Has Amazon Met Its Match?

Only two things in life are certain, Benjamin Franklin assured us, and Amazon is quickly coming to terms with one of them.
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Only two things in life are certain, Benjamin Franklin assured us, and Amazon is quickly coming to terms with one of them.

A new study by Ohio State University’s Fisher College of Business suggests that the impact of Internet sales tax collection on the No. 1 e-tailer may be profound.

Anticipating the inevitability of tax legislation, which it once fought tooth and nail, Amazon has been opening distribution centers across the country in a quest for next- or same-day delivery. A physical presence, or nexus, triggers mandatory online sales tax collection within states, although Amazon has often received tax breaks and other incentives in exchange for the jobs and revenue their warehouses bring.

But the researchers found that Internet tax collection, when implemented in California, New Jersey, Pennsylvania, Texas and Virginia from 2012 through 2013, had a deleterious effect on Amazon’s sales while aiding its online and physical competitors.

During the period, average customer spending on Amazon declined 2.8 percent in those states, while purchases over $150 decreased 15.5 percent and tickets of $300 or more fell nearly 24 percent.

And as spending went down, defections went up. The researchers documented a 19.8 percent spike in purchases at other e-commerce sites on average, which rose to nearly 24 percent for purchases over $300.

Brick-and-mortar retailers also benefitted, enjoying a 2 percent increase in sales on average, which rose to 6.5 percent for purchases over $300.

Not all the news was negative for Amazon.  Purchases over $300 shot up by more than 60 percent for its affiliate Marketplace merchants, who pay hefty sales and fulfillment fees to piggyback on the platform.

The findings also differ from past studies showing little competitive impact on Amazon’s sales from an Internet tax.

But if the Ohio State researchers are correct, taxes, like death, may ultimately prove the great equalizer.

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