Amazon sales take a hit in states with online tax, study says

  • Article by: ADAM SATARIANO , Bloomberg News
  • Updated: April 22, 2014 - 4:28 PM

– Amazon.com Inc. is taking a hit in states that are collecting an online sales tax.

In one of the first efforts to quantify the impact of states accruing more tax revenue from Web purchases, 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 about 10 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.”

The findings add to concerns about how much the world’s largest online retailer can expand. The Seattle-based company, which reports quarterly earnings on Thursday, has been grappling with decelerating revenue growth amid heavy spending on new initiatives. Amazon has enjoyed an edge against brick-and-mortar retailers because consumers didn’t have to pay sales tax for purchases from the site, yet that has eroded as states including California and Texas have unveiled the levies.

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

The push by states to collect taxes on Internet purchases has gathered momentum in the past few years. Amazon collects sales tax in 20 states, according to its website. More are set to follow as the company has become a popular target to help state governments generate more revenue to cover budget shortfalls; Florida is set to begin charging a tax on May 1. States lose an estimated $23 billion a year in uncollected sales taxes from Web retailers.

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