By STU WOO - Wall Street Journal.
SEATTLE—Amazon.com Inc., the world's largest online retailer, hasn't charged sales tax in most states since its founding in 1994. And it has taken some extreme measures to keep it that way.
Among them: Staff traveling around the U.S. have been required to first consult a company map that shades each state red, yellow or green, said three people who have worked for the retailer. These people said they needed permission from managers or company lawyers before entering "red" states because a worker's actions might trigger laws that force Amazon to collect taxes in those states.
A close examination of Amazon's corporate practices, based on interviews with more than a dozen former employees and people who have done business with the Seattle company, as well as a review of corporate documents, indicates that the company believes its sales-tax policy is critical to its performance.
Credit Suisse recently estimated that if Amazon were forced to collect sales taxes in all states, it would lose as much as $653 million in sales this year, or 1.4% out of an estimated $45.5 billion in revenue.
Amazon says it doesn't win orders by nixing sales taxes. Spokeswoman Mary Osako said the company focuses on "low prices, vast selection and fast delivery," adding that Amazon earns more than half its revenue in jurisdictions, including many overseas, where it collects sales tax or the local equivalent. Ms. Osako cited a July report from William Blair & Co. that said if Amazon added sales tax it would still be priced lower than other major retailers on nearly half of the products the report surveyed.
![[AMAZON_p1]](http://si.wsj.net/public/resources/images/P1-BB858_AMAZON_NS_20110802182719.jpg)
Like many online retailers, Amazon says it is obliged to add state and local sales taxes only on purchases from residents of states where Amazon has physical retail operations. But it also has defined retailing narrowly as selling, so related operations such as warehouses don't put it on the hook to charge tax, company representatives have said.
Among them: Staff traveling around the U.S. have been required to first consult a company map that shades each state red, yellow or green, said three people who have worked for the retailer. These people said they needed permission from managers or company lawyers before entering "red" states because a worker's actions might trigger laws that force Amazon to collect taxes in those states.
Amazon's latest efforts mark a new chapter in a long-running battle over national vs. state sales taxes, a critical part of its business model. WSJ's Stu Woo reports.
Such steps to avoid local levies allow Amazon to undercut in-state retailers by the amount they must add in sales tax, which can exceed 8%.
Credit Suisse recently estimated that if Amazon were forced to collect sales taxes in all states, it would lose as much as $653 million in sales this year, or 1.4% out of an estimated $45.5 billion in revenue.
Amazon says it doesn't win orders by nixing sales taxes. Spokeswoman Mary Osako said the company focuses on "low prices, vast selection and fast delivery," adding that Amazon earns more than half its revenue in jurisdictions, including many overseas, where it collects sales tax or the local equivalent. Ms. Osako cited a July report from William Blair & Co. that said if Amazon added sales tax it would still be priced lower than other major retailers on nearly half of the products the report surveyed.
Read more: http://online.wsj.com/article/SB10001424053111904772304576468753564916130.html#ixzz1U4vQdw6U
Footnote:
The Bookman has just read this story at Frankfurt Airport and thought it may be of special interest to NZ and Australian booksellers. Here of course Amazon are not obliged to collect gst which places NZ retailers at a huge disadvantage. Enough! Put them on an equal footing.
1 comment:
The problem is the rate of GST, not the existence of it. Everyone knows that books are zero rated in the UK, but in the rest of the EU the rate doesn't exceed 10%: the one exception is Denmark at 25% - the only country in the world which has a higher rate of tax on books than NZ.
Instead of griping, why don't NZ booksellers argue for a reduced rate of GST on books? Arguing for a zero rate may be a little optimstic, but there is no reason for it to be higher than the 5.5% that applies in France for example. A full list of EU VAT rates on books is being put on our blog today.
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