Amazon's Sales Fell As It Started To Collect Sales Tax

Kevin Drum has an interesting post on the effect of sales taxes on Amazon. On average, Amazon’s sales fell off nearly10% and sales increased in competing brick and mortar stores by about 2% when the company began to collect sales tax. For big ticket items in a high-tax state like California, Amazon saw an over 30% drop in sales. When Amazon started up as a true internet shopping firm, it did not have to collect sales tax as it had no physical presence in most states. As the company grew and expanded its warehouse and distribution presence across the country, that changed. It now collects tax in 29 states that hold over 80% of the US population.

The Supreme Court had ruled that a physical presence in the state is required in order to be subject to sales tax but specifically said that Congress could change that through legislation. That legislation has yet to pass. So, as usual, brick and mortar stores that played by the rules got screwed by a company that exploited a loophole and our legislators did nothing to protect them. Yes, of course, internet shopping was going to take off, but at least Congress could have created the semblance of a level playing field. Additionally, states lost millions of dollars in potential revenue because of their inability to collect sales tax on these sales. And this kind of exploitation of the rules is exactly the same modus operandi that Uber and Airbnb are using today. This time, at least, some communities are fighting back.