The Internet Sales Tax and Amazon

The Internet Sales Tax and Amazon

Amazon State Sales Tax

Amazon (AMZN) has long ruled among online retailers, and has caused many headaches for big-box retailers. With the Senate passing an act that allows states to collect sales tax on internet sales made to their residents yesterday, this could prove very harmful to Amazon down the road.

As odd as it may seem, Amazon is actually supporting this bill, putting it at odds with competitor eBay (EBAY). Amazon originally got its advantage by undercutting literally every competitors prices. Why would you go down to your Best Buy (BBY) or Circuit City before it went bankrupt and pay $1000 + tax for a 52" Plasma TV when you could get it delivered right to your front door with out having to pay sales tax and pay a lower price. But recently Amazon has moved more towards the efficiency of its delivery, for example offering free two day delivery for Amazon Prime members. Amazon apparently believes that it no longer needs to rely on having the lowest prices to remain competitive. I think Amazon is supporting this bill for two reasons. One, it lets them market themselves as a "good" company, similar to how Starbucks markets its use of Fair Trade coffee beans and literally ever food that was ever near an organic farm has "organic" stamped all over it. Secondly and most importantly, since Amazon sees that the future is next-day and same-day deliveries. Since delivering on the same day requires more warehouses closer to big cities and negotiating with individual states can get expensive, see: Columbia, South Carolina). This bill would put all retailers on the same playing field and Amazon believes that they can beat them even if customers have to pay 8% more. I have to agree with Amazon, they will still be the best. But do I like the tax? Absolutely not. I do not want to pay anymore than I have to, and I use Amazon frequently. I don't think this will hurt Amazon in the long run, but we might see a few hiccups if the bill gets signed into law.



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