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Will New eCommerce Tax Moves Help Local Retail?

Simon Eskow eCommerce articles Leave a Comment

Governments continue to take steps to apply sales tax to online purchases of goods from other jurisdictions. In the US, the Supreme Court will decide in July on a case brought by South Dakota to apply tax to interstate online purchases. New Zealand and Australia, likewise, intend to or will apply GST to online purchases. Local retailers see this as closing eCommerce tax loopholes that gave overseas sellers an unfair advantage.

New Zealand follows Australia on eCommerce Tax

The Labour government announced on May 1 that it wants foreign companies to apply New Zealand’s 15% GST on items worth less than $400 beginning October 2019. While Kiwi retailers lobbied for this for some time, New Zealand wasn’t the first to apply a national sales tax to overseas online purchases. Australia, reportedly an “Amazon Tax” pioneer, will start collecting 10% GST on purchases under A$1,000, beginning this July.

Retail Reaction

Australia and New Zealand’s Amazon Tax will apply to businesses selling at relatively high volume. In Australia, for example, an overseas company will have to sell more than A$75,000 a year to pay the tax. (In New Zealand, it will be $60,000). So no surprise, perhaps, that big local retailers selling at high volume were happy. Kiwi retailers say the GST loophole gave overseas sellers an unfair price advantage. They expect the Amazon Tax will not only sway customers to buy locally more often, but to add nearly $6 billion over ten years to government coffers.

No Silver Bullet

Industry experts emphasize that while an eCommerce tax on overseas goods will help retailers on pricing, it’s only part of the story. For one thing, New Zealand’s GST plan could give Amazon an incentive to launch a marketplace in New Zealand. But the bigger issue is how retailers compete in the age of Amazon.  Consumers enjoy convenience, selection and incentives from online marketplaces and eCommerce websites.

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