By Felipe Korzenny, Ph.D.
Many local merchants and multiple brick and mortar retailers complain that online merchants have an unfair advantage because many of them do not charge State and local taxes to purchasers. That is an interesting empirical question, particularly in the context of our multicultural society.
Are consumers more likely to buy online to save on taxes, or are they more attracted to online retailers because of convenience? That is the key question guiding this study.
In the Spring of 2012, at the Center for Hispanic Marketing Communication of Florida State University, in collaboration with Research Now, we collected data for our yearly Multicultural Marketing Study. We asked consumers to tell us how much they agree or disagree with the following statements:
– I purchase products online to save the money I would have to pay for State taxes
– If online merchants charged State tax I would continue purchasing online at the same rate I do now
Respondents could agree or disagree on a scale that went from completely disagree (0) to Completely agree (5).
Interestingly, across all respondents the average agreement with the first statement was 2.42 and 2.5 with the second statement, almost exactly in the middle of the scale. These overall trends appear to indicate that paying or not paying State taxes when shopping online is not a major consideration for shopping online. These findings tend to negate politicians’ and brick and mortar merchant arguments that advocate that local merchants would fare better if State taxes were imposed on online merchants.
The breakdown by major ethnic groups reveals some interesting but mild differences.
Statistically, Asians agreed the most with “I purchase products online to save the money I would have to pay for State taxes.” Hispanics were second and African Americans and Non-Hispanic Whites were least likely to agree with the statement. Still the differences are relatively small. Frugality may account for some of these differences. Still, even the largest mean of 2.8 for Asians is still relatively small in the context of the scale and seems to indicate that saving on State taxes is not a major motivation for purchasing online.
Even though the differences here are again relatively small, the tendency for non Hispanic Whites to agree more strongly with the statement “If online merchants charged State tax I would continue purchasing online at the same rate I do now” indicates cultural differences in the perception of value and saving on taxes. There was not statistically significant difference among Asians, Hispanics, and African Americans.
In sum, Asians seem to be somewhat more motivated by tax savings when purchasing online, and non Hispanic Whites appear to be more indifferent to online purchase taxation. Still, the main finding is clearly that overall, the impact of State taxing of online purchases is not likely to make a major difference. Convenience appears to be a major motivation for making online purchases. The cost of fuel and the amount of time that it takes to shop in brick and mortar shops does not appear to compensate for State taxation. It is unfortunate that brick and mortar businesses may not count on State taxation of line purchases to strengthen their businesses to any large extent. Perhaps the biggest lesson for marketers is that regardless of online taxation brick and mortar merchants need to transition to having a presence online. Also, the results of this research do point to cultural differences in perceptions of online purchase taxation that can be of interest to marketers in their positioning of their offerings.
The data for this study was collected by Research Now of Dallas, Texas, thanks to the generous initiative of Ms. Melanie Courtright. Research Now contributed these data to the research efforts of the Center for Hispanic Marketing Communication at Florida State University. This online survey included the responses of 936 Asians, 458 African Americans, 833 Hispanics, and 456 non Hispanic Whites. This national sample had quotas for US region, age, and gender to increase representativeness.