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Taxation

Taxation. 3-year moratorium imposed in 1998 ended Oct. 21 Congress plans to pass an extension by year’s end. Taxation. Why should Internet commerce be taxed? Why should Internet commerce NOT be taxed?. Taxation - for.

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Taxation

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  1. Taxation • 3-year moratorium imposed in 1998 ended Oct. 21 • Congress plans to pass an extension by year’s end HED 460

  2. Taxation • Why should Internet commerce be taxed? • Why should Internet commerce NOT be taxed? HED 460

  3. Taxation - for • Required to collect from customers who live in states of e-tailer presence • State/local govts argue loss of sales tax revenue harms • Bricks and mortar retail • Local schools • Local governments HED 460

  4. Taxation - against • Retailers argue state/local tax codes are complex • Lost tax revenue is a drop in the bucket since e-commerce is a small percentage of total retail sales HED 460

  5. Taxation - Michigan • State says it is no different than catalog • Puts Internet and stores on level playing field • Cost to collect is $2 million • Additional revenue is $240 million HED 460

  6. Taxation - future • Moratorium will probably be extended • Tax codes need to be simplified • Sales tax calculation and remittance software needs refining and validating HED 460

  7. Pricing • Feasible to test new pricing models • Traditional price setting is being modernized due to information availability • Internet reduces transaction costs for consumers • On-line prices are usually lower HED 460

  8. Pricing • Most prevalent model is fixed pricing • Prices are set; consumers decide • 79% of all e-tailers use it • Amazon.com, bn.com, buy.com, etoys.com, gap.com, macys.com HED 460

  9. Auctions • Publicly held sale • Property/goods sold to highest bidder • 20% of on-line sales • Amazon, eBay, Egghead, uBid, Yahoo! • Reverse auction • Buyers specify; sellers compete to offer best price – liquidprice.com HED 460

  10. Auctions - problems • Inefficient commerce and pricing • Artificially bidding up prices • Collusion • Two bidders can illegally team up to win • Payment • New systems – credit card is debited HED 460

  11. Auctions - benefits • Create hype and bolster traffic • Improve inventory management • Excess goods/returned merchandise • Generates repeat business • Estimate consumer demand • Evaluate price points for new products HED 460

  12. Name your own price • Consumer’s suggest price • Service presents price to sellers • Sellers decide whether to accept price • Similar to reverse auction • Priceline.com HED 460

  13. Demand aggregation • Group buying • Service assembles buyers who want to purchase same product • More buyers = lower prices • 1% of online sales • Actbig.com, mercata.com, mobshop.com HED 460

  14. Automatic price decline • Initial retail • Prices fall by seller-determined % at regular intervals • Prices quit declining when all is sold • Basement.com, jcpenney.com, outletzoo.com HED 460

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  16. Negotiated buy • Search for lowest prices available for specific product • Shoppers negotiate with select sellers to obtain better price • Hagglezone.com, nextag.com HED 460

  17. Barter sites • Person-to-person trading communities • Trade second-hand goods • Users negotiate with each other and reach agreement online • Mail items to each other • Intellibarter.com, swap.com, switchhouse,com, webswap.com HED 460

  18. Internet Levels playing field • Consumers • Lowers transaction costs • Price comparisons, easily and quickly • Retailers • Easy to shop the competition • Ability to track consumer clicks online • Helps identify price thresholds and willingness to pay for different products/services HED 460

  19. Synonymous pricing • Availability of pricing info places overall downward pressure on price • Creates an environment of frequent price changes • E-tailers offer similar products at the same price HED 460

  20. Synonymous pricing • Feasibility depends on nature of product • Stephen King novel is Stephen King novel, regardless of retailer • Wal-mart polo vs. Ralph Lauren polo • Differentiated products are not likely to experience synonymous pricing HED 460

  21. Synonymous pricing • Price is not always the driver • Gift giving • Some consumers are unwilling to spend time to track prices • Retailers will focus on the most important products for synonymous HED 460

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