A More Level Playing Field for Retail in 2013?

Amazon.com (NASDAQ: AMZN  ) might have a tax problem on its hands. According to new data from ChannelAdvisors, the e-tailer's sales took a dip in states where the company started charging sales tax this quarter.

California, Texas, and Pennsylvania recently joined just five other states on Amazon's taxing list. That effectively ends at least one price advantage that the company had over local stores there. And it opens the door -- just a crack -- for Amazon's competition.

ChannelAdvisor's analysis focused on California, where Amazon started collecting sales taxes in September. State taxes can add a hefty 8% to a customer's bill there.

No surprise: Shoppers were motivated by the price changes. As customers braced for the Sept. 15 price hike, ChannelAdvisor tracked a sales spike -- as high as 70% above other states -- in the week before the change. And afterward, Amazon's sales fell as much as 10% below other states' results heading into the holiday crush.

Those pricing changes also might have set the stage for better results at other retailers. Best Buy (NYSE: BBY  ) told Reuters last week that it saw about a 5% bounce in online orders from California, Texas, and Pennsylvania after Amazon's tax collecting ramped up. The struggling retailer just reported flat holiday sales, which were kept afloat by a solid 10% rise in e-commerce. Target (NYSE: TGT  ) booked its own disappointing sales growth of 0% in December. Still, the company was happy enough with its holiday price-matching policy against Amazon that it decided to extend it year-round.

But Amazon is a huge global retailer, expected to book $22 billion in revenue for the December quarter, after turning in $14 billion last quarter. The loss of a slight price advantage in a few states, even big ones like California, won't have much of an impact on overall earnings or revenue. Still, eye-popping revenue figures like those have drawn a lot of attention from state governments. So Amazon can't expect its list of just eight tax-charging states to stay that small for long.

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  • Report this Comment On January 26, 2013, at 2:44 PM, crca99 wrote:

    Glad to see a level playing field. About time AMZN got taxed.

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