Online sales tax (OST)

legal updates

With different interpretations of distance sales being bandied about, it is hard to see if and how OST will ever get implemented.

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As some dealers are aware, there is an ongoing government consultation in regard to online sales tax. The OST consultation was promised as part of the Autumn 2021 Budget to look at levelling out what are perceived as cost imbalances between online retailers and those paying business rates as bricks and mortar businesses. One would proffer this is really about large online retailers like Amazon and the level of tax they may or may not pay, but the entire retail industry is being considered.

The consultation document describes vehicle sales as a “traditionally in person industry”.  Of course, even before the various lockdowns, car dealers were increasingly using websites and other online portals to sell vehicles. Added to that, we have the likes of online car retailers such as Cinch and other proposed agency models for vehicles which will cause further change. As such, we are less of a traditionally in person industry than ever before. This itself presents issues for any potential OST as it could lead to some business paying an OST on top of bricks and mortar business rates.

If the government say the tax is exclusively for online businesses, what is to stop these online businesses opening up a central retail unit to avoid the OST?

Further, we already have grey areas around what is classed as a distance sale. Technically, any sale where a deal is agreed and the customer has paid a deposit before setting eyes on the vehicle, is a distance sale. The Motor Ombudsman seem to agree this is the case, but at the same time appear to suggest the contract can be unclassified as a distance sale if the customer later comes into collect the vehicle or sign paperwork. Any law student will be able to tell you that a contract can be verbal, and therefore, the signing of paperwork is irrelevant. If a deal is concluded over the phone before the customer has seen the car, the law says it’s a distance sale. It would be different if the customer had only paid a reservation fee, or potentially, if the deal was renegotiated when they did see the car. However, as is clear from the European Directive, on which the 2013 version of what we colloquially refer to as the Distance Sale Regulations are based, states:

“In concluding a distance contract, the parties may also use a combination of several different means of distance communication (e.g. website, mobile app, or phone call). The fact that parties meet each other after concluding the distance contract, typically at the time of delivery or payment, should not change the classification of a contract as a distance contract.”


“a binding reservation made, for example, by telephone of goods to be collected or services to be received at a certain time is likely to constitute a distance contract for the purposes of the Directive.”

Until a higher court makes a firm interpretation of the 2013 Regulations, traders should continue to treat deals agreed before the customer views the vehicle as a distance sale. The safest practice would be to take a nonbinding reservation fee and credit that against any deal confirmed once the customer has turned up to view/collect the vehicle.

So, with many businesses being both online and bricks and mortar, and with different interpretations of distance sales being bandied about, it is hard to see if and how OST will ever get implemented. All we can do now, is watch this space…

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Nona BowkisHead of Legal Services / SolicitorRead More by this author

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