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Retail Convergence Accompanied by Tax Complexities

Greg Chapman
Retail Convergence Accompanied by Tax Complexities

Greg Chapman is Senior Vice President of Avalara, which offers multi-channel merchants solutions for automated tax calculations, easy returns preparation, and integrated document management; former Amazon executive. He discusses retail convergence along with growing tax complexities in Part 5 of EcommerceBytes Online Selling Trends 2019.

In 2019, we’ll continue to see marketplaces and traditional retailers converge. It’s happening both ways, where marketplaces like Amazon are moving to forms of traditional retail, and traditional retailers like Albertsons are making the move to marketplaces to stay relevant in the digital economy.

This creates complexity for businesses and governments alike – especially when it comes to how marketplaces are taxed. By 2020 every U.S. state will have a law forcing marketplaces to collect sales tax in that state – whether they have a physical presence or sell remotely.

Marketplaces will continue to be the new “department store.” 2018 saw the death of the beloved Toys R Us. Sears and JCPenny are having their fair share of struggles as well, despite once being successful forces in retail. Marketplaces are continuing to thrive.

In 2019, we will continue to see marketplaces take over as top revenue drivers in retail versus the traditional department store. Even though some retailers like Walmart or Target are working to innovate beyond their traditional business models, this won’t be enough to save most department stores from slight (or in some cases, rapid) decline.

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2019 will see consumers as the driving force behind where businesses need to collect and remit taxes. We’ve moved beyond this old historical world where it was the retailer’s choice based on where they had property and people. Now with the South Dakota v. Wayfair case, where the Supreme Court ruled that states would be allowed to collect internet sales tax, that control is in the hands of the consumers.

In 2019 every retailer needs to know what is and isn’t taxable everywhere, because consumers are determining where a retailer needs to collect. Retailers don’t know where their next customer is coming from, so they need to be prepared.

By 2025, real-time tax approval and remittance will be a global topic of conversation. Countries like Brazil, Italy and Poland are already implementing real-time compliance and accounting. However, the United States has always been steps behind when it comes to digital taxation.

I predict while definitely a topic of discussion, the US government will not approve real-time taxation at the time of sale, because this would be a massive technology issue that our current infrastructure cannot support and that the government is not willing to invest in.

Introduction to Online Selling Trends 2019: Back to Basics
1) Diversification and Expansion Beyond Marketplaces
2) New Sales Tax Obligations
3) An Increase in Returns Combined with High Demand for Used Goods
4) Major Changes in USPS Rate Structure, Adoption of Voice Technology
5) Retail Convergence Accompanied by Tax Complexities
6) Increasing Cost and Complexity of Parcel Shipping
7) “Glass Box” in Artificial Intelligence, In-Store Personalization
8) Continued Dominance of Ecommerce by Amazon

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.