Online Tax Hit Amazon Sales

It appears Amazon Inc. is feeling negative effects in states that are collecting an online sales tax.

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 9.5 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.”

Amazon has enjoyed an advantage over brick-and-mortar retailers because consumers didn’t have to pay a sales tax when buying from the e-commerce site, but the study suggests that advantage has eroded as 20 states, including California and Texas, have unveiled the levies.

“There is no ambiguity,” said Brian Baugh, one of the report’s authors from Ohio State’s Fisher College of Business. “It has been their competitive advantage.”

The Ohio State University researchers who wrote this month’s paper tracked the spending of about 245,000 households that shelled out at least $100 on Amazon during the first six months of 2012, and then kept tabs on them through the end of 2013. About a third of the subjects lived in California, New Jersey, Pennsylvania, Texas and Virginia — states where new tax laws were implemented during that time.

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The study also found that brick-and-mortar retailers enjoyed a 2 percent bump in purchases in states that introduced an online sales tax, while competing online retailers got a 19.8 percent increase, the study found.

The biggest sales uptick – 61 percent for big-ticket items – went to merchants that use Amazon Marketplace. These outfits pay Amazon a fee to offer products through the Amazon Web site, yet don’t collect taxes. The products are typically available alongside Amazon’s own listings.

“If they make one extra click on Amazon, they can continue to realize these tax savings while still enjoying the whole Amazon ecosystem,” Baugh said.

At least for now.

For a copy of the study, contact martin@bekapublishing.com