By Quentin Fottrell
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.