Amazon's sales impacted as states introduce online tax

Justin Kahn

Posts: 752   +6

In some states across the US, Amazon holds a distinct competitive advantage over brick and mortar retailers, in that it's able to offer its goods without sales tax. Now that more states are beginning to require the company to charge tax, like Texas and California for example, researchers from Ohio State University decided to figure out how the introduction of the tax impacted sales in those areas.

According to the study, in states that have the tax introduced there is a 10% drop in Amazon purchases per household. More specifically, sales dropped by 24% on online purchases of items priced $300 or more from Amazon.

Brick and mortar retail sales didn't necessarily rise in these states because of this, but did see a 2% increase in purchases. According to the researchers, customers turned to other online retailers 20% more often during the months when the Amazon tax was introduced.

Another interesting statistic from the study is surrounding third party merchants using Amazon's platform. These sellers payout a fee to use the service, but do not collect taxes and during the same period saw a jump of 61% in sales. While Amazon may lose a percentage of revenue when its tax gets first introduced, it appears to see a boost in sales from its large selection of third party sellers at the same time. For the popular retailer's massive customers base, one extra click to view a third party version of a listing without tax likely isn't much of a hassle.

What this means for the online retailer in the long run is hard to say exactly, some have suggested the company's spending habits and slightly decelerated revenue from the sales tax brings up concerns regarding future expansion and growth. However, some analysts have said the tax has a minimal effect on Amazon's overall operation.

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... some analysts have said the tax has a minimal effect on Amazon's overall operation

I wonder who are these analysts, and what are their reasoning. Many people that I know, including myself, order online primarily because of the sales tax exemption. Besides, as the article points out, there is a 24% drop in sales of items over $300.

This has got to be one of the top 5 risks to Amazon's business.
 
I don't buy anything from Amazon I don't have to anyway. The added sales tax just reinforces my position.

In the product categories in which I'm normally investing, there are so many other better outlets anyway.

Once a year on Black Friday, I make a pilgrimage to Best Buy in Delaware, (no state sales tax), grab a bunch of loss leader items, and get the hell out of there before they figure out what happened.

Any item more than about $100.00, makes it worthwhile for me to travel to Delaware to buy it. So, gas costs aside, you get your item on the spot, and either break even against the fuel, or save quite a bit after about $200.00.

So, in no particular order, Newegg for computer parts, Adorama or B &H photovideo in NYC for cameras and some audio items, Musician's Friend, zZounds, and Sweetwater for musical instruments and related equipment. And lastly, Adirondack Guitar, for left handed guitars. These are all reputable eTailers, with toll free ordering as well, and all have some type of free shipping available. Walmart has "ship to store (free)", and a vast product array also.

Where Amazon does excel, and their 3rd party suppliers, is DVD &Blu-Ray, CDs, and Mp3 downloads. It would be too long a story to go into how to get the best deal in those categories, so I'll spare you the details.

Off the top of my head, I would swear Amazon charged me tax, on a non-taxable item. I can't remember what that was, so I guess it really didn't happen.

I'm "fortunate" enough to live in the big city, so auto parts, groceries, and the staples of everyday life, are easily in reach. Don't need the big "A" for those things.

And remember boys and girls, just because Amazon sells it, doesn't in any way shape or form, mean that you're getting the best price, So, shop wisely, grasshoppers!
 
I just purhcased a digital camera for my neice from Amazon. Didn't even consider buying it in-store. At $179.99, I just saved $14 buy not paying any taxes. You can't really believe that tax-free isn't a factor in opting to purchase from Amazon.
 
"And remember boys and girls, just because Amazon sells it, doesn't in any way shape or form, mean that you're getting the best price, So, shop wisely, grasshoppers!"

How true, Amazon's prices have steadily crept upwards in the last few years, while their quality control on non branded items has suffered as well. The addition of sales taxes, because of adding a warehouse in my state, plus their minimum $ 35,00 purchase for free shipping, have made it a non competitive store for me.
 
Whoever came up with the phrase, 'brick and mortar store', must be the same ***** who started the term, 'baby bump'.
 
Brick and mortar retail sales didn't necessarily rise in these states because of this, but did see a 2% increase in purchases.

Of course they didn't. The entire purpose for brick and mortars to want online sales to be taxed is out of envy.
 
They should just get rid of sales tax anyway. Its just double dipping. Income tax, sales tax. Choose one dammit.
 
They should just get rid of sales tax anyway. Its just double dipping. Income tax, sales tax. Choose one dammit.
"I have some bad news for you, sunshine",
(Roger Waters, From "The Wall").

The state of Delaware, has no retail sales tax! But, their personal income tax is, (or so I've heard), "oppressive".

They maintain the no retail sales tax policy, to draw people from the 2 neighboring states, (PA & Maryland), injecting big bucks into their economy.

In my area, the biggest taxation offender is the City of Philadelphia. (8% retail tax, vs. 6% for the rest of the state). This is because nobody has a job, and since they're mostly busy selling drugs and procreating, the school district is always begging far and wide for funding. Additionally, their offspring are, more often than not, classed as, "special needs". Which increases the public funds allotted to them, and helps politicians get elected on the, "look how much I've done for these useless kids", platform. So, the big double dip comes from across the state, the fed, plus our illustrious mayor has just summarily raised the real estate assessment of every property in Philadelphia.

So, school taxes, come from many sources already, and hence large population centers do indeed "triple dip for funds. That said,, serial taxation from multiple sources, isn't going away anytime soon..
 
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