Did you pay sales tax when shopping online?
By GREGORY HERBERT
Capital News Service

LANSING – The Saline Picture Frame Co. began using the Internet to its advantage in 2003 to promote a local benefit called Circle of Art.

Shortly after, the store decided to try its luck at marketing products online.

Now, Internet sales make up 12 percent of purchases, and the company sells online to places as far away as North Carolina and Texas.

That’s just one example of how technology has revolutionized the way people approach their daily lives. Since the emergence of the Internet, they expect things to be faster, easier and more efficient.

Online shopping has gained popularity due to its ease and often lower prices - but it’s not without drawbacks or controversies.

For example, out-of-state online sellers many times choose not to collect sales tax from Michigan buyers.

The Michigan Department of Treasury says that “the sales and use tax revenue base is being eroded by rapidly growing remote sales” by mail and the Internet.

It estimates that $283 million in total taxes was lost in 2006 and warns that amount could grow to $381 million by 2009.

Tom Scott, vice president of public affairs and communication for the Michigan Retailers Association, said the failure of many out-of-state sellers to collect the 6 percent sales tax “does have some effect” on traditional brick-and-mortar merchants.

According to Scott, retailers most hurt by the growth of Internet shopping include travel agents, who compete with on-line sellers of airline tickets, and small book and record stores that lose business to online music downloads and Internet operations such as Amazon.

While many traditional stores are suffering in the new age of Internet shopping, others are taking the initiative to expand their business.

Retailers “are realizing that an Internet store and a brick-and-mortar store go hand-in-hand,” said Scott. “There are more efforts to try and meet the customers’ needs and to allow them to shop however he or she wants.”

Another store that is taking advantage of online selling is Touch of Finland in Marquette.

According to owner Bryan LaChapell, the store began selling on the Internet around 2000.

LaChapell said that his store moved online because much of its business comes from tourists in the summer and it “wanted to reach out to them at other times of the year.”

Since expanding to the Internet, LaChapell said that online sales are seeing double-digit growth yearly. The store now sells worldwide to places like Finland, England, Australia, Ireland and France.

Roberta Schultz, professor of marketing at Western Michigan University, said that retailers aren’t forced to offer Internet sales, but it’s to their advantage.

“Some customers will examine product offerings on line and either buy then or physically go to the brick and mortar. Some will use the Web site for finding custom items or items that weren't available inthe physical store,” said Shultz.

Peter Bowe, owner of Saline Picture Frame, said that “it was a very gradual process “ when the store began marketing on the Internet.

Selling online allows it to target a different market said Bowe. There are only a finite number of customers in a given geographic area, but the Internet enables it to sell all over the country.

One worry is that with the rise of online shopping, traditional brick-and-mortar stores might eventually cease to exist.

“We do find the younger demographic looks online first,” said Bowe.

But while Bowe admits that Internet shopping is easy for many people, he predicted that traditional stores won’t go by the wayside anytime soon.

Schultz agreed, saying, “Retailers are definitely not becoming a thing of the past. With privacy issues and identity (theft) scares, customers may actually feel more secure transacting business with local brick and mortars. People still like the experience of shopping and being able to touch and feel their purchases.”

In the meantime, Scott said that the retailers association will try to level the playing field by pushing for federal legislation that would require all online stores to collect sales tax.

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© 2007, Capital News Service, Michigan State University School of Journalism