Amazon.com starts charging sales tax in Texas. That won’t hope local retailers much.
Last week I made a purchase on Amazon.com that had a new line item: sales tax.
A week ago Sunday Amazon.com started collecting sales tax in Texas. Local retailers are rejoicing.
To be fair to the retailers, it’s only right that Amazon collect sales tax on purchases made by Texas residents.
But if they’re hoping that this will suddenly send shoppers back to their shops, they’ll be deeply disappointed.
Consider why I made a $300 purchase for my business on Amazon.com rather than in a bricks-and-mortar store:
1. It’s still cheaper — or at least no more expensive — than the bricks and mortar store.
2. I don’t have to leave my office. I saved about 45-60 minutes of calling a store to see if it has the product, driving there, finding a clerk, etc.
3. Amazon.com provides more product information and reviews than any store I’ve ever been to. It sure beats the knowledge of a sales associate at one of these stores.
4. If I have a problem, Amazon.com’s customer service will be better than Best Buy, Office Depot, etc. That’s what history on past purchases tells me.
5. I didn’t have three sales clerks hounding me to by an extended warranty on a $150 product.
People don’t shop on Amazon.com just to save sales tax. The benefits of online commerce are much greater than that.
Tia Wood says
All good points but I wonder if all states required Amazon and other sites to collect sales taxes, I’m wondering how complicated that would make things?
Andrew Allemann says
@ Tia Wood – that’s the argument put up by retailers. Sales taxes are complicated because of so many local jurisdictions, rates, and the number of remittances.
Companies like Barnes and Noble and Best Buy have been doing it for years, so it’s not insurmountable for large retailers. I’ve seen some proposals that only require sales tax collection when a retailer hits a certain revenue threshold. But that could be gamed. Ideally systems and a nationwide exchange could be provided by ecommerce software companies.
Nick says
The customer service is excellent.
I had pre ordered some tv shows and it showed delivered but I couldn’t locate them.
Just sent them a mail that the stuff was missing. They offered to refund the purchase or send new ones. I opted for the later. This was weeks after it showed delivered.
All this, only 1 email, and the issue was resolved. No fuss, nothing ….. in less than 24 hrs.
Alan says
Great post, with so many states in the red, we all have to get used to paying a little more, whether on the internet or shopping at a local store. I expect all states to be taxing online purchases in the next couple of years.
Donald Aquilano says
Amazon might be able to survive paying state taxes but smaller retailers like newegg,buy.com would just go out of business.
There is know way in hell they can afford both shipping charges and state tax and compete against the buying power of Walmart/Bestbuy etc…
S.W. says
Newegg should be able to do just fine, they already charge a sales tax in CA, NJ, and TN. Here in CA, they are giving traditional powerhouse brick and mortar’s like Fry’s a run for their money. Fry’s has been desperate to stop the bleeding and have recently begun pricematching Newegg and other internet dealers.
MMB says
Wire stories today indicate that Amazon has waved the white flag and is no longer fighting the state by state sales tax collection. One poster is correct, though. Amazon’s prices (including our state sales tax) is usually FAR better than our local brick and mortar stores. And, Amazon’s customer service is fantastic, as is LLBean’s and a few other online sellers. Local stores have a long way to go to match Amazon’s customer service. Until they do, Amazon will keep leaving them in the dust.
Tom says
If I had to guess, online sales tax is coming for every business that would have to pay in the brick/mortar world. But it’ll be simplified by third party clearinghouses who offer tax remittance as a service.
ADP and Paychex do this on a smaller scale for payroll taxes which change in different localities. I think we’ll see something similar with retailers using an API to determine the exact amount to collect and then remit to a central location which then disseminates the funds on behalf of the retailer to each taxing agency. Or some variation…
Trico says
If your order is actually being fulfilled by Amazon and not a third party selling thru amazon, you can often get free shipping for purchases of $25 or more.
With an Amazon Prime membership the $25 minimum is eliminated.
Andrew Allemann says
I use Prime
Jason says
Amazon is definitely the king of online retail, I pretty much do exactly the same as you have with your purchase. I typically window-shop the stores, then simply place an order on Amazon.com.
Whether it’s a 55 inch smart TV, 47 inch smart TV or a portable basketball system I window-shopped at Sports Authority for.
Amazon wins hands down, taxes are simply a 10% (Chicago’s sales tax) bonus.
One TV saved me $350, the other TV saved me $250 and the portable basketball system was $200 less on Amazon. That’s about an $800 savings on price alone. Add sales tax to that mix ($2500 or so in purchases @ 10%, another $250 there.
The $1050 I saved was two free mortgage payments @ only $510 a month now.
Can’t beat that.
Amazon’s gross sales are on a trajectory to soar past those of Target by FYE 2014. Only Wal-Mart is bigger than Amazon at this point.
That places Amazon.com as the second largest per dollar volume retailer in the USA. Growth rates are faster than Wal-Mart.
Amazon might even catch Wal-Mart is about 15-20 years.
Josh says
I often wonder what people do regarding sales tax on online virtual property sales.
Being from Texas, I collect sales tax on the domains sales I make within Texas but not on interstate transactions. My confusion comes from when I sell domains through Sedo or GoDaddy to private registrants.
Trico says
“I often wonder what people do regarding sales tax on online virtual property sales. ”
Josh,
You really should check with your State’s Department of Taxation.
Although this may change in the future, currently most States do not impose a Sales Tax on Intangible Property.
It seems to me a domain name is certainly an intangible item.
AndyO says
I’m happy to pay sales tax, even though I’ve paid for an Amazon Prime membership, and am shipping my goods overseas via Shipito.com to Australia – it still works out cheaper. I receive my goods in 5-10 business days, which is on par with the standard shipping methods most Australian online retailers use.
Subtle differences like power cords or DVD region settings are relatively easily solved through standardised IEC plugs and most mainstream DVD players sold here supporting region changes (or having a region free function).
Australian retailers are bleeding money left right and centre, but they still have the old mentality of ‘build it and they will come’ with high prices and a very lax attitude towards pre and post sale customer service.
All I need now is for Amazon to open an Australian site!
KStud says
(Great post, with so many states in the red, we all have to get used to paying a little more, whether on the internet or shopping at a local store. I expect all states to be taxing online purchases in the next couple of years.)
What a bunch of idiots, just keep paying, no matter what they tell you to pay just pay it.
Why are the states in the red, did we spend the money, did we authorize anyone to spend the money, no, but we are the one that is expected to pay it back.
How about solving the problem… Congress