Online retailer Amazon has long been able to win the race to the bottom on the prices of merchandise through a number of ways, like being able to purchase merchandise in bulk and low operating costs, but their biggest competitive advantage could be avoiding state sales taxes.
While a physical store on the street in Los Angeles County has to charge an additional 8.75% for state and local sales tax, Amazon has been able to sidestep sales taxes by moving distribution centers to states like Nevada, and offering free shipping to boot. But now, the House Judiciary Committee will hold a hearing on a bill that will allow states to collect sales taxes from companies that sell to their residents. And to the states’ taxes rescue is an unexpected ally, it’s Wal-Mart, who few people would expect to come to the aid of mom-and-pop brick and mortar stores. But only 2 percent of their sales come online, and with Amazon expanding same-day delivery, Wal-Mart might soon see their own competitive advantage declining.
Selwyn Gerber, CPA and founder, Gerber & Co., Inc.
Kathy Warbelow, Austin bureau reporter for Bloomberg News