Amazon sees online sales decline in states where it charges tax

Apr 22, 2014
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Amazon sees online sales decline in states where it charges tax

Amazon has been at the heart of battles with state governments around the country as retailers want to the online seller to pay sales tax. Currently Amazon and other retailers don’t have to charge sales tax for products if they don’t have a physical location in the state where the product is purchased. A new study has been performed by researchers at Ohio State University that looks at the sales Amazon has made in states where it has to charge sales tax.

The study found that sales dropped for Amazon when it had to start charging sales tax in states. Within states where Amazon collects sales tax, households reduced their spending on Amazon by about 10% compared to states where sales tax isn't charged. Sales of larger ticket items saw an even sharper decline according to the study.

Online sales for items over $300 in states where sales tax is charged have decreased by 24%. States like California and Texas are now forcing Amazon to collect sales tax. Amazon currently collects taxes in 20 states with more states coming online for taxes. On May 1, Florida will begin forcing Amazon to collect sales tax for the state.

States maintain that they lose about $23 billion each year in uncollected sales tax revenue from web retailers. Amazon says that whether or not it has to charge sales tax, it has the lowest prices on most items. The study noted that brick and mortar retailers in states that force online sales tax increased by 2%. That indicates that many of the shoppers who aren't buying online are just not buying rather than making purchases in local stores.

SOURCE: Bloomberg


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