Study: Sales taxes took bite out of Amazon's sales

 

The online giant Amazon has seen its sales take a slide after states started charging a sales tax on purchases from the company, according to a new study.

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The study, from three Ohio State researchers, found that Amazon got around 10 percent less business in five states — California, New Jersey, Pennsylvania, Texas and Virginia — that installed a new sales tax on online purchases.

That drop was even starker when it came to bigger purchases. Sales dropped roughly 16 percent on purchases over $150, and 24 percent on purchases over $300.

Big-box retailers were the biggest beneficiary of that sales slide, the study found, getting a 20 percent increase in purchases. Local brick-and-mortar stores also saw a sales increase, though at a much more modest rate of 2 percent.

“We conclude that to a small degree, the tax legislation achieved its objective of restoring retail activity to local communities, though most of the gains in ‘leveling the playing field’ are garnered by the online operations of retailers,” wrote the Ohio State researchers, Brian Baugh, Itzhak Ben-David and Hoonsuk Park.

The study comes as lawmakers continue to debate whether to pass legislation to give states more authority to collect sales tax revenue from online retailers that don’t have any locations within their borders.

The Senate passed a measure last year, the Marketplace Fairness Act, which was supported by retail advocates and Amazon.

Right now, states can only collect those taxes from in-state businesses, which retail advocates say gives online sellers an unfair advantage. Consumers are in many cases supposed to report and pay sales taxes themselves on online purchases, though rarely do.

Critics of the Senate measure say it would burden smaller Internet outfits, and that it would be a de facto tax increase on consumers not used to paying sales tax on online purchases.

The House is taking a more methodical approach in dealing with online sales taxes, though Judiciary Committee Chairman Bob Goodlatte (R-Va.) has said he wants to find a solution. Rep. Jason Chaffetz (R-Utah) is also working to try to craft a measure in the House.

Asked about the study, Ty Rogers, an Amazon spokesman, said simply that “as analysts have noted, Amazon offers the best prices with or without sales tax.”

Amazon, which continues to expand around the country, has physical locations in many of the biggest states, meaning it already collects sales taxes from much of the U.S. population.

New York collects a sales tax on Amazon purchases, and the Supreme Court has declined to wade into the company’s challenge to those collections.

Advocates both for and against the Senate online sales tax bill said the study was a win for their side.

Jason Brewer of the Retail Industry Leaders Association said the study proved that government tax policy was influencing how and where people shop.

“We’re not in the business of advocating where and how people shop,” Brewer, whose group represents some of the country’s largest retailers, told The Hill. “We just want the government to get out of the business of pushing people in one direction.”

Brewer added that it made sense that Amazon consumers would turn to larger retailers if they were seeking to avoid a sales tax. “For those that choose to shop online, it would benefit national stores that have websites,” he said.

But Steve DelBianco of NetChoice, a strident critic of the Senate online sales tax bill, said the study showed that the Marketplace Fairness Act would be “no help at all for a Main Street store.”

In exchange for the 2 percent increase in sales — a “tiny little bump,” DelBianco said — smaller retailers that also sell online would face new collection burdens and increased risk for audit. 

“I think the study shows that the primary beneficiary are these big box stores that have such advantages in terms of supply chain and convenience,” DelBianco said. “I think the casualties in that battle of the giants are the small businesses.”