Tags: Amazon | collect | Sales | Tax

FT: Amazon to Collect Sales Tax, Offer Same-Day Delivery

By    |   Thursday, 12 Jul 2012 02:38 PM

In response to new laws in some states requiring the collection of sales tax from online retailers, Amazon.com Inc. is planning to expand its network of U.S. warehouses to offer faster deliver and even same-day delivery in some markets, according to The Financial Times.

Because of a Supreme Court ruling from 1992, which was before the Internet, retailers are exempt from sales tax in states where they do not have a physical presence.

However, many states have passed laws that broaden the meaning of having a physical presence in the state, thereby forcing Amazon to collect sales taxes, Slate reported. These new laws are in response to pressure from local businesses, which say that Amazon has an unfair advantage because it does not have to charge sales tax.

Not collecting sales tax translated into discounts on products of 4 to 9 percent relative to brick-and-mortar stores, The Times noted.

At first, Amazon fought the new laws and fired all of its marketing affiliates in Colorado, North Carolina, Rhode Island and California and closed its distribution center in Dallas, according to Slate.

But it has now stopped fighting the laws and has agreed to start collecting sales tax. Since it will now be collecting the tax, the company can set up warehouses in some of the largest metropolitan areas, allowing for speedier delivery, with some delivery as soon as a few hours after it is ordered, The Times reported.

At the end of last year, Amazon had 34 warehouses, mostly in low-cost states far away from more populous, high-cost states.

As a result of the deals, Amazon promised to build one or more warehouses in each of the states it signed agreements with, bringing in tax dollars and investing millions of dollars in the states, as well as hiring thousands of employees, Slate stated. The firm is opening warehouses in California, Texas, Virginia, Tennessee, Indiana and New Jersey, including one close to New York City.

These new distribution centers will spoil one of the last advantages that local, brick-and-mortar stores held: instant gratification, The Times noted.

If a consumer needs a product this evening, the only place to go is to a local store. However, if Amazon can deliver the product in three to four hours, there is no need for a consumer to waste the time of driving to a store, waiting in line and driving back home.

Amazon wants a single federal solution for the sales tax levy and is supporting a bipartisan bill sponsored by Rep. Steve Womack, R-Ark., that would give all states the right to collect sales tax from online retailers, and a twin bill in the Senate, The Times reported.

While Amazon already collects sales tax in six states, Jason Brewer of the Retail Industry Leaders Association, a lobbying group for big-box retailers, predicts the firm will be colleting sales tax in states where approximately half of the U.S. population resides by 2014, according to The Times.

While many believe the campaign to collect sales tax from Amazon has backfired, John Holub, president of the New Jersey Retail Merchants Association, does not agree.

“We know that’s where their business model is headed. Because they’re losing their tax advantage, they need something new to offer such as same-day delivery,” he said, according to The Times. “Our members are ready, willing and able to compete with them on customer service and price.”

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Thursday, 12 Jul 2012 02:38 PM
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