Chapter 4: Exploring the External Environment

amazon-sales-tax state

Amazon’s Battle Against Sales Tax

Amazon once had a strong competitive advantage against brick and mortar stores. The advantage was not charging sales tax and may be slowly disappearing. Amazon currently lists 21 states on their website that they collect sales tax for. Customers only have to pay sales tax if their order has a shipping destination to one of the 21 listed states. A study, from Ohio State University, found that sales dropped 10% in states charging sales tax. The reason why Amazon only collects tax in some states is because they only have to collect tax where they have a tax nexus, or a physical presence in. To combat this tax nexus law, ruled by the U.S Supreme Court in 1992, Amazon will cut deals with states they open distribution centers in and trade jobs in order to charge less or no taxes for a specific period of time, but not all states will bargain. Sales tax is bad for Amazon and good for local businesses.




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