I’ve thought long and hard about this. If the internet tax bill passes in Washington D.C., it will no longer be worth it for Customwave to build shopping carts for small businesses.
There are a lot of reasons for this. The biggest reason is that on a technical level, it’s going to be a nightmare for companies like Magento to figure out how to put in each state’s sales tax into the database and then have to track the IP address for each user based on what state they’re in. I’m not saying it’s impossible, but it will take them a while to figure out. And the cost for small businesses’ like Customwave to use shopping cart programs like this to build shopping carts like this will most likely go up. Joy.
Then there’s the fact that small business owners will turn to companies like us at Customwave to explain how this new internet tax deal works. And we don’t want to have to spend the extra time to become experts in whatever boondongle of legislation is passed and then take the time to explain how it works. And our clients won’t like it if we charge for our support on the phone. They’ll think we should include for free in the service.
Then there’s the issue that this tax will make it almost impossible for small businesses to make money with their shopping carts. It’s been polled to countless focus groups and surveys that the #1 reason people will buy a product off the internet is they’re trying to find a lower price than the nearby stores have. I know the politicians have been talking up taxing big corporations like Amazon, Ebay, Wal Mart, etc, but the small business will be hurt the most. Because a small business already has a very small profit margin with them trying to compete on price, after this tax, they’ll have even less money left over for themselves. And for a lot of companies, it’ll make having a shopping cart not worth it to them.
So, I’ve heard the argument about how the states are broke and they need to find new ways to bring in new money by taxing the internet. Well, here are the unintended consequences of their bill:
- Internet marketing companies like Customwave will start to refuse to build shopping carts. But if they do decide to build shopping carts they will for sure charge more money for the reasons I stated above.
- Programming companies like Magento might decide to leave the shopping cart business or charge more. This will also drive up the price for a small business having a shopping cart.
- There will now be an increased burden on small businesses to have yet another place they have to keep track of taxes. So now they’ll spend time on this instead of spending time growing their business, which would help create new jobs.
- Lots of small businesses will abandon their shopping carts and pull the plug because of higher prices and the hassle of being taxed. This will drive their revenue down being there’s one less place for them to make money.
The supposed “Fairness in the Marketplace” legislation (what the internet tax bill is ironically being called), I argue will harm small businesses more than help them. And the only people that will gain the most by this is people in the government that will be TAKING yet even more money from the private sector to spend it whichever special interest they need to pay back.