Bloomberg reports that Ohio State University researchers have published a study suggesting that in states where sales taxes are being charged for online purchases, Amazon's sales are being affected.
According to the story, "In states that have the tax, households reduced their spending on Amazon by about 10 percent compared to those in states that don’t have the levy. For online purchases of more than $300, sales fell by 24 percent."
However…while bricks-and-mortar stores in the states where sales taxes are being collected by Amazon saw a two percent increase in sales, the real benefit seems to accrue to other online retailers, which saw a 20 percent increase in sales. And, ironically, "the biggest sales uptick -- 61 percent for big-ticket items -- went to merchants that use Amazon Marketplace. These outfits pay Amazon a fee to offer products through the Amazon website, yet don’t collect taxes. The products are typically available alongside Amazon’s own listings.
"That means Amazon still indirectly benefits, since it collects a fee from merchants on its marketplace."
Bloomberg notes that "Amazon collects sales tax in 20 states, according to its website. More are set to follow as the company has become a popular target to help state governments generate more revenue to cover budget shortfalls; Florida is set to begin charging a tax on May 1. States lose an estimated $23 billion a year in uncollected sales taxes from Web retailers."
KC's View: The loophole seems to be size; many of the online retailers not collecting sales taxes are said to be too small to be affected by the new state laws.
This study runs contrary to what many experts believed would be the case with Amazon as sales taxes began to be collected; while I'd never qualify myself as an expert, I've tended to agree that sales taxes wouldn't be a big deal.
I will say this. It is absolutely fair for online purchases to be taxed at the same rates as purchases in physical stores, and Amazon is going to have to figure this all out - it has to make sure that its value proposition in terms of price, selection, speed of fulfillment and the broader customer experience more than compensate for the fact that sales taxes are now being added to purchases. I happen to believe that this is exactly what they're focused on at Amazon, and that the long-term prognosis is good.
In the short-term, Amazon may lose business from people who only shopped there to avoid sales taxes. But in the long-term, I believe its customer-centric model will serve it well.
According to the story, "In states that have the tax, households reduced their spending on Amazon by about 10 percent compared to those in states that don’t have the levy. For online purchases of more than $300, sales fell by 24 percent."
However…while bricks-and-mortar stores in the states where sales taxes are being collected by Amazon saw a two percent increase in sales, the real benefit seems to accrue to other online retailers, which saw a 20 percent increase in sales. And, ironically, "the biggest sales uptick -- 61 percent for big-ticket items -- went to merchants that use Amazon Marketplace. These outfits pay Amazon a fee to offer products through the Amazon website, yet don’t collect taxes. The products are typically available alongside Amazon’s own listings.
"That means Amazon still indirectly benefits, since it collects a fee from merchants on its marketplace."
Bloomberg notes that "Amazon collects sales tax in 20 states, according to its website. More are set to follow as the company has become a popular target to help state governments generate more revenue to cover budget shortfalls; Florida is set to begin charging a tax on May 1. States lose an estimated $23 billion a year in uncollected sales taxes from Web retailers."
KC's View: The loophole seems to be size; many of the online retailers not collecting sales taxes are said to be too small to be affected by the new state laws.
This study runs contrary to what many experts believed would be the case with Amazon as sales taxes began to be collected; while I'd never qualify myself as an expert, I've tended to agree that sales taxes wouldn't be a big deal.
I will say this. It is absolutely fair for online purchases to be taxed at the same rates as purchases in physical stores, and Amazon is going to have to figure this all out - it has to make sure that its value proposition in terms of price, selection, speed of fulfillment and the broader customer experience more than compensate for the fact that sales taxes are now being added to purchases. I happen to believe that this is exactly what they're focused on at Amazon, and that the long-term prognosis is good.
In the short-term, Amazon may lose business from people who only shopped there to avoid sales taxes. But in the long-term, I believe its customer-centric model will serve it well.
- KC's View:
