The retail giant Amazon.com, was founded in 1994 by Jeff Bezos and opened for business online in 1995. In its beginnings, and throughout its sixteen years in business, Amazon has enjoyed a considerable advantage over traditional bricks and mortar businesses by its online sales-tax reprieve; meant to support an infant industry. But now, when Amazon’s annual sales exceed $34 billion, there is a growing outcry by state and federal government. They feel that Amazon should not continue to receive such an advantage and should be required to collect sales tax from its customers and pay said tax to the state in which the customer resides.
Not being even slightly stupid, Mr. Bezos and his company recently told Consumer Reports that he supports federal legislation that rationalizes the patchwork of 30,000 state and local sales tax jurisdictions; each with its own rules and administrative illogic. Notwithstanding the verbal “support”, Amazon has fought state by state sales tax collection efforts with a powerful weapon; namely loss of jobs. Amazon’s position has been that state laws requiring it to collect sales tax violates Supreme Court rulings from 1967 and 1992 which stipulate that only retailers with a “physical presence” in a state must do this. Some states have argued that Amazon has distribution facilities within their jurisdiction and should thus be required to collect sales tax. Amazon thereupon announced that it would close its distribution centers forthwith and also abandon plans to build other facilities within the state; thus causing the loss of hundreds of jobs. The governor of each state (so far) has decided to not pursue these efforts. Not surprising.
Amazon’s opponents contend that they will eventually prevail because they feel Amazon knows that its efforts are only delaying what must eventually happen. There is too much red ink flowing in state coffers to allow Amazon to continue as it has in the past. Sometime soon, Amazon will collect sales taxes from its customers, but analysts feel that even with sales taxes, Amazon’s prices are, on average, 5-6% lower than Walmart and 12-13% lower than Target. There are even more powerful advantages to shopping online; gasoline savings, weather factors (who wants to shop in a heat wave or a snowstorm), the ability to compare prices with other online retailers, to name just a few. Amazon doesn’t have much to fear for its future; but as many retailers discovered to their chagrin; things change.