Amazon Flips On Sales Tax; Reportedly Eyes Same-Day Delivery Service

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News Posted: Mon, Jul 16 2012 3:51 PM
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?
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sackyhack replied on Mon, Jul 16 2012 3:59 PM

I'm a little confused by the article. So how is the change of heart on taxes related to same-day delivery? Is it because it'll be easier to get permits for building the distribution centers if they're paying into the state's economy?

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RTietjens replied on Mon, Jul 16 2012 5:35 PM

"If Amazon removes that advantage, the few big box stores that are left could die -- right? "

Good riddance, then. Poor service, constant out-of-stock status for popular items, complete lack of SKUs that aren't highly popular, low-quality items pushed hard by sales drones, worthless but expensive "extended warranty" pressure... I see no reason the remaining big box retailers should survive. I've gotten excellent customer service from Amazon even though they have no brick-and-mortar presence. If the box box stroes were that good, I'd support them, but the best thing I have to say about them is "they suck."

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Inspector replied on Mon, Jul 16 2012 6:14 PM

Sacky, it is related to same-day delivery because if they pay their taxes they can open a distributions center in that state. For Same-day delivery to work, the closer the center to the customer the faster the customer gets their order.

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realneil replied on Mon, Jul 16 2012 8:30 PM

I shop for price. If Amazon's no~tax gets it to me cheaper, that is who I buy from. Newegg doesn't charge tax here either.

Most brick and mortar stores don't have the goods I want anyways. If they do, they want too much for it. I can wait a few days for delivery.

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CDeeter replied on Mon, Jul 16 2012 8:58 PM

realneil:
Most brick and mortar stores don't have the goods I want anyways. If they do, they want too much for it. I can wait a few days for delivery

Exactly, trying to buy quality components is nearly impossible at a retail store, and like you said what they do have is way over priced, or out dated.

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rapid1 replied on Mon, Jul 16 2012 9:59 PM

Interesting really and it also leans exactly where I have seen it going for some time. If you do not need to refrigerate it or try it on prior to purchasing it the need for many, many things disappear in a retail environment for most. Oh and realneil do you not have Fry's or Microcenter there yet? Fry's directly matches all pricing internet included and Microcenter may be a few dollars more on many things than the net but if you need it now they often have a lot of hardware like 10 miles from me generally.

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rapid1 replied on Mon, Jul 16 2012 10:03 PM

Either way I give much of what we know as retail 5-10 years as it currently exists same for print media in many cases and television as well we are coming on the cusp of the information age I think where it becomes the norm and a lot of things from the 70's-80's start disappearing.

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Inspector replied on Mon, Jul 16 2012 11:39 PM

Microcenter has awesome deals on CPUs, sadly there isn't one near me :(, but i am willing to travel... :D

No frys either :(

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Shadizzle replied on Mon, Jul 16 2012 11:51 PM

The ONLY thing Amazon cannot replace, is the ability to go into the store, and actually look at, test/handle the item that you are interested in. Yes, online makes it easy, and cheaper- though unless you really know that it IS the item you want. Sometimes, things are marketed nice, but junk when you finally get ahold of it for yourself.

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CDeeter replied on Tue, Jul 17 2012 8:07 AM

Darn, no Fry's or Micro Center near me. Would have been nice, but oh well.

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sackyhack replied on Tue, Jul 17 2012 10:57 AM

I feel like even after taxes amazon will be cheaper for a lot of the things I buy. For example, a relatively new blu-ray is always ~$40 in a retail store, but amazon seems to have a permanent 25%-50% discount on movies. A tax can't bridge that gap.

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I do not see retail going anywhere, convenience is a big thing and people will gladly pay for it. Me included on most occasions. That said, at least in Canada, price matching is aggressive enough that I do not even need to worry about online deals. I only need to hop online for stuff stores do not carry because it is too niche.

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