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Amazon is now collecting sales tax in some states in exchange for more distribution centers for same-day shipping options

Amazon is already a major threat to brick-and-mortar competitors with its low prices and easy online shopping method, but now, physical stores have another reason to fear the monster e-tailer: same-day shipping.

Amazon is currently working on same-day shipping methods for customers, which would send a package out only a few hours after the order is placed according to Slate. How is Amazon doing this? By opening more distribution centers, and putting a lot of money into these new centers to make them efficient. This is likely an expansion of Amazon's existing Local Express Shipping option which provides same-day delivery to a handful of large U.S. cities.  

Amazon's old way of conducting business was to set up distribution centers in low-cost states and ship the orders to wherever they needed to go. This worked because Amazon didn't have to collect taxes in states that it didn't have a physical presence in, and low-cost states didn't put too much financial strain on the e-tailer.

However, Amazon has been fighting that tax-related battle for awhile now. The online retailer cut ties with states like Texas, where Texas State Comptroller Susan Combs charged Amazon $269 million in unpaid sales taxes, and Illinois, where Sen. Dick Durbin (D-Ill.) introduced a bill called the Main Street Fairness Act, which would force Amazon to collect sales tax. In California, Governor Jerry Brown signed a bill that would require websites that forward shoppers to Amazon to collect sales tax in the state. The law is expected to generate $200 million in revenue, and prompted Amazon to threaten to leave California-based affiliates. It ended up filing lawsuits in many states like California, Rhode Island, North Carolina and Colorado.

But more recently, Amazon has been backing off on the tax front. It has agreed to collect sales tax in many states, including Texas, New Jersey, Nevada, Tennessee, Indiana and Virginia. Before that, the e-tailer only collected taxes in Kansas, Kentucky, North Dakota, New York and Washington.

Amazon has decided to bend on the tax issue because this would allow the company to open more distribution centers within those states. Having more distribution centers means even faster shipping, which is where the same-day shipping idea came from.

To make sure the same-day shipping method is a success, Amazon has poured a lot of money into making these new distribution centers. For instance, the e-tailer invested $130 million into new facilities in New Jersey, $135 million for two new centers in Virginia, $200 million for Texas distribution centers, $150 million in Indiana and another $150 million in Tennessee. But it's not finished yet -- Amazon plans to build as many as 10 distribution centers in California, totaling $500 million in expenses.

Amazon has also made these centers super efficient by purchasing picking robots, which accurately improve shipping times. It is also placing "lockers" at nearby drug stores and convenience stores, where those who live or work nearby can pick up their Amazon purchases from the locker if they wish.

Same-day shipping could really give brick-and-mortar stores (and even other online stores) a run for their money. Not only is Amazon convenient and cheap, but now it's also fast. The e-tailer keeps giving customers more reasons to shop from Amazon instead of competitors like Walmart and Best Buy. It's funny that brick-and-mortar stores complained that Amazon's lack of sales tax collection was unfair, and now that the online shop is collecting taxes, these other stores could still have the disadvantage -- and we'll likely be hearing about it.

In addition to being a major e-tailer, Amazon is becoming more of a tech giant as well with the release of its hit Kindle Fire tablet last November, and the upcoming release of its first smartphone and the next generation Kindle Fire.

Source: Slate

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RE: Kozmo v2?
By Reclaimer77 on 7/12/2012 3:13:08 PM , Rating: 2
I'm not a fan of sales taxes by any sense, but even I think it's counter intuitive for tax laws to favor businesses who deliberately maintain their operations out-of-state. Either eliminate the sales tax for all businesses, or apply sales taxes to all businesses regardless of whether they sell locally or sell from out-of-state.

Fortunately the Constitution and nearly 100 years of court rulings don't agree.

RE: Kozmo v2?
By ClownPuncher on 7/12/2012 7:25:37 PM , Rating: 2
Agreed, really. If certain laws are the jurisdiction of state and local govenrments, and they get stripped away, may as well dissovle the idea of statehood and the 10th amendment entirely.

RE: Kozmo v2?
By Samus on 7/13/2012 12:00:07 AM , Rating: 2
Amazon drop-ships most of the products they sell. That is, 70% of is products 'sold by...'

The affiliate simply ships the item directly to you without Amazon involvement. Obviously none of these items will be able to same-day ship because Amazon has little control over their affiliates shipping abilities.

RE: Kozmo v2?
By MojoMan on 7/13/2012 11:13:03 AM , Rating: 2
That is not necessarily true Kozmo. If the seller has a "Fulfilled by Amazon" gold box near their name, Amazon handles the shipping because those items are already in Amazon distribution centers.

Only sellers that don't have that "Fulfilled by Amazon" gold box don't pay Amazon to handle shipping for them, and therefore don't get to take advantage of Amazon's logistics.

RE: Kozmo v2?
By KentState on 7/15/2012 7:46:15 PM , Rating: 2
That is correct. I actually have implemented fulfillment by Amazon for two companies and the most recent did over 10 million in sales just through Amazon. About 2 million of that was sent directly to Amazon and fulfilled out of their warehouse. Strangely enough, it was cheaper for us to send product directly to Amazon and have them ship it then using our own workforce and shipping. Their rates are too good all the way around.

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