Sales tax may cut into Amazon’s edge

Marketplace Contributor Sep 14, 2012

Stacey Vanek Smith: Used to be, if you ordered something off the Internet, you didn’t have to pay state sales tax. But now Amazon is now charging sales tax in a growing number of states. California goes on that list this weekend.

Marketplace’s Bob Moon reports.

Bob Moon: A lot of the big-ticket items that have meant the biggest savings from Amazon are the kinds of goods you want to see before you buy. And Morningstar’s R.J. Hottovy says customers will still be tempted to go for the cheaper price online.

R.J. Hottovy: Even if Amazon does charge sales tax across the country, we still think it maintains a meaningful price leadership, just because it doesn’t have the burden of having physical storefronts.

We compared after-tax prices on a 55-inch TV made by LG. Suppose you headed to a Best Buy showroom here in L.A., then fired up one of those smartphone apps that do price comparisons. Would you be tempted to buy the same model for $90 less from Amazon — tax included?

That pricing is in line with the average 10 percent savings that Wedbush analyst Michael Pachter says Amazon normally beats brick-and-mortar retailers by. But he thinks the added taxes could tip the balance for some consumers.

Michael Pachter: If the price difference is narrowed, a lot of people are going to say, “Well, shoot — I’m here, I’m looking at the TV, it looks great, what the heck.”

Especially, he says, if it means not stiffing the salesperson who helped you check out the merchandise.

Pachter: I think that’s pretty cheesy.

I’m Bob Moon for Marketplace.

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