Online sales tax welcome, but should not stifle future online sales, indies say

The majority of bricks and mortar retailers welcome the idea of an Online Sales Tax (OST) offsetting business rates costs, which significantly impact their physical premises, but not at the cost of stifling their future online sales, a new survey by the Independent Retailers Confederation (IRC) has found.

A Treasury consultation on whether to introduce the same has closed on Friday (May 20).

The IRC, a body of 19 trade associations representing over 100,000 independent retailers in the UK, which polled retail businesses from across its membership, said there is no consensus view from across independent retailers about the introduction of OST.

“Where the majority of retail businesses are closer to alignment is that business rates are in dire need of fundamental reform, and that if OST income was repurposed to offset business rates for small businesses operating from bricks and mortar stores, they could welcome OST,” the trade body said.

The IRC added it will be taking a neutral position on the proposal.

The survey also revealed that indie retailers want a sufficiently high qualifying threshold, starting at £2million of online sales, needs to be applied if the tax was to be introduced. They also demand an exemption for click and collect services because of the important role they play in driving footfall to shops and town centres.

Over 60 per cent of retailers believe B2C services connected to the sale of goods (e.g. delivery costs, insurances/warranties) and B2C services unconnected to the sale of goods (e.g. holidays and flights) should also be exempt. The vast majority feel that sales transacted through third-party sales and delivery platforms should be subject to OST.

“Our research found agreement that a minimum OST threshold could help to rebalance the burden of tax across the industry, generate revenue to reduce business rates for smaller businesses, modernise tax treatment of retail activity, improve the economics of storebased retail and support the attractiveness of our high streets and town centres,” the IRC said.

“It is important however that OST doesn’t hinder retailers’ investment and innovation, nor become too difficult to implement.”