As Internet shoppers know, online sales taxes have been a legal gray area since the Internet was first invented. Amazon.com
Now, 24 states are joining together to adopt a uniform policy on daily deals sites like Groupon
An unfavorable tax policy would affect the pure-play Groupon more than companies such as Google or Amazon, for which deals are a small portion of their business, or discount travel sites like Expedia
So far the group of states has agreed that taxes should not be collected when the deal is purchased, but when the coupon is exchanged for the respective good or service. With average sales tax rates nationwide near 10%, the difference in being taxed on half the normal rate or the full rate amounts to a 5% fee over the purchase.
Expecting merchants to tax a consumer at the full rate seems odd when shoppers using store-produced coupons only pay taxes on what they spend.
Amazon's resistance to collecting taxes may serve as a warning for Groupon, as online shoppers are particularly price-sensitive, and daily deal hunters tend to be even more so. Reviewers on Yelp
Interestingly, a study discovered a negative correlation between Groupon offers and Yelp ratings. On average, researchers from Boston University and Harvard found that consumers who mentioned "Groupon" or "coupon" in their review gave an average rating 10% lower than their peers. The experimenters speculated the cause could be that Groupon users are more critical, or that there was a poor fit between the merchants' businesses and the new customers.
State-by-state legal questions have also arisen in other areas of Groupon's deals. In some states, for example, it's illegal to offer discounts on alcohol, though many Groupon merchants do so. Other states require coupons to last five years before expiring, a much longer period than Groupon uses. Sometimes shoppers receive cash back for redeeming coupons for less than their face value.
The group of 24 states could reach a decision as early as late May, when it holds its next meeting. Two of the states in the organization, Kentucky and Iowa, have already issued tax policies similar to California's. In those states, sales tax should be applied to what the consumer pays if the price is listed on the coupon, as it usually is; otherwise, they must pay tax on the full retail price.
Groupon Founder Andrew Mason said five years from now he envisions a much different retail climate guided by smartphones and tablets, but his company is just one of many businesses growing from the mobile revolution. Our experts have found a well-established company with triple-digit sales in mobile that got on the bandwagon early. Learn more about this hot stock in the Fool's special free report: "The Next Trillion Dollar Revolution." You can get your free copy by clicking right here.Fool contributor Jeremy Bowman owns shares of Google but holds no other positions in the companies in this article. The Motley Fool owns shares of Google and Amazon.com. Motley Fool newsletter services have recommended buying shares of priceline.com, Google, and Amazon.com. The Motley Fool has a disclosure policy.
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