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Amazon Tries to Save its Subsidy

Published September 06, 2011 Share

As some of you may know, Shopatron has been outspoken in its support for leveling the sales tax playing field between local and out-of-state retailers (online or off).  Working with 18,000 mostly brick-and-mortar retail partners has given us a good understanding of how unfair the situation really is.

Our partners see customers walk in every day, try on or test out their products, then walk out and buy them online because they can avoid paying sales tax. So you can imagine the amusement the recent story about Amazon promising 7,000 jobs to California (our home state) provided us.

It is amazing to me the lengths Amazon is willing to go to repeal a new California tax law that takes away their online sales tax subsidy and forces them to charge sales tax to online buyers. (You can see the details in this Seattle Times article.) Amazon is clearly concerned about losing this loophole and competing fairly with local brick-and-mortar retailers. But why the panic? Does Amazon really feel that it can’t compete if it is forced to charge online shoppers state sales tax on their orders?

Apparently so.

But the moves by Amazon discussed in the article do not look like they will be able to change the current legislation. When the laws take effect, the online tax-free incentive will be gone and Amazon will have to step up and give shoppers new reasons to buy from them rather than the retail store down the street. (Funny, that’s what the store down the street has been doing since they opened their business.)

And we think this new reality is not only good for local retailers, but also for the consumer. Amazon will have to create other programs like Amazon Prime (which I think has been a home run for Amazon in terms of customer satisfaction). 

Taxes are coming to online, out-of-state retailers. That is clear, even if Amazon could delay California taxes by bribing the state. Let’s just get this over with and return to innovation online. That is what made online interesting for customers in the first place, and that is where the future of online retailers needs to be focused—on creating a better shopping experience. Right?