Never before has a tax increase—a sales tax increase, to be precise—been so easily accepted by taxpayers, with hardly a newspaper editorial or a consumer group protesting. Rightly or wrongly (OK, it's wrongly), consumers in those states have been avoiding paying state sales tax and that's about to end. We would have expected at least a whimper from consumer groups.
But even more surprising than the silence from consumer advocates (including newspapers and politicians seeking re-election) is the remarkably muted defense from the E-tail community, beyond Amazon. Overstock, one of the few chains to also vigorously oppose the state changes, attacked the law on Monday (April 4) in a most baffling way.
Instead of making the argument to consumers—who are both Overstock's customers and potential customers, in addition to the bosses of the politicians they are fighting—Overstock tried turning it into a marketing promotion and made a non-consumer-friendly Constitutional argument.
Why make that argument when there is a much more compelling "the states are trying to balance their budgets by taking it out of your pockets. And these guys work for you" case to be made? Here's what Overstock did: It said "that it will award free Club O accounts ($20 value) pre-loaded with $10 in Club O Reward dollars to top customers in states where the company canceled ad contracts because of unconstitutional Sales Tax Laws."
Overstock's rationale continued: "We have decided to sever our relationships with thousands of marketing affiliates in those states, take the money we would normally pay those affiliates, and use it to reward our best customers in those states. Any customer in these states who has spent more than $300 in the past year will receive a free Club O membership (normally priced at $20) and their membership account will come preloaded with an additional $10 balance. Those qualifying who are already Club O members will instead have $20 added to their existing Club O Rewards account. There are over 150,000 customers meeting this description, to whom we are in effect transferring $30 of value, for a total economic value of over $4.5 million."
Yeah, that will turn these states right around. Amazon pulling major operations out of the state—along with a ton of jobs—didn't do it, but this program should.
The bottom line is that, eventually, E-tailers will have to collect these taxes and everything will then even out. And that's not even the wrong outcome. But for every month that this switch can be delayed is a month of incentives for consumers to shop online and additional profits for E-tailers. Why consumer forces haven't weighed in yet—and newspapers that have weighed in have overwhelmingly sided in favor of the tax increase to be paid by its readers, which is stunningly adult of them and a move rarely seen in election cycles—is a huge compliment to the brick-and-mortar marketing and lobbying efforts. Sears, your NRF dues seem to be paying off.