It’s official: E-commerce’s secret advantage may soon be over, giving way to what could be a wildly busy time for the retail real estate industry.
Up until now, web-based retailers were not required to collect sales taxes on internet sales in states where they don’t have a physical presence. Billions of dollars in uncollected sales tax revenue have hurt not only individual states, but also brick-and-mortar retailers. The current sales tax system unfairly favors online retailers to the disadvantage of brick-and-mortar retailers.
Simply put, shoppers buy online in order to avoid paying the sales tax. Many retailers with a physical store report the phenomenon of “showrooming,” where consumers come into their stores to touch, see and try the merchandise and then order it online. This discriminatory practice undermines not only physical retailers but also the local municipalities where over $24 billion of sales tax was lost.
This practice negatively impacts physical retailers, jobs and the economy. The solution to level the playing field is the The Marketplace Fairness Act, which would mandate such a change. It has already passed in the U.S. Senate and is now before the House of Representatives.
If passed by Congress, the Marketplace Fairness Act will also bring about serious positive results for owners of retail properties.
Once web-based retailers are required to collect sales taxes the same way their brick-and-mortar competitors do, landlords are likely to have a plethora of new tenants to choose from as these online chains launch their own physical stores to compete with and restore their competitive edge brick-and-mortar stores. Many web retailers are already anticipating the change and seeking out retail stores and warehouses in advance of this legislation.
In an effort to remain competitive, the behemoth online retailers like Amazon, eBay, and other online retailers will get even more serious about moving into shopping centers once their sales-tax advantage is gone.
The advantage to having a physical presence will not only enhance online retailers ability to retain their current customers but also engage new ones. In addition, real estate situated in strong shopping districts should see an increase in leasing activity as the bill gets passed. And that’s a great deal for everyone.