E-commerce companies don’t have to collect sales tax from customers who live in states where they have no physical presence, which could be anything from their headquarters to a distribution center. That’s been one of the advantages that Jet has had in the marketplace over its chief rival Amazon, which has facilities in 28 states, including the most populous ones. Jet customers in most states don’t have to pay sales tax. However, that could change soon, after Walmart’s acquisition of the young e-commerce company.
The Wall Street Journal explains that Jet has physical presences (distribution centers or offices) in seven states, so only shoppers in Kansas, Nebraska, Nevada, New Jersey, New York, Ohio, and Utah have to pay sales tax on purchases from the site. Walmart, on the other hand, has a physical presence in all 50 states.
While integrating Walmart’s inventory on the Jet site would expand its offerings and create all sorts of exciting savings using the company’s cart-building algorithm, integrating with Walmart to that extent would mean losing its advantage in states that have a sales tax.
Jet founder Marc Lore sold his previous company, Quidsi (Diapers.com, Soap.com, and Wag.com), to Amazon, and it operates independently from Amazon’s distribution network. So does Zappos. However, shoppers at both sites have to pay sales tax in states where Amazon has a physical presence.
Which rules apply will depend on how the alliance between Walmart and Jet is structured, but it would mean Jet losing its main advantage for consumers over shopping on Amazon.
Wal-Mart Deal Could Jeopardize Jet.com’s Sales-Tax Advantage [Wall Street Journal]
by Laura Northrup via Consumerist
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