Study: Amazon Hurt in States With New Tax Laws

[rdodolak]

http://homemediamagazine.com/retaile...tax-laws-33042

A new study finds that in states that have implemented laws requiring the collection of sales tax on online purchases, practically no online business other than Amazon has been negatively affected, with the online retailer seeing a 9.5% drop in sales in those states.

The report from Ohio State University found that the decline in Amazon purchases was offset by a 2% increase in purchases at local brick-and-mortar stores and a nearly 20% increase in purchases at competing online retailers.

“Though the laws are written generally to apply to all online retailers, Amazon is usually the only retailer to have been affected by such laws because it dominates the online retail space,” the report reads. “Previous empirical work shows that consumers are sensitive to prices and to sales tax, especially in the online retail arena, yet little empirical evidence has been gathered about the effects of wide implementation of such a tax on online and brick-and-mortar retail.”

The study looked at five states that have implemented online tax collection laws — California, New Jersey, Pennsylvania, Texas and Virginia — and examined transaction data for 3 million households. It found that consumers decreased their spending by 15.5% on Amazon purchases of more than $150 and by 23.8% on purchases equal to or more than $300.

Meanwhile, there was a 23.7% increase in purchases at other online retailers and a 6.5% increase in purchases at local brick-and-mortar retailers.

“We conclude that to a small degree, the tax legislation achieved its objective of restoring retail activity to local communities, though most of the gains in ‘leveling the playing field’ are garnered by the online operations of retailers,” the report reads.

State by state, Amazon purchases were reduced the most in California (14.7%), followed by Texas (11%), New Jersey (7.8%), Pennsylvania (6.8%) and Virginia (3.4%).

The report suggests that the Marketplace Fairness Act of 2013 — which would allow every state to collect sales tax on purchases made from out-of-state retailers — would lead to an “increase in the online sales of national retailers while only modestly increasing local brick- and-mortar revenues.” The Marketplace Fairness Act has been passed by the U.S. Senate and is currently before the House.

As of January, Amazon collects sales taxes in 19 states.

[Jett Rink]

They should collect tax in all 50 states! Taxes help make life better! People seem to forget that fact.

[Chiefy]

Originally Posted by Jett Rink

They should collect tax in all 50 states! Taxes help make life better! People seem to forget that fact.

In a perfect world yes, but that is never the case. How much tax is enough? Seems like anytime there is a deficit due to revenue (tax) mismanagement/overspending, taxes are raised again. Is that the answer? I'm all for shrinking our bloated government. Take Take Take is all they do. And when that's not enough, take some more.

[rdodolak]

Originally Posted by Jett Rink

They should collect tax in all 50 states! Taxes help make life better! People seem to forget that fact.

In an ideal world yes but it seems the stated claims that Amazon was hurting B&M stores wasn't all it was cracked up to be. B&M sales only increase 2% where as sales at other online retailers increased 20%. One could state not collecting sales tax does affect local B&M stores but it's not solely Amazon. It's far from it as all online retailers have an effect on local stores. In addition the online convenience factor does have an effect on where consumers choose to shop. Not surprising Amazon was affected the most by states with the highest sales tax.

Here's the OSU paper:

http://papers.nber.org/tmp/51204-w20052.pdf

According to this paper, "Households substitute Amazon with other retailers: either online retailers who are exempt from collecting sales tax, or in-state retailers (online and brick and-mortar)."

According to those numbers all this really did, for the most part, was shift consumers to other online retailers that aren't collecting sales tax.

[fronk777]

Not sure why anyone ever thought this wouldn't be the case...

[Blaze_Chamberlin]

It's basically the government wanting more money for doing the same job. Construction, government benefits, earmarked projects, etc.

[Jett Rink]

Originally Posted by Blaze_Chamberlin

It's basically the government wanting more money for doing the same job. Construction, government benefits, earmarked projects, etc.

...Trash collection, libraries, water services, etc.

[K i r a]

May 1st is the day they start collecting tax in FL. Aka.. the day I bring my purchases WAYYYYYYYYYYYYYYYYYYYYYYYYY down.

[MaCruz]

Originally Posted by K i r a

May 1st is the day they start collecting tax in FL. Aka.. the day I bring my purchases WAYYYYYYYYYYYYYYYYYYYYYYYYY down.

Yup, we got the confirmation email. Sucks but it was bound to happen.

[MoulinBlu]

If their prices were still as competitive as they were years back, charging taxes wouldn't be making a dent. Amazon would still be one of the most affordable places to buy. But they've gotten greedy, likely mismanaged and/or possibly corrupt. I hope they figure it out before the party's over.

[obssessive]

Originally Posted by MoulinBlu

If their prices were still as competitive as they were years back, charging taxes wouldn't be making a dent. Amazon would still be one of the most affordable places to buy. But they've gotten greedy, likely mismanaged and/or possibly corrupt. I hope they figure it out before the party's over.

That's where everyone that says: "it was bound to happen, so get over it" seems to leave out. Understandingly, it was bound to happen, and to that, I'll only say one thing, pay for 2-day shipping and maybe receive it within a week nowadays! Haha.

[Blu-Benny]

my orders on Amazon have gone down due to their lack of competitive pricing and now collecting tax in WI.

[Clark Kent]

The tax situation would not have hurt nearly as much if Amazon was still the same low-cost leader it once was. My order totals have declined for five straight years from Amazon. I don't even use their marketplace sellers as much anymore, last year's shipping increase made them uncompetitive with places like eBay and Half for the same items.

Amazon spent a huge amount of money expanding their distribution infrastructure and raised prices across the board to compensate. The only time it really makes sense to directly order from Amazon is the holiday shopping window around Black Friday.

[Monterey Jack]

Ever since Amazon started charging tax and upping their free shipping limit to a stinging $35 late last year, I think I have ordered through them maybe three times (and one of them was the tax and shipping-free Twilight Zone set).

[Mr. Cinema]

Tax collecting, Prime increase, less deliveries by UPS/FedEx with more using the USPS are a few reasons why I've really slowed down my shopping at Amazon. I've been price matching BDs more often at Target due to Amazon having to collect tax.

[Jett Rink]

Originally Posted by Mr. Cinema

Tax collecting, Prime increase, less deliveries by UPS/FedEx with more using the USPS are a few reasons why I've really slowed down my shopping at Amazon. I've been price matching BDs more often at Target due to Amazon having to collect tax.

You are still paying local tax, so you are not really punishing Amazon at all. Taxes can't be avoided, you have to pay them where ever you shop.

[ultlife2013]

Oh no I have to pay taxes!

[Risahawkeye]

Originally Posted by Clark Kent

The tax situation would not have hurt nearly as much if Amazon was still the same low-cost leader it once.

Agreed. While they match others, it is the exclusives that have me canceling my Amazon pre-orders. Coupons also impact my orders from Amazon. Amazon exclusives are not in the same caliber as others. They tend to cost more and lack extra content.

Taxes on the other hand do not hold me back from ordering.

[Chloenator]

Originally Posted by Risahawkeye

Taxes on the other hand do not hold me back from ordering.

+1

Taxes don't hold me back from ordering either. However, shipping prices do. I hardly ever order from third party sellers anymore because it is $3.99 for shipping per item. That is ridiculous!

[pi2loc]

Overseas customers are not amused.