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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 Solandri on 7/12/2012 3:21:17 PM , Rating: 5
quote:
Depends on how much same day shipping costs.

The expensive part of same-day shipping is the long-distance haul (usually by plane). If there's a local distribution center, it won't cost appreciably more than regular shipping. The shipping companies are constantly getting packages in and sending them out. If your distribution center is getting enough of their trucks that they're making pickups multiple times a day, it's no additional work to put packages picked up in the AM on a truck in the PM for a local delivery run it was going to make anyway.

quote:
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.

The tax laws do not favor out-of-state businesses. The taxes hurt in-state businesses. Subtle distinction.

The states have been arguing from the standpoint that the sales taxes are a given, when they're not. It's completely within their power right now to eliminate any advantage Amazon has without running afoul of the Constitution - simply eliminate their sales tax. The truth is it's the states themselves which have put their in-state businesses at a disadvantage with a high sales tax.

On a more abstract level, I don't really understand why people are for taxing Amazon. It's exactly why the clause was written in the Constitution (to prohibit states from discouraging interstate commerce), and it forces states to compete with each other for an environment friendly to commerce. If a state taxes its sales up the wazoo, its citizens will simply buy from a state which doesn't tax sales as much, thus providing a moderating force against excessive taxation (one which doesn't require you to move out of the state). Conservatives should be against sales taxes because it's a tax on commerce. Liberals should be against it because it (being completely flat) is one of the most regressive taxes we have. Simply eliminate sales taxes and shift the revenue shortfall to other, more progressive taxes like income taxes.


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