amazonsignage2Laws that require online retailers to collect local sales tax are hitting Amazon particularly hard, according to a new study by researchers at Ohio State University. Amazon’s sales in states where it collected sales tax decreased about 10 percent, compared to states that don’t require tax collection.

In turn, brick-and-mortar retailers in those states saw a 2 percent increase in purchases, but the biggest winners in the study were other online retailers, which saw almost 20 percent more purchases. The results imply that one of Amazon’s major competitive advantages over other retailers has been its lack of sales tax, and further expansion of laws that require the company to collect taxes could have a significant impact on its sales.

Researchers found 245,000 households across the country who spent more than $100 with Amazon in the first half of 2012, and tracked their spending habits through the end of 2013. About a third of those included in the study lived in California, New Jersey, Pennsylvania, Texas and Virginia, states where Amazon started collecting sales tax during 2013. 

For its part, Amazon stands by its low prices. “As analysts have noted, Amazon offers the best prices with or without sales tax,” Amazon spokesperson Ty Rogers said in an email to GeekWire.

It’s not all bad news for Amazon, though. The study found that Amazon Marketplace sellers, who pay a fee to Amazon in exchange for listing their products on the company’s website, saw a 61 percent increase in sales of higher-priced items. Amazon doesn’t collect sales tax on items sold through its Marketplace, though sellers are required to comply with local tax laws.

Still, the results of the study represent a growing concern for Amazon: the Seattle-based retailer will have to collect sales tax on 60 percent of its American customer base when it begins tax collection for customers in Florida on May 1, and that number will almost certainly grow as more states look to gain revenue by tapping into the growth of e-commerce.

Amazon has aggressively fought state-by-state sales tax laws in the past, though it supports a nationwide law that would require online retailers of a certain size to pay local sales tax.

Comments

  • Nicholas Cobraetti

    ““As analysts have noted, Amazon offers the best prices with or without sales tax,”
    No, not really, but Amazon Marketplace sellers often do

    • Kary

      If you throw in free second day shipping with Prime, many of their items are well priced.

      As to the article, I suspect a lot of people in states where Amazon didn’t collect tax bought through Amazon just because they knew they weren’t paying tax. That’s where their analysis began and ended.

  • DietDF

    Most people agree Amazon offers dependable service, do you?

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