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Will Sales Tax Give Amazon Customers Pause?

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Will consumers go from clicks to bricks if Amazon starts charging sales tax? Those who relied on the online retailer’s long-held stance against paying sales tax in certain states may think again, unless they still believe they are getting better deals online, expert say. Amazon has long opposed including sales tax in its prices. But that now appears to have changed.

On Wednesday, Paul Misener, Amazon’s vice president for global public policy, said he “strongly supports” federal legislation on state taxes. He told a House Judiciary Committee hearing, “Congress should authorize the states to require collection, with the great objects of protecting states’ rights, addressing the states’ needs, and leveling the playing field for all sellers.” And added, “The time to act is nigh.”

If and when that time comes, some bargain-hunters will turn back to brick-and-mortar retailers, says Jeff Galak, assistant professor of marketing in the Tepper School of Business at Carnegie Mellon University. “It will impact some consumers,” he says. “Consumers who are after the best deal possible, those who are particularly price sensitive, will be less likely to buy online if they now have to pay taxes.”

Whether online retailers pay sales tax – and on what items – varies from state-to-state. Some states require online retailers to collect sales tax if they have a physical presence in that state where the item is being purchased. Otherwise, it’s up to consumers to keep their receipts and pay the tax. Similarly, not every state charges a sales tax on digital good such as e-books and music files.

What’s more, every online retailer is different, depending on the type of products they sell and the kind of physical presence they may have in a particular state. For instance, items sold by Amazon.com, or its subsidiaries, and shipped to destinations in New York and certain other states are subject to sales tax. Amazon explains its own sales tax policies here.

But other online retailers are not for turning. As Pay Dirt previously reported, Overstock.com CEO Patrick Byrne has vowed to resist paying a sales tax. Overstock pays a sales tax in Utah, where its headquarters are based and, therefore, has a physical presence, but has cut ties with marketing affiliates in Illinois to avoid sales tax as Overstock doesn’t have a physical presence there.

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    • AZN has sold out to the Devil. See Luke 18 about tax collectors–you already know businesses are more concerned about collecting sales tax rounded up than giving the customer a break.

    • Since the online prices are usually cheaper anyway paying a sales tax won’t push it beyond the brick&mortar pricing. Plus, most stores I go to rarely have what I am looking for and staff are often rude or indifferent to helping customers so I’d rather buy online… more secure, less hassle, easy returns, and no rude, pepper spraying people to deal with ;-)

    • Not that I’m looking to pay more taxes, but I see no reason why online retailers shouldn’t collect sales tax. The internet has allowed retailers to sell to much wider audiences, and some like Amazon, sell only via online transactions. Why should they have any extra advantage over a physical store? If I live in TN and buy anything, no matter how or where I buy it from, I should expect to pay sales tax. As strapped as all the states seem to be at the moment, this could really make a difference.
      I look at the total price when deciding where to purchase, including actual price, shipping, taxes, etc.

    • Even with sales tax included, the price of most products on Amazon is still roughly 10% cheaper than stores with a physical location. Also, you save on gas, time, traffic, frustration, lousy sales people, etc. when you shop online. Local retailers are crazy if they think sales tax is the only reason they are losing out to Amazon.

    • My Kindle Fire spotty wi-fi connection and revolutionary slower browser has got me pretty angry with Amazon.

      But there are not a lot of on-line mega stores alternatives if you are angry with Amazon.

      I’ve done okay via google shopping which has directed me to merchants such as Sears, Fleet-Feet and some no-names.

      It is tough to beat the convenience of Amazon’s one-stop we have most everything on the planet in stock shopping.

About Pay Dirt

  • Pay Dirt examines the millions of consumer decisions Americans make every day: What to buy, how much to pay, whether to rave or complain. Lead written by Quentin Fottrell, the blog examines these interactions, providing readers with news, insight and tips on shopping, spending, customer service, and companies that do right – and wrong – by their customers. Send items, questions and comments to quentin.fottrell@dowjones.com or tweet @SMPayDirt.

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