Amazon tax bill in CA could encourage passage in more states

Marketplace Staff Sep 23, 2011

Amazon tax bill in CA could encourage passage in more states

Marketplace Staff Sep 23, 2011

Steve Chiotakis: California Governor Jerry Brown will be in San Francisco today, and the Los Angeles Times reports he’s expected to sign the state’s Amazon Tax bill into law while he’s there. The bill clears the way for state collectors to tax anything sold by Amazon — and many other internet retailers within the next year.

Opponents, of course, aren’t happy about new taxes. But those in favor of the bill say it could save a lot of jobs by leveling the playing field between web and brick-and-mortar stores — and maybe even create new jobs with the possibility of Amazon building distribution warehouses in California.

Kerry Rice is senior Internet analyst at Needham and Company, an investment bank. He’s with us from San Francisco. Hi Kerry.

Kerry Rice: Hi, how are you?

Chiotakis: I’m doing well. How might this affect Amazon? I mean, what are we talking about here?

Rice: Well, it’s really hard to determine with any certainty how this is going to impact Amazon. We know that in about a year, they will have to start collecting sales tax for the state of California. You know, in simple economics, if they were to pass that onto the consumer and raise prices, that could actually negatively impact demand. And so, would the consumer choose to go to say,, or, or somewhere else where prices are more competitive now?

Chiotakis: Are we talking about a lot of money that this could bring into California, or like you say — if they’re going to either other websites or brick-and-mortar stores, right — it could just be a shift of tax money?

Rice: You know, I think because of the way the recession has worked, it’s really conditioned the consumer to go look for the best price and decide how much it’s going to cost us and when we’re going to get it. And no one competes with Amazon on selection. And then on price, Amazon is generally the lowest price across the board — then throw in free shipping, and they become the kind of one-stop-shop for many, many consumers.

Chiotakis: I know New York state has passed a so-called “Amazon Tax.” Is this this the beginning of the end of Internet sales with no sales tax?

Rice: I believe it is. I mean, I think it’s a matter of time until we do either have a Federal sales tax or that each state requires Amazon to collect sales tax.

Chiotakis: But not just Amazon — others as well, right?

Rice: Yeah. Any kind of online, out of state retailer, they would collect taxes for that state. And that’s kind of new. You know, it was initially brought up to incentivize competition and to help those businesses grow. You know, Amazon is a multi-billion dollar company with revenues expected to be near $50 billion in 2011. So it’s not longer a start-up, and I don’t know if it necessarily needs the benefit of not collecting a sales tax.

Chiotakis: Kerry Rice from Needham and Company up in San Francisco. Kerry, thanks.

Rice: Thank you so much, Steve.

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