Amazon Sales Tax Impacts

Adam Satriano of Bloomberg on the impact of sales tax on Amazon purchases:

In one of the first efforts to quantify the impact of states accruing more tax revenue from Web purchases, researchers at Ohio State University published a paper this month that found sales dropped for Amazon when the online charge was introduced. In states that have the tax, households reduced their spending on Amazon by about 10 percent compared to those in states that don’t have the levy. For online purchases of more than $300, sales fell by 24 percent, according to the report titled “The Amazon Tax.”

This is not surprising in the least. Amazon’s prices are generally better than most brick and mortar stores, but not by much. The real savings comes in the form of no sales tax which generally means at least a 10% discount for most people. That is usually enough to offset the need to have something right away. When that get’s taken away it’s suddenly not as good of an option.

Amazon has to be a little concerned. Some people think they are overextending themselves as it is and if more and more states why ways to tax purchases through them things get could dicey in a hurry. If things go from being $10-20 cheaper to $1-2 cheaper, but with a 2-5 day wait, suddenly Amazon isn’t as appealing. The cascading effect of this could be interesting as well. Less purchases makes Amazon Prime (and especially it’s upcoming price increase) less valuable. That means less people will have a free gateway into all the digital content that Amazon seems to be focusing on. Seems like a slippery slope.