MIT Study: Online Retailers Should Avoid Sales Tax States
Online retailers that open actual stores during the holiday season are shooting themselves in the foot, according to researchers at the Massachusetts Institute of Technology Sloan School of Management.
State sales tax laws provide a disincentive to both retailers and customers, according to the Sloan School researchers.
Opening a physical store and thus being required to charge sales tax, causes online shoppers to search for items at better prices at other online retail sites. The Sloan researchers claim that when retailers charge sales tax online, customer demand drops about 16 percent.
Retailers can offset the effects of setting up shop in a high tax state by offering deep discounts online, the researchers found. But the Sloan paper also suggests that sales tax obligations are "a significant deterrent" to opening physical stores in high-tax states.
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