06/27/2013 02:29 pm ET Updated Aug 27, 2013

USA: Online Retailers May Not Have the Lowest Prices for Much Longer

Online retailers in the U.S. have a huge financial advantage compared with their counterparts in over-the-counter trade. Due to a loophole in legislation, they can usually get away with not adding VAT to their prices, but the U.S. Senate has now approved a law which could change this.

Consequences for retailers

In the U.S., both large and small online retailers tend to be cheaper than their over-the-counter counterparts and are therefore winning the price wars. This is mainly because online retailers are only allowed to charge VAT (Sales Tax) in states where they have a branch.

For consumers, this means prices which can be lower than 7 percent compared with large over-the-counter chains, which tend to have branches all over the USA. According to the German price comparison website, Heise:

"This meant that small online shops in particular were unable to sell their goods to customers in other states at lower prices which couldn't be guaranteed by large chains with branches and warehouses all over the country."

The bill does, however, still require the approval of the House of Representatives before it can enter into force.