Overstock.com 2012 Annual Report Download - page 25

Table of Contents
could harm our business. If other states similarly enact and are successful in enforcing similar commercial activity tax laws, these also could harm our
business.
Several other states have enacted laws requiring remote vendors to notify resident purchasers in those states of their obligation to pay a use tax on
their purchases and, in some instances, to report untaxed purchases to the state tax authorities. In Colorado, a federal court on constitutional grounds
granted a preliminary injunction against the state's enforcement its tax-notice and reporting law. However, other states may enact legislation similar to
these laws. Such laws could harm our business by imposing unreasonable notice burdens upon us, by interposing burdensome transaction notices that
negatively affect conversion, or by discouraging customer purchases by requiring detailed purchase reporting.
Economic pressure on states could harm our business.
The current economic climate has resulted in a sharp decline in state revenues, and states have projected large state budget shortfalls in the years
ahead. These shortfalls require state legislatures and agencies to examine the means to increase state revenues. States may increase sales and use tax
rates, create new tax laws covering previously untaxed activities, or increase existing license fees or create new fees all of which may directly or
indirectly harm our business. Similarly, administrative agencies may apply more rigorous enforcement efforts or take inflexible positions respecting the
laws they administer, especially if the laws permit the imposition of monetary penalties and fines which either the state or the administrative agency may
use to balance their budgets. To the extent that states pass additional revenue measures, or significantly increase their enforcement efforts, these activities
could directly or indirectly harm our business.
If we do not respond to rapid technological changes, our services could become obsolete and we could lose customers.
The Internet and the online commerce industry are changing rapidly. To remain competitive, we must continue to enhance and improve the
functionality and features of our e-commerce businesses. If we fail to do so, we may lose customers. If competitors introduce new products or services
using new technologies or if new industry standards and practices emerge, our Website and our proprietary technology and systems may become
obsolete. Our failure to respond to technological change or to adequately maintain, upgrade and develop our computer network and the systems used to
process customers' orders and payments could harm our business.
We have an evolving business model.
Our business model has evolved in the past and continues to do so. In prior years we have added additional types of services and product offerings
and in some cases we have modified or discontinued those offerings. We may continue to try to offer additional types of products or services, and we
cannot offer any assurance that any of them will be successful. From time to time we have also modified aspects of our business model relating to our
product mix and the mix of direct/fulfillment partner sourcing of the products we offer. We may continue to modify this aspect of our business as well
as other significant aspects of our business. We cannot offer any assurance that these or any other modifications will be successful or will not result in
harm to the business. The additions and modifications to our business have increased the complexity of our business and placed significant strain on our
management, personnel, operations, systems, technical performance, financial resources, and internal financial control and reporting functions. Future
additions to or modifications of our business are likely to have similar effects. We may not be able to manage growth effectively, which could damage
our reputation, limit our growth and negatively affect our operating results. Further, any new business or website we launch that is not favorably
received by consumers could damage our reputation or the Overstock.com brand.
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