Chances are American online shops will become subject to VAT

Chances are American online shops will become subject to VAT

If the American House of Representatives follows its Senate, most American online shops will become subject to VAT. With this new legislation, the United States wants to make an end to the competitive advantage pure players have had for years over classic or multi-channel retailers.

“Marketplace Fairness Act”

At the moment American states can only impose VAT on shops with a physical location on their territory, such as a shop, an office or a warehouse. Each state can decide on its own how high the VAT is: some charge none, while in other states it can be as high as eight percent. Nonetheless, pure online shops without a physical location have always escaped VAT.

 

Not only big retail chains have been fighting against what they call “distortion of competition”, but also a pure player as Amazon, with distribution centres in many states and subject to a different VAT in almost every one of them, is asking for more uniformity.

 

Notorious opponents are among others eBay and Overstock.com, internet companies who barely have to pay any VAT. Other opponents are smaller companies, who fear they will drown in the administration that comes with all this.

 

New legislation earns governments billions

The new legislation, which was approved by a majority in the Senate earlier this week, gives each state the possibility to go directly to online shops - even those without a physical location on their territory - to charge VAT for every order they deliver in the state.

 

Some retailers with less than one million dollar in sales from distance sales could be exempt from the tax. Based on online sales of 2012, the new law would get the states about eleven billion dollar of new earnings.

 

Tackle VAT inequality

The National Retail Federation, America’s biggest retail federation, is very pleased and thanks the senators “for standing with local retailers and America’s small business owners. Today’s action in the Senate is a significant step for sales tax fairness”, said the NRF president Matthew Shay.

 

“Retailers compete for customers on many different levels, distribution channels and fronts, including service and selection, but they cannot compete on sales tax. Congress needs to address this sales tax disparity and allow retailers to compete freely and fairly. Retailers of all shapes, sizes and channels deserve a level playing field”, said Chairman of NRF Stephen Sadove.

Questions or comments? Please feel free to contact the editors


Rocket Internet wants to go public with Home24

19/01/2018

Rocket Internet wants to go public with its furniture web shop Home24 in the summer. During the next few months, it will work tirelessly to improve the web shop’s results.

Carrefour buys stake in Showroomprivé

12/01/2018

Carrefour has obtained a 17 % minority stake in flash sale seller Showroomprivé with the intent of increasing its digital and non-food reach. Former shareholder Conforama did suffer a loss.

Will free home delivery disappear?

15/12/2017

A growing number of online orders also brings additional pressure on the logistical industry. Free home delivery can no longer be maintained according to research company ECC Köln. More flexible options should be installed.

Amazon brings its private labels to Europe

14/12/2017

After it introduced Amazon Prime to an increased number of European markets, Amazon is now bringing in its own FMCG private labels. Over the past few weeks, the online department store launched several private label products in Europe and it has plans for even more. 

Amazon Echo is now available in the Benelux

11/12/2017

Amazon announced it will ship its smart speaker Amazon Echo to another 28 countries, including Belgium and the Netherlands. Its own music streaming service will also get a local launch.

Luxury manufacturers can block retailers from selling on Amazon

07/12/2017

Luxury product manufactures can block retailers from selling their merchandise on online marketplaces like Amazon. The European Court of Justice has ruled on the matter after cosmetics manufacturer Coty filed a complaint.

Back to top