February 07, 2001, 1:45 PM — WITH THE BLOOM off the pure-play e-commerce rose, two big name e-tailers Amazon.com and Buy.com this week announced strategies to achieve profitability sooner, including layoffs and the refocusing of resources on core business.
Although many are struggling for financial viability, e-commerce companies this year may sidestep a major Internet tax blow.
State government groups recently scaled back efforts to standardize sales tax collection across states with such a tax. That effort could have paved the way for lawmakers to begin demanding that Internet vendors collect sales tax owed.
States by 2003 could lose more than $23 billion in uncollected sales tax on Internet purchases, according to estimates prepared by the Center for Business and Economic Research at the University of Tennessee.
To prompt more e-businesses to voluntarily collect sales tax on remote purchases -- which consumers owe but rarely submit on their own -- the National Conference of State Legislatures (NCSL) spearheaded an effort to make this collection easier. But Washington-based NCSL's efforts don't stretch beyond the administrative, proposing only such things as outlining a standardized mechanism that companies could use to remit sales tax on remote purchases.
Taken off the table were more controversial items such as a set of "uniform definitions." These common definitions would have dictated which food items, for example, are taxable -- just one area where states vary widely. "We would have met with a great deal of opposition," said Neal Osten, an NCSL committee director.
Lacking widescale uniformity, NCSL's Streamlined Sales Tax Project (SSTP) will likely be used to coax more collection, but won't become a tool to convince Congress to mandate collection on e-commerce sales, most agree.
"For [NCSL] to say to Congress, 'Look at SSTP, we've simplified,' is going to be a much harder sell [without uniform definitions]," said Washington-based Stan Sokul, who represents the Direct Marketing Association.
*Retailers are taking different approaches to adjust to a tough market
Pure plays cut costs to achieve profitability:
*Amazon.com cut 1,300 jobs, closed distribution and service centers, and expects to see fourth-quarter profitability
Click-and-mortars install Web kiosks:
*Staples.com, among others, plans to stem lost sales with Web kiosks in stores
Dot-coms purchase competitors to help consolidate strengths:
CarsDirect.com gets a partnership with Amazon.com through its acquisition of Greenlight.com