How Amazon Built Its Empire On One Tax Loophole

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http://thinkprogress.org/economy/2014/04/26/3431227/amazon-empire-loophole/



Amazon.com has reshaped American commerce in just two decades. But how much of the online shopping empire’s success owes to innovation and entrepreneurial genius, and how much of it stems from cheating the system?

Without the loopholes it uses to avoid state sales taxes, new research shows, Amazon loses a substantial portion of its customers’ spending to alternative retailers. In five states that closed the sales tax loopholes that make Amazon’s prices more competitive than what in-state retailers can charge, the site’s sales fell by 9.5 percent.

For large purchases where the sales tax advantage would be most pronounced, the researchers found an even steeper drop in Amazon spending. When states close their online sales tax loopholes, “consumers decrease their spending by 15.5% on purchases larger than $150, and by 23.8% on purchases equal to or larger than $300.” These findings come from a National Bureau of Economic Research (NBER) working paper which examined data on millions of shoppers from before and after the implementation of so-called “Amazon tax” laws in California, Pennsylvania, Texas, New Jersey, and Virginia.

The money that stops going to Amazon mostly goes to competing online retailers, according to the NBER paper, but some of it also reverts back to the brick-and-mortar storefronts that have been getting pushed out of business by online shopping for years. Had the web giant not enjoyed these huge price advantages over the past 20 years, of course, those other online retailers that customers now turn to might not have developed. When the company launched in the mid-1990s, the alternative businesses positioned to capture all the spending that sales tax fairness displaces from Amazon today would mostly have been physical stores.

[Octafish]

1. Perfect storm for plutocracy, wrecking retail and cheating the nation.

Then, they park their loot offshore. Life's tough for the billionaire.

http://www.huffingtonpost.com/2012/04/17/apple-corporate-income-tax-rate_n_1429955.html

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2. +1

[pipoman]

3. Online shopping isn't going away

and it is triggered by convenience almost as much as price. I suspect the majority of Amazon's decline was to other online retailers who don't charge sales tax. As for lamenting the effects of online retailers on local stores is like lamenting the decline of buggy whips with the invention of cars. People buy online because they don't have to waste their time driving around looking for what they want, nor do they have to wonder if the item is competitively priced.

Also we shouldn't forget that Amazon is a clearinghouse for many brick and mortar businesses. Much of the items on Amazon come from progressive retailers willing to change with the times.