Cameras, iPhone cases, golf balls, wigs — if you can think it, you can probably buy it online. And Amazon.com leads the pack as the world’s largest online retailer.
Beginning in July, Amazon was forced to collect sales tax in Texas, which now joins five other states — Kansas, Kentucky, New York, North Dakota and Washington — that tax Amazon.com purchases. Other states such California, where the sales tax is 9%, are scheduled to follow suit.
The 1992 U.S. Supreme Court case Quill Corp. v. North Dakota ruled that Internet retailers are required to collect taxes when they have a physical selling presence in that state. Amazon headquarters are based in Seattle but the company has distribution centers and warehouses around the country.
Taxing online retailers has been debated for years, with groups such as the Alliance for Main Street Fairness (AMSF) lobbying lawmakers to enforce a tax. The group is “a coalition of business owners and concerned citizens who want to bring sales tax laws up-to-date and level the playing field so all businesses can compete fairly,” according to its website.
AMSF encourages its members to contact elected officials and advocate for laws to support brick-and-mortar stores.
USA TODAY financial markets reporter Matt Krantz argues that having to collect taxes, Amazon loses its big price advantage, which may cause the company to lose its stock shares.
“Consumers knew that if they bought something from Amazon.com, they were pretty sure they’d pay 5% or more below what they pay at a local store,” he wrote in a recent column. “And the reason was simple: Amazon hasn’t been required to collect sales tax on the behalf of consumers for years in nearly all states.”
Krantz added that the company must think of other services to buffer the higher prices, such as offering same-day delivery or building product showrooms.
However, Eric Clemons, an operations and information management professor at University of Pennsylvania’s Wharton School of Business, said he doesn’t believe Amazon’s business model will be seriously affected by the new rules.
“Amazon is still the low-cost, low-price place to buy, whether or not you have a sales tax,” he said, and with economies of scale, the company is a relatively low-cost operation.
“Their source of advantage is scale, leading to lower cost and scope – you can find anything you want there,” he said.
College students often buy textbooks online at cheaper prices instead of going to their campus bookstore. Some said the tax will not deter them from continuing to click and shop at Amazon.
Peter Bang, a rising sophomore at Harvard University, orders almost everything from Amazon when he’s at school — textbooks, hangers, socks, PlayStation 3 games and his Halloween costume.
Higher prices wouldn’t change his habits much, he said, as low prices are only one of the reasons he shops online a lot; there’s also convenience.
“The walk to the student mail center is so much shorter than the walk to Staples, the prices are a lot better than those of CVS and I am able to get an idea of the quality of the product based on customer ratings and reviews,” he wrote in an email.
Rising University of Pennsylvania sophomore Hector Kilgoe uses Amazon mostly to buy music and books, often used copies.
“You’ll never find books for one cent at Barnes & Nobles,” he said.
Similarly, higher prices wouldn’t keep Kilgoe away.
“Amazon is convenient because it’s simply easier to search for books than in various book stores,” he said. “There is a certain level of trust that I have in Amazon that I don’t have in other sites.”
But for Allie Caren, a rising junior at Syracuse University, higher prices would deter her from using Amazon. She said she’s a big online shopper and usually goes to Amazon for its cheap prices.
“Taxes are meddlesome and annoying, but everyone has to deal with them,” Caren, a USA TODAY Collegiate Correspondent, wrote in an email, although she added that she doesn’t think it’s fair to pay both online taxes and shipping and handling fees.
Clemons said he thinks Amazon and states could strike a deal to waive taxes for various items, such as textbooks for students and faculty.
“If Amazon lobbied as a compromise that they’re willing to impose taxes but recommended certain categories [of products] to be exempt from taxes, I think that makes a lot of sense,” he said, adding that it wouldn’t be a huge sacrifice for a state since the majority of tax revenue comes from gasoline sales, not textbook sales.
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