Third-Party Sellers on Amazon See Holiday Sales Dive Following New Tax Rules
January 17, 2013 3:00 PM
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Sellers in the state of California, where sales tax is collected, were down over Q4 2012
Research suggests that Amazon may have taken a sales hit over the holiday period after
collecting sales tax
in certain U.S. states.
While the real results of Amazon's online sales during the holiday season won't be revealed until January 29, e-commerce firm ChannelAdvisor has given a small glimpse at its research, which took a look at the sales figures of its clients (third-party sellers on Amazon) over the holiday period in California and compared it with other states where Amazon doesn't collect sales tax.
Amazon started collecting sales tax in Texas in July 2012, and California and Pennsylvania in September 2012.
In California, specifically, Amazon started collecting a sales tax of 7.25 percent to 9.75 percent. ChannelAdvisor found that its client's sales on Amazon before sales tax collection in California was 5 to 10 percent above other states. The week before the e-tailer began collecting taxes, sales jumped 70 percent compared to other states.
After the sales tax collection began, sales in California matched those of other states. In early November 2012, California sales fell 10 percent below sales in other states.
The busy period of the holiday season, which is late November and early December, saw lower Amazon sales in California compared to other states as well, although ChannelAdvisor didn't provide exact numbers. However, at the end of the holiday season, sales came back up a bit.
According to Thomas Reuters I/B/E/S, Amazon is expected to report a revenue of $22.3 billion at 52 cents a share for Q4 2012.
While Amazon sellers saw a drop after tax collection, Best Buy was reaping the benefits. In California, Pennsylvania and Texas, Best Buy's online sales jumped 4 to 6 percent over the holiday season compared to other states. It also saw a 6 to 9 percent increase in online orders that are picked up in-store within those states.
Amazon fought a long, hard battle against several U.S. states back when it didn't collect sales tax (except in
Kansas, Kentucky, New York, North Dakota and Washington).
The e-tailer fled many states that attempted to force tax collection on the company, such as
and Illinois. Amazon has said that it
does not have to collect sales tax
because of a 1992 Supreme Court decision that excuses Amazon and other remote sellers from having to collect taxes in U.S. states that do not have the company's employees or warehouses operating within those states. But between states looking for ways to offset large financial deficits and brick-and-mortar stores like Best Buy complaining about Amazon being unfair competition
, the issue swelled.
Amazon CEO Jeff Bezos said many times that his company would agree to collect taxes if there were some sort of federal legislation.
Amazon finally broke down and started collecting sales tax in certain states, which allowed it to build more distribution centers within those states. For instance, Amazon announced that it would
collect sales tax in New Jersey
last May so that
two Amazon distribution centers could be built.
This led to faster shipping for customers, such as
Amazon's same-day delivery
program, making it more competitive than ever (especially since it still had cheaper prices than most brick-and-mortars).
This article is over a month old, voting and posting comments is disabled
1/17/2013 3:41:39 PM
That's strange, because third party sellers actually don't collect sales tax from sales made through Amazon. They still go by the old 'report your use tax' system. Only sales made directly by 'Amazon.com' are assessed sales tax at the time of purchase. Being in one of the newly taxed states I know, I wonder if people just assumed and didn't attempt to make purchases instead of actually looking at the details of their invoice.
1/17/2013 10:58:35 PM
Even so, if people know (or think) that the prices at their local BB are the same as Amazon's fewer of them are going to be shopping online in the first place. Amazon's prices are not rock-bottom anyway and the prices set by 3rd party sellers are usually not the best deal since they gouge on shipping. Amazon in general has a lot of good deals and fair prices.
I'll often pay a bit more to shop at Amazon simply because they have a solid return policy and with prime I get free 2-day shipping on pretty much everything. When it's a matter of saving a few hundred bucks over Amazon's price I will go elsewhere.
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