Sainsbury's checkout-free

Source: Sainsbury’s

The suggestion of including in-store app-based purchases raises the possibility the tax will hit scan & go initiatives such as Sainsbury’s SmartShop

The government is to consider hitting retailers with a new tax of up to 2% on in-store sales paid for via an app.

The move is to be considered among proposals for an online sales tax, which could also apply to click & collect orders.

The ideas are set out in the government’s final report on a year-long review of business rates in England and Wales. It says a consultation will be launched shortly on whether to introduce an online sales tax and warns it will involve “potentially arbitrary decisions on the items that are taxable or not”.

It goes on to list activities the online sales tax could apply to, including “purchases made via web-based apps while consumers are in-store” and “click & collect and online reservations, where transactions begin online but high street retailers retain a role”.

It also lists “sales agreed via channels such as email, instant messages and telephone; essentials, such as food and medicines and children’s clothes” and “how it applies to small retailers”. 

The report suggests the tax could be levied at 1% or 2%, saying it could fund a reduction in business rates for shops.

The suggestion of including in-store app-based purchases raises the possibility the tax will hit scan & go initiatives which let shoppers avoid checkouts, such as Sainsbury’s SmartShop. The scheme lets customers scan their own shopping using a smartphone and in some of the supermarket’s convenience stores they can also complete the purchase by paying in the app.

Checkout-free stores, including Tesco’s recently opened GetGo in London’s High Holborn and an Aldi soon to open in Greenwich, could also be within the scope of the tax, as they rely on automatic payment via an app when a customer leaves. 

Read more: Industry reacts to Sunak’s business rates reform, including one-year 50% cut for retail and hospitality

A number of supermarket bosses, including former Tesco CEO Dave Lewis, have voiced support for an online sales tax to fund business rates cuts. Yet the government report puts supermarkets’ growing click & collect sales in the firing line too, as well as delivered online shopping.

The Grocer understands the Treasury sees both click & collect and in-store app-based sales as posing difficult design questions which will need to be resolved if an online sales tax is pursued.

However, it has led to claims the government is at risk of defeating the point of an online sales tax.

“Whatever they can raise from it should come off the £25bn they are taking in business rates, and the £7-£8bn from retail,” said John Webber, head of business rates at property consultancy Colliers.

“To involve going into a store to buy something physically, even with an app while you’re in there, is going to defeat the object. They have to be really carefully they are not double counting, which in that scenario they would be.”

The issue of an online sales tax is said to have become so divisive within retail that industry groups are reluctant to comment on it.

The BRC has previously warned it risks becoming a future burden for the sector as online’s share of the market grows.