Shoppers aren’t stupid. With momentum gathering around e-fairness, it’s only a matter of time before the online giant is required to collect sales tax. And when shoppers get wind of the looming change, watch out!
Amazon.com’s sales will surge in the quarter before the e-fairness legislation kicks in and the retailer is required to collect sales tax on behalf of jurisdictions nationwide. It will mark the end of a golden era for shoppers who will rush to make purchases, especially big ticket items, in advance of the legislation’s effective date.
It has been suggested, that the issue of sales tax avoidance isn’t a major driver of Amazon.com’s success. The company built a better mousetrap and shoppers responded. There is a lot of truth to that, but to suggest tax avoidance didn’t play a key role is absurd.
People will go to great lengths to avoid paying taxes and they were provided a quasi-legal way to do so on the uneven e-commerce playing field that existed since the birth of the Internet. Not paying sales tax on online purchases has become a shopper expectation online the same way free-shipping has. Take either away and there is bound to be some backlash.
How much is somewhat in doubt, but the current back-to-school season offers some evidence. In states that offer sales tax free holidays on select merchandise, shoppers will flock to stores to take advantage of the savings. But the ability to avoid taxes at Amazon.com isn’t a competitive advantage?
Imagine if Kmart suddenly stopped collecting sales tax. Even without any direct promotion, word of the development would spread quickly and shoppers would beat a path to the retailer’s stores. Within weeks, customer traffic and transaction sizes would swell and over time the company would regain its prominence, assuming it was able to do a lot of other things right too.
The point being that sales tax avoidance is a powerful competitive advantage and one whose time appears short-lived. The change probably would have happened sooner were it not for the fact that politicians likely fear how the issue would play with constituents. Most don’t want to be seen raising taxes, unless doing so selectively improves one’s re-election prospects. That why e-fairness legislation is being cast as a compliance issue. The tax requirement is already there, e-fairness measures simple eliminates the ability of shoppers to avoid surrendering the tax at the time of purchase and restores levelness to the playing field.