February 20, 2013
California's budget outlook is improving, and the state can thank Amazon.com (NASDAQ: AMZN ) for chipping in. The e-tailer started charging sales tax to its California shoppers this past holiday season. Early results show a solid -- but not blowout -- win for the state government. And in exchange, Amazon may be looking at a minor sales slowdown.
California took in $96.4 million in new taxes from online sales last quarter. That puts the state in position to easily hit the $107 million in online sales taxes it expected to collect by the end of this June. Still, as Reuters reports, the tax inflow was well below what some had projected. An influential study back in 2009 estimated that the annual online tax haul in California could be as large as $1.9 billion. Nationwide, the total amount of annual revenue that states were missing by not collecting online sales taxes has been pegged at $23 billion. But California's recent experience points to a much lower figure.
Still, that doesn't mean Amazon won't see an impact to its business. Industry analytics firm ChannelAdvisors tracked a big drop in the e-tailer's California sales just after the tax collecting began there. And competitors boasted that they saw a jump in their own revenue at the time, with Best Buy (NYSE: BBY ) claiming a 5% bounce in online orders. The effect has been muted for Amazon, especially since it only collects sales taxes in a handful of states. That won't be true for long, as more states are set to join the list, and a nationwide law even looks likely.
The tax changes, combined with fresh price-matching guarantees at Best Buy and Target (NYSE: TGT ) , should erase the pricing advantage that made showrooming so lethal to brick-and-mortar stores. Best Buy claimed last week that it had put an "end" to showrooming by agreeing to match prices year-round. Target made a similar announcement last month, calling out Amazon and Wal-Mart while saying that it provides "unbeatable value" to customers. Those policies will help, but it might be state governments that finally put an end to showrooming.
Amazon is the big bad wolf in the retail world right now, but at its sky-high valuation, most investors are worried it's the company's share price that will get knocked down instead of competitors'. We'll tell you what's driving the company's growth, and fill you in on reasons to buy and reasons to sell Amazon
in our new premium report. Our report also has you covered with a full year of free analyst updates to keep you informed as the company's story changes, so click here now
to read more.