Amazon Sales Take a Hit in States With Online Tax

April 25, 2014

Amazon is taking a hit in states that are collecting an online sales tax, says Bloomberg.

  • Researchers at Ohio State University published a paper this month that found sales dropped for Amazon when the online charge was introduced.
  • In states that have the tax, households reduced their spending on Amazon by about 10 percent compared to those in states that don't have the levy.
  • For online purchases of more than $300, sales fell by 24 percent, according to the report.

In addition to quantifying the sales impact, the researchers also concluded that brick-and-mortar stores didn't hugely benefit from households reducing their spending on Amazon. That's because many shoppers simply turned to online alternatives.

  • In total, brick-and-mortar retailers enjoyed a 2 percent bump in purchases in states that introduced an online sales tax, while competing online retailers got a 20 percent increase, the study found.
  • The biggest sales uptick -- 61 percent for big-ticket items -- went to merchants that use Amazon Marketplace. These outfits pay Amazon a fee to offer products through the Amazon website, yet don't collect taxes.

The push by states to collect taxes on Internet purchases has gathered momentum in the past few years.

  • Amazon collects sales tax in 20 states.
  • More are set to follow as the company has become a popular target to help state governments generate more revenue to cover budget shortfalls; Florida is set to begin charging a tax on May 1.
  • States lose an estimated $23 billion a year in uncollected sales taxes from Web retailers.

Amazon and other online retailers have fought some efforts to implement the taxes, with the U.S. Supreme Court in December rejecting an appeal by the company to rule against a New York law forcing it to collect money from customers. New York and others have said the push to tax Amazon is an effort to treat online and brick-and-mortar retailers equally.

Source: Adam Satariano, "Amazon Sales Take a Hit in States With Online Tax," Bloomberg, April 21, 2014. Brian Baugh, Itzhak Ben-David and Hoonsuk Park, "The 'Amazon Tax': Empirical Evidence from Amazon and Main Street Retailers," National Bureau of Economic Research, April 2014.

 

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