By Troy Brown, Demandware Retail Practice

Okay, okay, while ‘collecting taxes' may not be the highest priority on your list of ideas to drive growth this year, the Colorado Use Tax is an area where you need to be aware, and quite possibly, take action. The Policy Advisory Group, a committee of shop.org, the digital retail division of the National Retail Federation (NRF), is actively engaged on this topic. I'd like to thank Maureen Riehl, VP Government and Industry Relations Counsel at NRF, for sharing this information and giving me permission to pass on to you.

First, my disclaimer: Nothing contained in this blog should be construed as legal or tax advice. All retailers are strongly encouraged to seek personal legal counsel and tax advice to judge whether this applies to them and whether they need to do anything as a result.

Summary
Starting May 1, 2010, the new Colorado law, requires companies that sell to Colorado customers, but are not obligated to collect state sales tax, to take specific actions that encourage these customers to pay use taxes on their purchases. There are penalties for retailers for not complying with this law. Be informed and seek legal counsel.

Overview
Starting on May 1, 2010, the law requires retailers that do not have to collect Colorado's sales tax to do three things: (1) put a lengthy message on their web sites and on all invoices sent to Colorado customers informing the customers of their obligation to pay Colorado use tax on their purchases ($5 penalty for each failure); (2) send to each Colorado customer an annual statement, similar to a Form 1099, describing each purchase that the customer made during the year, including the date of purchase, amount of purchase, and whether each purchase is or is not subject to Colorado sales tax ($10 penalty for each failure); and (3) annually send to the Colorado Department of Revenue a list of the name, address, and detailed purchase information for each Colorado customer who made a purchase from that seller during the year ($10 penalty for each failure).

The law does not compel tax collection from non-nexus sellers, but it is certainly intended to "encourage" just that (and this decision goes to needing company-specific legal counsel). One way to avoid the onerous reporting requirements is to simply collect and remit the tax for the state. Another big question remains: does that include the local sales tax, too? (there are more than 280 local taxing jurisdictions in CO, each with their own ability to set rates and bases). To "wait and watch" - absent an active lawsuit or a bill to repeal this new law before the legislature adjourns for the year on May 11 - is risky.

NRF opposes the Colorado approach for the reasons below:

1. 1) Affiliate nexus statutes of this nature are, most likely, unconstitutional and therefore will not serve their intended purpose of compelling remote collection of use tax.
   
   
2. 2) This reaches far beyond the New York-type approach, and is an audit and compliance nightmare. Most troubling is the requirement in the Colorado law that companies without nexus are required to send tax notices to their customers and to provide their customers' names and addresses, along with specific information about their purchases, to the state Department of Revenue, or face penalties. Again, this is most likely unconstitutional and an enormous invasion of a customer's personal privacy. However, even if the provision is valid, this could affect Colorado's in-state retailers, too. Some multistate retailers may be structured in a way that they have one subsidiary that operates stores in Colorado, but another remote selling subsidiary that has no presence in Colorado (i.e. does not collect tax for purchase made into CO). The Colorado law imposes onerous reporting requirements on the company's out-of-state subsidiary, which will now have to collect tax. Even though there is no constitutional obligation to collect, the subsidiary may find it preferable to start tax collection rather than do the record keeping and reporting.
   
   
3. 3) While NRF supports the concept of a level playing field for tax collection for all sellers, the ends do not justify the means. The Colorado law will - or similar bills in other states could - trample on the constitutional rights of certain retailers and is still unlikely to produce much new revenue for the state. The U.S. Supreme Court has said that this is a Federal issue that must be addressed by Congress. The appropriate way for this to happen is through the Streamlined Sales Tax Project (SST).

NRF Recommendation to Sellers: Seek legal counsel, and stay tuned!

NRF Recommendation to States: There is no short cut to leveling the playing field for comprehensive sales and use tax collection. Rather than the Colorado approach with its questionable constitutionality and onerous reporting requirements, if a state is serious about requiring remote sellers to collect its use tax, then we encourage that state to become full members of the Streamlined Sales Tax Agreement and work toward Federal legislation that provides for simplicity and uniformity among all states' sales and use tax laws, and provides a meaningful collection reimbursement to all sellers who collect the states' sales and use tax.

DW Recommendation to Clients: Seek legal counsel.

So what would I do if I were running a website? I'd connect with the general counsel of my company and begin to assess what, if any, actions I need to take. Hopefully, you've already done that. But until revoked or repealed or defeated through the courts, the actions the law mandates may require unplanned resource allocation from your web team, IT team, and/or fulfillment teams to notify CO customers and collect and disseminate information.

