Bloomberg Businessweek article reaches surprising conclusion

Businessweek

Businessweek: Amazon may soon have to collect sales tax

A terrific article in Bloomberg Businessweek offers an insightful analysis of the state of online sales tax and ultimately reaches a surprising conclusion.

The article quotes Senator Dick Durbin,who plans to introduce the Main Street Fairness Act, on why the time is right for this legislation:

“This idea is overdue,” he says. “Online retail sales are now very fulsome and are growing at the expense of local units of government.” Many state budgets are bleeding red, despite some recent revenue upswings around the country . . . A University of Tennessee study recently estimated that states will collectively lose $10.1 billion in uncollected online sales-tax revenue this year and $11.3 billion next year.

But the real meat of the article comes at the end, when they look at what collecting sales tax would mean for Amazon, the largest of the online-only retailers:

Actually, being forced to collect sales tax may not turn out to be so bad for Amazon. Analysts at Wells Fargo Securities (WFC) recently surveyed a range of products and found that even without factoring in sales tax, Amazon’s prices were, on average, 5 to 6 percent lower than Wal-Mart’s and 12 to 13 percent below Target’s. And without having to worry about sales-tax consequences, Amazon will be able to freely add shipping centers near every major city and accelerate its push toward delivering products overnight, or even on the day they’re ordered. (emphasis added)

As our regular readers know, technology has reached the point that collecting sales tax isn’t a burden for online sellers. But it was fascinating to read that Amazon not only wouldn’t be hurt by collecting sales tax, it might even do better.

The entire article is worth a read for its incisive analysis.

3 Responses to Bloomberg Businessweek article reaches surprising conclusion

  1. Kumar says:

    You would think that with their efficient biz model which lets them outprice all competitors they would be less aggressive in their opposition to this incremental competitive edge. But they are an insatiable predator and will fight fair or foul to preserve the status quo.

    An orchestrated pushback to Sen. Durbin’s “Main St. Fairness” bill is just getting started..
    An Open Letter to Fiscal Conservatives in the Senate: The “Main Street Fairness Act” Is a Dead-End Street for Taxpayers and Small Businesses!
    http://www.ntu.org/news-and-issues/taxes/business/an-open-letter-to-fiscal.html

    Although a level playing field is in the enlightened self-interest of all citizens, an average voter won’t be easily persuaded and more likely fall for the cynical & visceral “no net tax increase” message of the opponents.

    One way to blunt the opponent’s efforts would be if the adoption of SSUTA is also accompanied by an across the board sales tax cut so that for NOW the whole new scheme is revenue neutral, but states will balk at that as they too can’t see beyond the here & now.

  2. John says:

    It’s amazing to learn that Democrats are such fans of regressive taxation. Let’s shift the tax burden down more, down to Main Street, and pretend we are doing the little guy a favor. Instead of making states more dependent on sales taxes, the federal government should encourage states to adopt/increase income taxes. This is bad policy. Brick and mortar retailer should be agitating for a repeal of sales taxes, not to punish online retailers.

    The comment about shipping centers is fairly silly. Amazon can ship overnight, for a fee. Most customers don’t care about overnighting. Any saved shipping would be more than offset by the costs of acquiring the facility, and, of course, smaller online retailers would be at a further disadvantage.

  3. […] Bloomberg Businessweek article reaches surprising conclusion – 6/6/2011 […]

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