How Online Shoppers Think About Sales Tax
- July 16, 2015 | Ryan O'Donnell
It isn't hard to find merchants who voice great concern regarding dealing with sales tax on online purchases. Sales tax (or lack thereof) is often cited as a pricing differentiator (one way or the other) that can make or break an online business. Sellers will go to great lengths to avoid triggering nexus and having to collect sales tax. Believe it or not, we have users who actually pay sales tax for their customers to avoid having to charge a higher price.
With increased success and business growth, however, most online sellers are inevitably forced to confront the omnipresent specter of sales tax compliance beyond their home state. That got us thinking about how important sales tax really is to online shoppers when they are choosing where to purchase online. Where do taxes fall in the order of store selection criteria?
We turned to Google Surveys to get an answer.
For our survey, we asked one simple question, "When choosing where to shop online, which do you find to be the most compelling?" and offered the following four options survey participants could choose from:
- User reviews and ratings
- No questions asked return policy
- Tax free buying
- Product recommendations
The order of the choices was randomized and the survey achieved 13,545 impressions and 1,500 responses. Respondents were slightly overrepresented in the midwest (+3.5%) and slightly underrepresented in the south (-5.2%). Finally, respondents skewed younger (18-34 years old) and male (605 male vs. 443 female).
Filtering by Gender
The order of online store preference held for both male and female respondents. Although males preferred tax free buying to a "no questions asked" return policy. That being said, the small sample sizes began to rear their head here (and even more so as we segmented further) so take into account the error bars which indicated males and females may think the same about the store features we offered in our survey. Something online store owners may find surprising.
What we found interesting about this data wasn't the fact that tax free buying wasn't at the top of the list. Rather, it was how much it lagged the combined total of "User reviews and ratings" and "No questions asked return policy"--73.3% vs. 15.1%. Quite a gap! If you're spending any time at all worrying about whether to collect sales tax in your online store and you haven't addressed reviews, ratings, and your return policy, you may need to rethink what you are prioritizing. The same could be said for product recommendations give that it falls to the bottom of the list.
Of course, for many sellers on platforms like Amazon, Etsy, or eBay, total control of what features and functionality your store offers may be out of your hands. If you're running your own store or leveraging a shopping cart solution such as Shopify, however, consider this data when optimizing your shopping experience.