Amazon's long battle against any law that would require it to pay sales taxes may finally be coming to an end. For years, Amazon has benefited from tax exemptions banning the collection of sales tax from online vendors, while competing against the brick-and-mortar establishments in the various states, which are legally required to pay such taxes. When states attempted to pass laws targeting Amazon affiliates as taxable entities, Amazon responded by dumping affiliates in that state.
In better economic times, Amazon fought back by filing numerous legal challenges to state sales tax laws, lobbied politicians, and laid astroturf on behalf of consumers who were 'outraged' at the idea that the company might have to compete fairly with everyone else. When Texas sent Amazon a bill for $289M in sales tax, the company closed its TX distribution center and fired 119 people. The company has fought to retain the tax policies that sheltered its early years, even though it now rings up an estimated 20% of all US online retail sales.
After years of playing as nasty a game of hardball as it's possible to play, Amazon has had a change of heart. The company has reached agreements with Nevada, New Jersey, Indiana, Tennessee, and Virginia. It's also made peace with Texas over future tax collections, though not in time to save the jobs of the aforementioned distribution center employees. So what brought on the change of heart?
One of the company's mammoth new distribution centers, under construction
Slate's Farhad Manjoo suggests that it's partly a recognition of the economic climate. With the economy stuttering and on the verge of a stallout, Republican state governors aren't as willing to turn a blind eye towards the company's tax status -- not when they're struggling to close mammoth budget deficits and Amazon's taxes represent hundreds of millions of dollars in potential revenue over several years. The other change -- and possibly the more important reason as far as the company is concerned -- is the idea of same-day delivery.
There've been a number of high-profile implosions at companies that promised immediate delivery of online goods, but Amazon has the clout to build a distribution network that could handle the weight. Obviously, same-day delivery would depend on where you live, but building major distribution centers in the heart of urban areas would give the company the ability to target millions of customers who currently rely on conventional shipping times. Check many of the agreements Amazon has reached with the various states, and they stipulate that the retail giant will build distribution centers in each of the states.
Manjoo thinks these efforts could further damage retail sales, claiming that the one real advantage physical retailers have left is instant gratification -- you see something, you buy it, you take it home. If Amazon removes that advantage, the few big box stores that are left could die -- right?
Maybe, but I'm less convinced. Allegations of poor worker treatment and back-breaking labor under draconian restrictions have shone a spotlight on the way Amazon treats its distribution center employees, and it's not a good one. If Amazon keeps treating its workers the way it does, and actually started denting conventional retail, it could open a discussion in which Wal-mart, ironically, might look like the good guy. For all its numerous problems, Wal-mart employs the elderly and mentally/physically disabled in jobs that would have no equivalent in an Amazon warehouse.
For now, that's nothing but an idle hypothesis, but it could seriously start to matter if Amazon starts pushing same-day delivery. What do you say -- is the advantage of having a product hours after you order it big enough to make the sales tax a non-issue?