Amazon's sales impacted as states introduce online taxBy Justin Kahn 8 comments
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.