The New Marketplace and Relevance to Tax

A year ago, eBay announced its acquisition of Milo which provides online information on prices and availability in local stores. This should aid in the merger of online and in-store shopping and use of mobile applications. It potentially brings about a new meaning of “marketplace.” With the acquisition, Mark Carges, CTO and senior VP, global products, eBay Marketplaces stated: “Since eBay is an online marketplace and doesn’t compete with brick-and-mortar stores, adding local store inventory to the eBay marketplace is a natural extension of what we’ve been doing for 15 years – bringing buyers and sellers together to access the largest selection available anywhere.” (12/2/10 press release)

Here is a recent article from Internet Retailer, "Updated Milo app enables mobile checkout and in-store pick up" by Kevin Woodward, 12/6/11 on the use of Milo for shopping ease.

On 12/6/11, Amazon issued a call for people to help it get price information. A press release of 12/6/11 is entitled - "Is That Deal Really A Deal? Use the Price Check by Amazon App to Make Sure." It calls upon consumers to download the free "Price Check" app for the iPhone and Android and use it to check prices against what Amazon and its sales partners offer. There are four ways a consumer can input a price into the app for verification: (1) scan the product's bar code, (2) take a picture of the item for a photo match, (3) speak the name of the product into your device, or (4) type in the product name.

This all seems to get Amazon more data for helping to set its prices - and to help make sales. For example, you are in a physical store and want to see if you can get a better price at Amazon. So you use the price check app. Being connected to the Internet, you can also, of course, order the product from Amazon right then. So you get to see and touch what a store is trying to sell you, but if you find a better price at Amazon, you can purchase it right then - you, of course, won't get to take it home with you. The first two lines of the press release offer encouragement for consumers (with the right technology) to help Amazon (and help yourself at the same time):
"As an added incentive, on December 10^thAmazon is giving customers using Price Check an additional 5% discount (up to $5) off the Amazon price on up to three qualifying items in toys, electronics, sporting goods, music and DVDs."
"Shoppers can also start submitting in-store prices with the Price Check app, ensuring they are really getting a deal and allowing all Amazon customers to get the lowest prices year-round."

I think a lot of shopping will become one of checking prices (which if you are already on your computer, we have been doing for sometime) and seeing who can get it to you cheapest. Perhaps in-store shopping will just be when we want it right away. And given that we are more prone to wanting instant gratification, will keep brick-and-mortar stores in business. I think such stores though may need to find ways to bundle goods and services. For example, buy the equipment here and we'll show you how to use it or we will come to your home and set it up.

Tax relevance:

• Borders become less relevant as consumers buying online may not even know where the product or service originated. But states are moving to market sourcing for goods and services so sellers do need to know the location of the buyer. Mobile and stationary electronics will likely need to have a location default in them unless states do want to source a sale, for example, to Illinois because the California buyer was at the Chicago airport waiting to board a plane. That seems too difficult to track and audit.
• Build the sales tax assessment and collection feature into the selling websites - states need to create a "sales tax app." It will collect the sales tax at the same time the buyer clicks to buy the item with the same funding source (Paypal or credit card, for example). This should become the standard for sales tax collection. Sourcing will have to be worked out, but technology should also be able to handle that. If purchasing on your mobile device, it knows where you are and can default to pay the state's sales tax for the jurisdiction you are in AND if your state's sales tax rate is higher, it can charge the difference to your state's tax authority (unless it is a meal consumed on the premises).

Eventually, sellers will not need to deal with sales and use tax because:

• All sales would be run through the "app" so the tax is collected and remitted to the appropriate state at the same time the goods or services are purchased. Auditors would just need to verify that the technology is working.
• Sales tax bases should be broadened for many reasons (such as equity and simplicity) but would also make it easier for the app to work - full amount charged to consumer is subject to sales tax.
• States should move to exempting purchases by businesses (to eliminate pyramiding of the tax). So another verification for the app would be the type of buyer - consumer or business. But, some buyers have dual roles. So, a VAT would be better. Everyone is charged sales tax and if you are a business, you keep records to apply for a sales tax refund. But, technology should be capable of even avoiding this paperwork by a dual check - let the buyer and seller both have to enter whether the purchase is for business or consumption.

Other ideas? What do you think?