Amazon.com, Inc. (NASDAQ:AMZN) has made millions of satisfied customers by creating a shipping experience that is easy, convenient, with strong customer service and very low prices. And for the better part of two decades, Amazon.com has taken very full advantage of a little taxation loophole that has allowed it to charge its low prices up front and not being required to tack on sales taxes. But as we are sure you have noticed lately, the U.S. government is attempting to use its right to regulate “interstate” commerce by moving forward with a bill that would require online retailers such as Amazon to add and collect sales tax for the state in which the good or service is delivered, instead of from where the good or service is ordered.
For years, Amazon.com, Inc. (NASDAQ:AMZN) had this huge competitive advantage over many brick-and-mortar stores because it was not forced to charge sales tax on its orders unless it had a presence in the sate (a warehouse, a data center, an office building, etc.). But with many retailers complaining about the Amazon.com advantage (and because many of these retailers cannot afford to lower their margins for risk of loss), these companies have been successfully lobbying to get the federal government involved.
One writer was suggesting that Amazon.com, Inc. (NASDAQ:AMZN) was actually lobbying against its own self-interest, and pushing or this law to go through. Why?
Image: Amazon.com, Inc. (NASDAQ:AMZN)
The claim is that if Amazon.com is going to be targeted for this, then the playing field needs to be evened out. That has been the claim of the brick-and-mortar stores in the first place – they have to charge sales tax and online-only retailers don’t, and that’s not fair. Amazon.com wants to expand the legislation to ensure that even the online versions of Best Buy Co. Inc. (NYSE:BBY) or Target Corporation (NYSE:TGT) can’t skirt around the legislation by collecting in-store taxes but not having to collect online orders.
Here is the bottom line of this article – the beauty of online convenience is just that, convenience. And part of that convenience comes with a price – namely shipping costs, for which brick-and-mortar stores do not have to charge. And in a lot of cases, shipping costs might be more than the taxes people would pay for the same item inside a brick-and-mortar retailer. Therefore, adding sales tax to online orders doesn’t necessarily balance out the playing field – but what might truly balance it out?
Rather than trying to increase competition through legislation, some of these retailers, like Best Buy and Target, are beginning to conduct “price-matching” with Amazon.com, Inc. (NASDAQ:AMZN). A customer can go into a brick-and-mortar store describing Amazon’s price for an item, and the retailer claims that it would match or beat that price.
It sounds too much like the retailers are tired of trying to compete with Amazon.com, so it will try to legislate Amazon off the mountain where it is king of retail. It is too bad that these stores think that forcing Amazon.com, Inc. (NASDAQ:AMZN) to collect sales taxes is the answer to creating competition 0 when the truth is, what might really be a better option would be to have these retailers lobby their states to repeal the sales tax altogether. Oh, and besides – Amazon.com has lower prices for goods and services than these retailers, so it will post lower state taxes on an item – thus it would still be cheaper, with the difference being only shipping, or the fuel it takes to drive to a brick-and-mortar store to collect the item.
What do you think about the economics of online shopping? Should Amazon.com, Inc. (NASDAQ:AMZN) continue to have this advantage, or do you think other retailers should have the same privilege to not charge sales taxes, in the wake of a growing online economy? Let us know your thoughts on this topic in the comments section below.
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