Report: Internet Sales Taxes Hit Amazon, but Not to Brick and Mortar Benefit

A recent report indicates that new state taxes imposed on purchases from online retailer Amazon drove down purchases from Amazon by almost 10%. The report compared Amazon sales figures in 5 states which recently started collecting taxes from Amazon sales, to online sales before the implementation of taxes and in states that still do not tax online purchases. The study found decreased sales, particularly on big ticket goods, which led to an overall decrease of 9.5% in sales. The study indicates that the taxes increased revenue for the states. However, taxes did not appear to drive many shoppers to local stores as some had hoped, but rather to other online retailers.

The Supreme Court has ruled that states can only tax online purveyors with a substantial presence in their home state. Because Amazon has such a large presence across the country, for example with its warehouses, it is subject to taxes in more states than other online retailers. The study found that because of this, the taxes caused about a 20% increase in sales at Amazon’s online competitors, but only a 2% increase at brick and mortar stores. So, the early reports appear to indicate that, unless Congress changes the current federal laws, the so-called “Amazon Tax” may be benefitting other on-line retailers rather than the primary advocates of the Amazon Tax–bricks and mortar retailers.

Related topics: Retail, Tax