By Sue Chapman, Demandware Merchandising Practice Leader 

Site search optimization is a critical factor in online retail success and an immediate source of competitive advantage for those merchants that do it well. Unfortunately, there is significantly more focus today on improving site navigation and not enough on site search. Addressing the problem requires that online retailers know what their customers are searching for, yet fewer than 15% of online retailers we speak with look at their search results more than once per month.

Shoppers that search know what they want - they convert at a higher rate, buy more products and spend more per order than those that navigate. Improving the online shopping experience should start at the search box because it's the quickest, most efficient way to help shoppers find what they are looking for. The only thing that stops searchers or ‘surgical shoppers' from spending money on your site is getting lost in a "No Result" experience.

As a member of Demandware's Retail Practice team, my goal is to provide actionable recommendations based on best practice analysis and industry assessment. We are in the process of building a "best practices" engine to summarize a lot of what we know and periodically publish it in the form of a whitepaper. This paper details a program and methodology called Turning "No Results" into Sales. It will show you how you can turn your current "No Result" search experience into "shopportunities" for your customers and increase sales and profits for you. It provides a methodology, best practices and tools for translating "No Result" search terms into incremental sales by:

• outlining a framework for testing the top "No Result" search terms on your shopping site using a Search Tuning Feedback Form tool;
• assisting in analyzing why "No Result" searches are returned and grouping these terms into logical buckets or types;
• providing guidelines and best practices for presenting alternatives to the shopper to keep them engaged on your site;
• reducing "No Result" searches by up to 50%;
• increasing sales and revenues for "No Result" searches through alternative product suggestions; and
• outlining a methodology for measuring your success.

By Shaun White, Demandware Retail Practice

SEO is a combination of strategy and tactics and art and science. It requires ongoing attention at multiple levels of an online retail business. It's often misunderstood and as a result, frequently under-utilized. But once you understand the fundamental elements that go into optimizing a site for organic search, it's not nearly so perplexing. And when it's managed and implemented correctly, it delivers constant results in return.

As a member of Demandware's Retail Practice team, my goal is to provide actionable recommendations based on best practice analysis and industry assessment. We are in the process of building a "best practices" engine to summarize a lot of what we know and periodically publish it in the form of a whitepaper. Here is my first piece—"Optimizing Your Online Retail Site for Organic Search". This paper highlights the untapped opportunity missed by organizations regarding organic search, the must do and don't do list of SEO, and 5 strategist considerations and organization must focus on regarding its SEO approach. The paper will also focus on the tactics and tools to use to analyze an organization's current site and then create an actionable plan.

By Kristyn Levine, Demandware Retail Practice

In the world of online retail, no place defines the difference between success and failure more than checkout. Recent industry reports put shopping cart abandonment rates at anywhere from 20 to 50%. In too many cases, cart checkout processes take too long, require too many clicks and involve too many requests for non-essential information. Shoppers get distracted, impatient and distressed. They lose interest, leave the site, or simply take a detour to shop and research at another online store. The result is a huge lost revenue opportunity.

Online customers abandon their shopping carts for lots of different reasons. Not all of them are in the merchant's control, but many are. With competition for new and existing customers as intense as ever, online retailers need to optimize their checkout processes to ensure they are doing everything they can to capitalize on existing opportunities by converting shoppers into customers and keeping customers coming back to their sites.

As a member of Demandware's Retail Practice team, my goal is to provide actionable recommendations based on best practice analysis and industry assessment. We are in the process of building a "best practices" engine to summarize a lot of what we know and periodically publish it in the form of a whitepaper. Here is my first piece - "Optimizing Online Checkout: 20 Practical Ways to Reduce Cart Abandonment and Increase Online Profits". This paper highlights some of the most common checkout mistakes today, what online retailers can do to address them and provides examples of best practices in action. It also looks at some of the other factors that influence shopping cart conversion and how they might impact your own performance. I hope you find it valuable - and most importantly actionable.

In a recent Shop.org survey, The State of Retailing Online 2009: Merchandising Report, conducted by Forrester Research, 79% of retailers said they plan to focus heavily on improving customers' checkout experience in 2010. The best practices and recommendations in this paper are a good start. They can be implemented one at a time, or many at once, but they all can help you increase shopper conversion rates and increase profitability. I encourage you to download this paper and evaluate your site against these 20 best practices and get started today!