Amazon losing sales because of sales tax
Amazon.com’s inexorable march to retail dominance has hit a bump in the road. According to a new report from researchers at Ohio State’s Fisher College of Business, Amazon households in states where it previously did not collect sales taxes reduced their spending on the site by 9.5 percent once the levies went into effect.
The drop in spending was most evident when it came to bigger shopping carts. According to the research, purchases of $300 or more on Amazon decreased by 23.8 percent once sales taxes were added to the price.
Brick and mortar rivals to Amazon.com and other pure play e-tailers have long argued that collecting sales tax has put them at a disadvantage. "There is no ambiquity," Brian Baugh, one of the report’s authors was quoted as saying by Bloomberg News. "It has been their competitive advantage."
While collecting sales tax has hurt Amazon, it has only translated into small gains (two percent) for brick and mortar stores. The reason, according to the study’s authors, is that these consumers have taken their business to other merchants that are not collecting sale tax in their states.
Competitive e-tailers saw sales increase 19.8 percent after Amazon began collecting taxes. On the plus side for Amazon, many of these merchants are members of its Marketplace, meaning Jeff Bezos and company get a cut anyway.
- The ‘Amazon Tax’: Empirical Evidence from Amazon and Main Street Retailers – National Bureau of Economic Research
- Amazon Sales Take a Hit in States With Online Tax – Bloomberg News
Do you agree with the Ohio State researchers that not collecting sales tax has been Amazon’s competitive advantage? What will Amazon need to do to overcome the perception of higher prices caused by sales tax?