Download Taxation - Michigan State University

Taxation
3-year moratorium imposed in 1998
ended Oct. 21
 Congress plans to pass an extension
by year’s end
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HED 460
Taxation
Why should Internet commerce be
taxed?
 Why should Internet commerce
NOT be taxed?
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HED 460
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
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Bricks and mortar retail
 Local schools
 Local governments
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HED 460
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
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HED 460
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
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HED 460
Taxation - future
Moratorium will probably be
extended
 Tax codes need to be simplified
 Sales tax calculation and
remittance software needs refining
and validating
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HED 460
Pricing
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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
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
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HED 460
Auctions
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Publicly held sale
Property/goods sold to highest bidder
20% of on-line sales
Amazon, eBay, Egghead, uBid, Yahoo!
Reverse auction
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Buyers specify; sellers compete to offer
best price – liquidprice.com
HED 460
Auctions - problems
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Inefficient commerce and pricing
Artificially bidding up prices
Collusion
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Two bidders can illegally team up to win
Payment
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New systems – credit card is debited
HED 460
Auctions - benefits
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Create hype and bolster traffic
Improve inventory management
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Excess goods/returned merchandise
Generates repeat business
Estimate consumer demand
Evaluate price points for new products
HED 460
Name your own price
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Consumer’s suggest price
Service presents price to sellers
Sellers decide whether to accept price
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Similar to reverse auction
Priceline.com
HED 460
Demand aggregation
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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
Automatic price decline
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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
HED 460
Negotiated buy
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Search for lowest prices available for
specific product
Shoppers negotiate with select sellers to
obtain better price
Hagglezone.com, nextag.com
HED 460
Barter sites
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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
Internet Levels playing field
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Consumers
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Lowers transaction costs
Price comparisons, easily and quickly
Retailers
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Easy to shop the competition
Ability to track consumer clicks online
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Helps identify price thresholds and willingness to pay
for different products/services
HED 460
Synonymous pricing
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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
Synonymous pricing
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Feasibility depends on nature of product
Stephen King novel is Stephen King novel,
regardless of retailer
 Wal-mart polo vs. Ralph Lauren polo
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Differentiated products are not likely to
experience synonymous pricing
HED 460
Synonymous pricing
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Price is not always the driver
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Gift giving
Some consumers are unwilling to spend
time to track prices
Retailers will focus on the most
important products for synonymous
HED 460