Cyber Monday arrived threatening to knock another brick out of brick-and-mortar retailers, as experts predicted more than $7.8 billion in online sales as a sequel to Black Friday’s record-setting $6.2 billion online performance.
Somewhere Karen Patterson was smiling. A day earlier, on Sunday, the Waco native now living in Midland was killing time inside Old Navy at Central Texas Marketplace. She stood in the midst of trendy apparel, but her train of thought had been derailed — by Amazon, apps and free delivery offers.
“I do 80 percent of my shopping online,” said Patterson, 42. She described her weekend haul that included saving 40 percent on Under Armour apparel by letting her fingers do the walking.
“And then the day after Thanksgiving, I was at Claire’s and noticed a singing Santa hat,” she recalled. “If I ordered online, I would get 50 percent off, and shipping was free. The store would not match that price.”
But after this season, online retailers will lose one of their advantages over their traditional competitors: Sales tax savings.
For years, many online retailers have en able to offer merchandise to out-of-state buyers without paying state and local sales tax. But the U.S. Supreme Court in June ruled that states can compel internet retailers to collect sales taxes even in states where they have no physical presence.
The decision was a relief for brick-and-mortar businesses, which have long complained of a playing field tilted toward their online competitors. States such as Texas, meanwhile, have said they were losing billions of dollars in potential tax revenue, even though some larger online retailers such as Amazon already pay sales tax.
The change won’t happen immediately. The Texas Comptroller’s Office, which collects sales taxes and sends rebates to local taxing entities, prepared proposed legislation on online sales in October. In January the office will produce a formal estimate of the impact on state finances.
Texas lawmakers will take up the Comptroller’s Office proposal in January. Under the proposal, sellers with annual revenues of more than $500,000 would have to pay the state sales tax rate of 6.25 cents per $1, plus 1.75 cents for local entities.
Passage of the bill would mean retailers outside Texas would escape the bookkeeping nightmare of researching the sales tax rates of 1,500 taxing entities statewide, said Kevin Lyons, a comptroller spokesman.
“Someone ordering online from Corpus Christi would pay the same rate as someone ordering online from Waco,” he said.
As for Texas buyers perusing the web for bargains elsewhere, they must comply with the rules imposed within each state. Those issues do not fall under the jurisdiction of the Texas Comptroller’s Office, and there remains no national consensus, said Lyons, speaking by phone.
He said online shoppers should remember that the process revolves around the seller. Buyers in Texas ordering merchandise online from a shop in Alabama, California or New York pay what those states demand.
Local shoppers pay an 8.25 percent sales tax on every dollar spent on qualifying goods and services, with 6.25 cents going to the state. Waco and McLennan County receive rebates on the balance.
If lawmakers approve the Comptroller’s Office online tax proposal, it would become the rule of law in October 2019, in time for the next Cyber Monday.
Travis Allison and Lauren Allison, who were shopping Sunday at Target with their nearly 8-month-old daughter, Carli Jo, said they are avid online shoppers. Paying a sales tax likely would not alter their buying habits. They already do so on items they buy from big-name retailers.
“We’re big Amazon people,” said Lauren Allison, a McGregor resident and X-ray technician at Baylor Scott & White Medical Center in Temple. “We’re sold on the convenience, and it’s much easier now that we have her.”
But Brandie Fillip, 44, from Robinson, who visited Kohl’s over the weekend, described herself as an unabashed “in-store type of person.”
“I want to touch it and feel it,” she said.
The National Retail Federation suggests the web and Walmart, among other retailers, can peacefully co-exist. Larger chains tout their online bargains, and dangle the best of both worlds by offering in-store pickup.
“We do not see online sales as a threat, not at all,” said Ana Smith, spokeswoman for the retail advocacy group, speaking by phone. “Our research shows 89 percent of all U.S. retail sales take place in physical stores. But if you want to connect with consumers of all ages, you need to put them in a position to interact using social media tools. Online sales are just one of many channels retailers should leverage in their approach.”
Several high-profile businesses locally have an online presence, including Magnolia Market at the Silos, Bicycle World, Bankston’s Collectibles and WRS Group, whose divisions sell medical-related instructional items.
Waco-based American Domino Co., formerly Puremco, has a shop in Lacy Lakeview, but also fills online orders from around the nation.
“Oh, my gosh, we get thousands,” said manager Erica Gray, speaking by phone. She said the holidays represent the company’s busiest time, and sets of tournament-size double-six dominoes are the most requested. They range in price from $30 to $80, depending on the degree of detail.
“Some of our customers do pay sales tax, but not all. Some buy in bulk as gifts to employees,” said Gray, adding she has heard of the changes in law and plans to research their application to American Dominoes.
Dick’s Sporting Goods, which this year opened its first Waco store, was offering 25-percent-off sales on an array of online merchandise.
Walmart.com released a statement saying iPads and TVs, gaming consoles and video games were selling well online, as were toys such as Legos and L.O.L Surprise Dolls, and home products such as Dyson vacuum cleaners and Pioneer Woman baking sets. “Interestingly,” said the Walmart statement released late Monday, “classic board games were also top sellers, including Connect 4, Sorry!, Chutes and Ladders and Candy Land.”