Amazon Makes a Taxing Change
Remember the salad days of Amazon when most people could order goods without paying sales tax? It wasn’t that long ago, but for many Amazon-ordering addicts, it might seem like an eternity. One by one, as Amazon put physical locations in various states, those residents started seeing the tax bump on their purchases. The other shoe hung suspended, waiting to drop. Now, it has.
Recently, Amazon announced it will begin collecting sales tax across the board. There had been four holdouts: Maine, New Mexico, Hawaii, and Idaho.
How big was the “only where you’re physically located” loophole? Well, according to a report in CNN Money, that rule led to a more than $17 billion shortfall in lost sales taxes in 2016. This stat came from the National Conference of State Legislators, whose director of tax policy, Max Behlke, had this to say:
“The way we are consuming things is so different. Because of that, the state’s’ sales tax revenue is not keeping pace… States have to modernize [sales taxes] to the 21st century. If they can’t collect sales taxes, it’ll mean higher state income taxes or property taxes.”
This announcement is good news for traditional retailers who have been aggravated for years about what they see as an unfair advantage Amazon had over their retail shops. Items purchased online could be done so while saving the customer the tax amount off the top, even on items priced exactly the same. For retailers with tight margins, they couldn’t afford to drop their prices to compete on an “out the door” price. Now, they won’t have that gripe anymore.
But is it too little too late? Consumers are creatures of habit. We buy where and how we’re accustomed to buying, and this move toward online shopping has become ingrained in our habits now. It’s showing in regular purchases and during big shopping sale times, including holiday sales and Black Friday sales. The old “Cyber Monday” really isn’t much of a thing anymore, as most retailers just extend their Black Friday sales online, some even well before the sales day itself.
The change was one Amazon fought tooth and nail, but they’ve accepted the consequences of a much more powerful sales tool: same day delivery. To keep pace with the “free” Prime two-day delivery and the growing demand for same-day delivery, Amazon needed vastly more distribution centers, and they needed them closer to more customers. That meant placement in more states, which, inevitably, led to this move.
For Amazon, they’re taking a bit of a bump in revenue to ensure a much greater increase in sales, knowing it will continue to bolster the current trend toward increasing dependence on Amazon to deliver what customers want … even when they want it this afternoon.