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Hawaii: The Worst State to Shop Online
By Selected News Articles @ 2:57 PM :: 13421 Views :: Energy, Environment, National News, Ethics

The Best (And Worst) States to Live for Online Shoppers

by Jeff Nobbs on March 16, 2011 Extrabux.com

Two of our most valued commodities in the world today are time and money. That notion is actually why we started Extrabux.com in the first place, to save online shoppers as much time and money as possible. We obsess over it. So naturally when determining the best places for online shoppers to live, we considered four factors; shipping time and costs, sales tax rates and the chance of having to pay sales tax at all–all of which contribute to how much you pay for your online order and how much time you spend waiting for it.

So after analyzing each state’s online sales tax incongruities along with the varying shipping times and costs, we’ve determined the top 5 best and worst places for online shoppers to live–and that we are moving to Delaware.

Five Best States to Live for Online Shoppers

1. Delaware

It’s no coincidence that “It’s good being first” is Delaware’s state slogan as its 2.74 days average shipping time (6th shortest in U.S.), $4.07 average shipping costs (tied 3rd lowest) and 0% sales tax (tied 1st lowest) clearly make it our number one place for online shoppers to live.

Shipping Transit Times to Delaware with Distribution Center Locations

Not only do Delawareans avoid paying sales tax on every online order, they have some of the lowest shipping costs and fastest shipping times. The map above shows how many days it takes for a UPS shipment to arrive in Delaware from a retailer distribution center, with the majority of distribution centers in a region with a delivery time of only 1-2 days (in yellow or brown.)

 

2. Mississippi

The fact that only 5% of online retailers charge sales tax to Mississippi residents combined with its relative proximity to east coast distribution centers make Mississippi our top southern state and #2 on our list.

3. New Hampshire

Although New Hampshire residents may wait a bit longer for their packages (3.52 days on average) they never pay sales tax. We suggest New Hampshirites use the extra money saved on sales tax for expedited shipping.

4. West Virginia

West Virginia residents enjoy some of the quickest shipping times in the country with an average shipping time of only 2.72 days. The #4 state on our list sits right between distribution center hubs in Pennsylvania, Ohio and Kentucky but has a small retailer presence itself—meaning very few online retailers charge sales tax to West Virginia residents.

5. Oregon

Oregon residents always pay 0% sales tax on their online orders; however delivery times are less consistent than other states. While an order from a west coast distribution center only takes a day or two to arrive, shipments from an east coast distribution center take almost a week. On average, shipments to Oregon take 3.8 days.

Check how your state compares to the top 5!

Five Worst States to Live for Online Shoppers

50. Hawaii

Although Hawaii residents don’t pay too much for sales tax (only 4.25% on average), they have to pay the equivalent of overnight shipping for the slowest shipping times in the country. On average, an order shipped to Hawaii costs $19.17 and spends 4.57 days in transit.

49. Alaska

Alaska residents also pay very little in online sales tax (1.7% on average), but the shipping rates and shipping times are just about as bad as Hawaii’s.

48. California

About 50% of online retailers charge sales tax to California residents, which is more than in any other state. Combine that with an average sales tax of 8.96% (2nd highest) and you’re looking at an additional 4.5% in sales tax costs, on average. In addition, Californians wait 4-5 days for shipments coming from an east coast distribution center.

47. New York

New York residents pay, on average, 8.16% in sales tax with about 46% of retailers charging sales tax to the state’s online shoppers. Although shipping times are pretty quick, the additional costs of tax make New York a costly state to live in for online shoppers.

46. Washington

Because pretty much every non-Seattle shipping distribution center is thousands of miles away, Washington has the slowest average shipping time of all states in the continental U.S. Those long shipping distances also make the cost of shipping more expensive. To make matters worse, Washington has the 5th highest average sales tax rate at 8.45%.

 

The scatter plot below gives a visual summary of each state’s average tax and shipping costs and average shipping times.

Best Online Shopping States Scatter Plot

Before we dive into an analysis of how we standardized tax rates and calculated shipping costs to determine the best online shopping states, a quick lesson in online sales tax: Only when the online retailer you’re buying from has a physical presence (a warehouse, a store, headquarters, etc.) in your state, do you pay sales tax on that order. And every state has a different base sales tax rate, unless you live in one of a handful of states, like #1 on our list, where online shoppers never pay sales tax.

Moving on to shipping… There are only a few factors that online retailers consider when calculating shipping times and costs: your order subtotal, shipping package dimensions/weight, and your distance from their shipping distribution center. Since the first two are the same in every state, your proximity to an online retailer’s distribution center can be what sets you apart from #50 on our list.

Shipping Transit Time

To determine the best and worst states for online shopping, we first considered the location of online retailers’ shipping distribution centers. The closer you are to a retailer’s distribution center, the sooner you’ll get your item.

Map of Average Shipping Times by State

The majority of distribution centers are located on the east coast, meaning that residents in that region usually receive their online purchases the fastest.

 

Shipping Cost

For some stores the shipping cost is based on the order total. For many other stores the shipping cost is based on your distance from the shipping distribution center and the weight of the item. To determine the average shipping cost per state, we took a large sample set of popular products on Extrabux.com, each with 2-45 different sellers, and found the average shipping cost per product for 50 different zip codes (one in each state). We then averaged all these products’ average shipping costs for each of the 50 states.

Map of Average Shipping Costs by State

Unless you live in Alaska or Hawaii, shipping costs vary only slightly based on where in the country you’re located.

Sales Tax

Because the sales tax for online purchases can be as high as 11.725% for some cities (in Fredonia, Arizona to be exact), it is an important factor in determining the best states for online shoppers to live. The following map shows the average sales tax rate in each state, which we determined by averaging the total sales tax of every city in each state:

Map of Average Sales Tax Rate by State

But the above graph only tells half the story. For our purposes, it doesn’t matter how high the sales tax rate in your state is if only a small fraction of online retailers ever charge sales tax there (as with those lucky Mississippians). The following map shows which percentage of Extrabux’s 1,500 retailers charge sales tax in each state, or in other words, in which states these retailers have a physical presence (headquarters, brick and mortar store, distribution center, etc.)

U.S. Map of Online Retailer Physical Presences or Nexus

When we multiply a state’s average sales tax rate by the percentage of retailers that charge sales tax in that state, we find the average sales tax you can expect to pay on any given order (officially termed “standardized sales tax rate” by… me).

Map of Standardized Sales Tax Rate by State

Voila! So unless you live in Oregon, Montana, New Hampshire or Delaware, you should budget in about 1-5% of your online spending toward sales tax… and another 99% or so toward purchases on Extrabux.com.

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