If you, like most Internet users, have relied on Amazon.com for those purchases you just cannot find cheaper elsewhere, you may have already heard that they are planning to roll out same day shipping. While that seems like a great idea for an already booming Internet retailer, it comes at the cost of charging you sales tax.
Depending on where you live, how you order and Amazon’s plans in the coming years, you may begin paying sales tax on your purchases sooner rather than later. We are going to breakdown exactly what Amazon plans to do and our take on whether they is a smart idea or might just begin the downfall of the Internet giant.
How will Amazon make same day shipping reality
Amazon’s plan is simple. They want to build and work through distribution centers in each state to offer same day shipping. This is similar to how Netflix offers distribution centers for rentals in most states. This makes it possible for them to send and receive on a daily basis which makes the turnaround for shipping must quicker for customers.
Amazon does not plan to roll this out overnight but over the next few years.
California and Pennsylvania will be the first two states to offer this service. Customers could see a rise in price as much as $10 per $100 spent in California whereas in Pennsylvania they could see a tax of as much as $8 per $100 spent. This can make a big difference for customers who are looking to buy a high price item and have been relying on Amazon not charging sales tax into the final price.
This is a sharp turnaround for Amazon who for years have fought various states, federal agencies and brick and mortar retailers who have come after them to charge sales tax. Since Amazon does not operate out of every state, they are not required to collect sales tax. In the states they do have a physical, operational presence, they are required to charge sales tax. Now, as Amazon begins to build physical distribution centers in various states, they will be required by law to collect sales tax.
Amazon will now back the Marketplace Fairness Act. This is a bill in Congress that would allow each state to actually collect sales tax from companies located in other states. Other online retailers, such as Yahoo, Facebook, Expedia and others, are vehemently opposed to the idea, mostly because they feel it would hamper their business. In fact, this about face by Amazon may prove to be disastrous in its dominance over brick and mortar retailers.
What do you as a customer lose by Amazon shifting to same day shipping?
Amazon’s plans to offer same day shipping and overall quicker shipping options is both a blessing and a curse for customers. The primary reason why Amazon has overtaken the majority of brick and mortar retailers is because when you factor in the costs of shipping and sales tax, larger purchase are cheaper through them then physically going to a store. Now that you will add back in sales tax in larger states, this may just be enough to start forcing people to head back into retailers in their local area.
While local retailers will not complain about this, Amazon may actually be successful in their venture if they can find a way to lure customers in who have to pay sales tax. Same day shipping will not be enough unless the prices of items themselves go down a tad bit to offset the cost. The benefit brick and mortar stores will have in this case will be that people can touch, feel and see purchases beforehand whereas ordering online limits them from that ability. Amazon would not have made the choice to reverse their ideology on sales tax lightly; do not be surprised if they roll out new features, a new pricing break or some other gimmick to keep loyal customers shopping with them.