Best Buy Reaping Benefit of Amazon's Sales Tax

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News Posted: Thu, Jan 17 2013 10:37 AM
For years, brick-and-mortar retailers have been crowing about the unfair advantage Amazon has in the retail space in territories where it doesn't have to collect sales tax, and now that the playing field is starting to level, their sales are going up. Best Buy, for example, noted that holiday online sales increased in three states where Amazon started collecting sales tax ahead of the holiday shopping season. Coincidence?

Probably not. In many cases, Amazon's prices are lower than what shoppers find in brick-and-mortar stores to begin with, but the icing on the cake, where applicable, is the lack of sales tax, creating an even bigger pricing disparity. Especially in this tough economy, shoppers have shown a willingness to pay less and wait for shipping rather than pay extra and receive instant gratification.

Best Buy

Amazon isn't just competing with brick-and-mortar locations. Best Buy sells products online, but it charges sales tax in locations where Amazon doesn't.

Over the past year or so, and especially in recent months, states have more aggressively targeted Amazon with new tax laws. In California, Amazon began collecting sales tax of 7.25 percent to 9.75 percent starting in September, and as a result, third-party sellers moving their wares on Amazon.com saw their sales drop for the quarter, Reuters reports.

Interestingly, Best Buy saw its online sales in California, Texas, and Pennsylvania spike 4-6 percent during the holiday shopping season compared to other territories, as well as an increase of 6-9 percent in online orders that are picked up in-store.
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I have never understood why Amazon is exempt from taxing customers to begin with.

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rapid1 replied on Fri, Jan 18 2013 10:51 AM

I still stand by the statement that one of the reasons for the relatively recent (Ongoing for the last 4 years now) melt down has been Internet adaptation. While it has continued to grow slowly year after year it has taken a percentage of the only way the general public shopped for the last 10 years at an ever increasing ratio. Then when other economic pressures cam to bear that percentage was more and more expensive to the retailers. Several have completely died or re-adapted to a web only existence, and now many big retailers match web prices. The taxation ratio is still not totally correct but it is becoming more so as well. While I of course do not want to pay more for anything than I have to, I do realize that without taxation on goods and services it in the end hurts us all, and is therefor worth it in the end. I wish they would adopt one of the many fair taxation methods totally based on direct taxes rather than the combination method they currently use as in the end I think we personally could at the least budget our taxes and within a couple of years the end product would be better for the government as well. Either way much of the worlds economic problems are at least to some degree even if minor due to the shift in commerce induced to a percentage through "E" rather than "B&M" commerce.

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rapid1 replied on Fri, Jan 18 2013 11:00 AM

The reason Amazon is exempt is because they operate in a sphere the government had no methods of tracking and therefore taxing except for direct reports from said entity on the amount of sales they had. The companies therefore taxed out the goods and services they bought to sell, but did not re-integrate the following sale of these goods and services (and or did so as they saw fit) to the IRS. The Government had (and still has a messed up way as far as I see)method to track sales and therefore collect taxes. Think of this if (this is just made up not real for demonstration purposes) if the web retail market does an added 60% of business over the Christmas season, but that is not tracked and they then say we did an extra 40% of business because we discounted everything we sold by 20% no one could tell the difference, and then Amazon has a free increase of 20% of untaxed revenue for that holiday. Then they look better to investors, the market etc., and therefore are rated higher and the owners monetary picture grows exponentially because the stock and futures prices increase exponentially (and they have a 20% cash flow for there company that is hidden free as well) its a total win/win for the companies and owners and a loose/loose for everyone else.

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pkase replied on Mon, Jan 21 2013 11:10 AM

Here is where i believe is is messed up.

Let's say in Illinois the state tax rate is 6.25% and in the month of December Walmart, Best Buy and Amazon all did $1,000,000 in sales through the internet. The state of Illinois would receive $62,500 from Walmart and Best Buy but would get nothing from Amazon. How is that fair?

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realneil replied on Mon, Jan 21 2013 1:47 PM

All of this is true, but who goes to Best Buy these days?

Some people don't learn.

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