9.25% (!)

Today, I went down to Fry’s to look for memory for a Dell server (which had somehow been limping through life with its built-in 256 MB of RAM). Since the Dell was now being asked to act as a backup server, it needed more juice, and honestly, I wanted the problem solved ASAP so I could get on to other things.

Shopping around, Dell wanted $99/GB for the memory in question, plus shipping and tax. Other online places had it for about $55 + $2 for shipping. Since I wanted the memory as soon as possible–preferably yesterday, I figured I’d waste part of my lunch break, run over to Fry’s and look for the memory there. Their price: $79 + tax.

Here’s where we hit an interesting bit of consumer psychology. On one hand, for $22 more than my online alternative, I could have the memory now. And I really did want it now. But I also would have preferred 2 GB so I didn’t need to do all this again anytime soon. So really, now didn’t cost $22, it cost $46.

And then there was the 8.25% sales tax, bringing the total difference to a whopping $59.04. I might have paid $22 for now, but no way was I going to pay effectively half the purchase price just to save 3 days of waiting. Accordingly, I got back to the office and ordered from Dallas, Texas-based ComputerMemoryOutlet.com.

We consumers can be incredibly price-sensitive at times, particularly when exact alternatives are available by doing something as simple as trading off a bit of time for money and ordering mail order. In the end, I might have decided to eat the $22 and solve my immediate problem by buying at the local Fry’s, but the key to the decision was really the sales tax. In most states, sales tax mentally amounts to, “plus a little bit more” in calculating a purchase’s true cost, and is rarely decisive in itself. When you’re making a purchase decision In California, sales tax is worth actually calculating on larger purchases, since it can easily outweigh shipping and other costs.

On April 1st, Santa Clara county sales tax (where I live) will have its sales tax increased to 9.25%, one of the highest sales tax rates in the nation. In San Francisco, it goes up to 9.5%. Effectively, it changes the purchase-time mental calculation for sales tax from, “plus a bit more” to, “Add 10%”. On any purchase larger than a candy bar, 10% usually amounts to enough money to notice, at least for me.

Does anyone think this won’t make a difference to folks’ decision whether to buy in-state or out?

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