Online Sales Tax: A Non-Issue

[Commentary] Amazon recently began charging sales tax on online transactions made by residents of Pennsylvania and California, which means that 33 percent of the U.S. population is paying sales tax on Amazon purchases. This figure is expected to climb to 44 percent, or 14 states total, by 2016. And at the federal level, three bills are pending that would enact a federal requirement for online sales tax collection. However, just because online sales tax collection is a growing phenomenon among states does not mean it poses a threat to Amazon’s march toward retail dominance, and eCommerce growth generally. In fact, the competitive advantage of ecommerce has little to do with online sales tax. The reality is that according to the Amazon 2011 Annual Report, the company is already collecting sales tax on over half of their revenue, and sales growth is only accelerating. There are no doubt shoppers deterred from buying online in states where sales tax is collected. But with Amazon already collecting sales tax on more than half of its revenue, a national online tax law is unlikely to slow Amazon’s meteoric growth because the eCommerce value proposition extends far beyond the perceived “discount” of avoiding sales tax. Amazon and eCommerce sellers have found many ways to meet shopper expectations better than offline retailers, but avoiding sales tax collection has never been on the list.

[Silverman is director, sales support for etailing solutions]