Online retailers have always been just one step ahead of face-to-face retailers. Why? Sales tax. Sales tax can certainly be a determining factor in whether or not a product is purchased by a consumer – especially when sales tax is nearly 10%, like in some areas of California.

California has recently passed a law that will charge sales tax on online purchases. This brings up many questions. Will sales tax be charged on international purchases? When will other states implement this sales tax? How will this affect the market?

More importantly, one must wonder what Amazon will do next. Many are stating that their next step is to add distribution centers throughout other states, in order to decrease shipping time. This strategy is expected to compensate for the newly implemented sales tax. Amazon may have even been pushed enough to open their own retail stores, directly competing with companies like Wal-Mart, Radio Shack, Target, and Best Buy. With this in mind, one must also wonder how these popular retail stores will respond.

Regardless, this ruling affects many different companies, which means it also affects advertising. Popular retail stores could use this ruling as ammunition against Amazon or eBay (in the future), in regards to advertising. For example, Wal-Mart’s advertising strategy could focus on bringing awareness to this tax implementation, in an attempt to steal consumers from Amazon. This can be a great opportunity for these retailers to target the largest online retailer in the world. Amazon, in turn, could respond by advertising their upcoming ability to increase shipping speeds.

Should retailers use advertising to build awareness of this tax implementation to target Amazon? Should they, instead, lower prices to compete with the massive online retailer? How do you think Amazon would respond to that? Also, what will be the future of other massive online retailers like eBay?

What is your perspective?

Looking for more info? Check out these links:
http://www.businessweek.com/ap/2012-09-13/tax-on-amazon-purchases-in-calif-dot-begins-saturday#p1

http://www.forbes.com/sites/robertwood/2013/01/28/sales-tax-amazon-fights-irs-too/

http://www.sensibleemarketing.com/2013/02/will-amazon-be-next-walmart-new-tax.html