-tailers can find workarounds for the coming spate of governmental overreach.

From the link:

States and local governments hope sales taxes would help them recoup part of the revenue lost amid a recession that has diminished property values and crimped demand for items sold in stores. In the fourth quarter, state sales tax collections dropped 4%, the steepest decline in 50 years, according to the Nelson A. Rockefeller Institute of Government. Online sales taxes could help states generate at least $52 billion in added revenue over the next six years, according to an Apr. 13 study conducted by three University of Tennessee professors. Requiring virtual stores to collect taxes, even in parts of the country where they don’t have physical operations, would also place e-tailers on a more even footing with brick-and-mortar stores such as Wal-Mart (WMT), which collect sales taxes on in-store as well as online purchases.

Companies that sell products over the Internet say the taxes would hamper growth. “The introduction and passage of an Internet tax bill would have adverse effects on e-commerce,” George Askew, an analyst at Stifel Nicolaus , wrote in a recent note. After New York’s law was passed, Overstock.com says it had to terminate agreements with some 3,400 Web sites that once promoted the closeout retailer in the Empire State.

Overstock ceased operating in New York altogether, says the company’s president, Jonathan E. Johnson III. After losing a court battle seeking to repeal the law, Overstock plans to file an appeal in the coming weeks, Johnson says. “These states are signing up for a lawsuit, or for businesses to pull out of their states,” he says.

Discounts may help drive online holiday sales

Some promising early reports for e-tailers.

From the WSJ’s “holiday sales” blog:

Cyber Monday Boosts Online Retail Spending

Online retail spending for the first 31 days of the holiday season starting Nov. 1 fell 2% from a year ago, but spending on Cyber Monday, the Monday after Thanksgiving, rose 15%, according to research company comScore Inc.

The report also said the four days from Black Friday through Cyber Monday saw online sales jump 13%.

“Consumers are clearly responding positively to retailers’ aggressive online discounts,” comScore Chairman Gian Fulgoni said. He added that Monday’s sales of $846 million was the second-highest total for any day since the company started keeping track six years ago.

Retail feeling the crunch

Aside from Wal-Mart, the retail numbers this quarter are pretty bleak and not promising to be much better over the traditional big holiday season.

Here’s an example from today — Abercrombie & Fitch:

Abercrombie & Fitch Reports Third Quarter Results;

Third Quarter Net Income of $63.9 Million or $0.72 Per Diluted Share;

Board of Directors Declares Quarterly Dividend of $0.175;

Company Provides Update for 2008

NEW ALBANY, Ohio, Nov. 14 /PRNewswire-FirstCall/ — Abercrombie & Fitch Co. (NYSE:ANF) today reported unaudited results which reflected third quarter net income of $63.9 million and net income per diluted share of $0.72 for the thirteen weeks ended November 1, 2008, compared to net income of $117.6 million and net income per diluted share of $1.29 for the thirteen weeks ended November 3, 2007.

  Third Quarter Highlights

   — Total Company net sales decreased 8% to $896.3; comparable store sales
      decreased 14%

   — Total direct-to-consumer net sales decreased 6% to $57.5 million

   — Abercrombie & Fitch net sales decreased 8% to $385.8 million;
      Abercrombie & Fitch comparable store sales decreased 8%

   — abercrombie net sales decreased 14% to $109.5 million, abercrombie
      comparable store sales decreased 20%

   — Hollister Co. net sales decreased 7% to $383.6 million; Hollister
      comparable store sales decreased 18%

   — RUEHL net sales increased 7% to $13.5 million; RUEHL comparable store
      sales decreased 25%

   — Net income for the third quarter was $63.9 million

   — Net income per diluted share in the third quarter was $0.72

Mike Jeffries, Chief Executive Officer and Chairman of the Board of Abercrombie & Fitch Co., said:

“Our third quarter financial results reflect a pull back in consumer spending and a difficult economic environment that is having an affect on all retailers.  However, during these difficult times, we remain firmly committed to the aspirational positioning of our brands, providing an unparalleled store experience for our customers and investing in initiatives that will allow us to continue the international expansion of our brands.  We are mindful of the current environment and will continue to operate the business with a seasoned and disciplined approach, looking for efficiencies within our operations.”

Update — Here’s a Wall Street Journal piece on the sector.

From the link:

U.S. retail sales took a record dive in October as consumers afraid for their jobs continued a retreat heading into the holiday shopping season and cut back spending on a wide variety of goods ranging from cars to furniture to electronics.

Separately, U.S. import prices fell at a record pace last month, further evidence that falling oil prices and the slowing global economy are having a rapid damping effect on inflation. Assuming that trend is confirmed by upcoming producer and consumer price reports, Federal Reserve policymakers should have added flexibility to address the credit crisis through liquidity programs and even more rate cuts without worrying about an inflationary outbreak.

Retail sales tumbled 2.8% last month from the previous month, the Commerce Department said Friday. It was the fourth drop in a row. Sales in September decreased 1.3%, revised down from an originally estimated 1.2% decline.

Economists expected a 2.4% drop in sales during October, the first month of the fourth quarter. The 2.8% drop was the largest since records began in 1992. The previous record was a 2.65% decline in November 2001.

Update 11/19/08 — And here more news, a bit more focused on the online retail sector, via AccountantsWorld:

The retail industry continued to see signs of a sharp pullback in consumer spending, both online and in stores.

Growth in online sales slowed to a near halt in October, comScore, a research firm, is expected to report on Tuesday. Separately, Lowe’s and Target reported Monday that third-quarter profit fell as consumers cut back on large home-improvement projects and discretionary purchases.

 

Online spending grew by only 1 percent over October 2007, comScore said. That was the lowest monthly growth rate since comScore began tracking e-commerce in 2001, and was down from 5 percent in September.

In the past, e-commerce has been somewhat protected from cutbacks in consumer spending that have affected retail stores, because online shopping was perceived as more convenient. Consumers also turned to online outlets to compare prices easily.