Amazon started collecting sales tax on its Florida sales today—does that mean that particular customer base will purchase less from the online retail giant? If the results of a recent Ohio State University study carry through to Florida, Sunshine State residents will indeed purchase a little less on Amazon than they used to.
That might be good for brick-and-mortar retailers and other online retailers though, since the study found that previous Amazon purchasers offset their lower Amazon purchasing with more purchases in those other places.
Specifically, the study, available on the Social Science Research Network, found that households in states that require sales tax collection from online purchases reduce their spending on Amazon by about 9.5 percent. However, the decline in Amazon purchases is offset by a 2 percent increase in purchases at local brick-and-mortar retailers, and a 19.8 percent increase in online purchases made with competing retailers.
The study focused on five states (California, New Jersey, Pennsylvania, Texas and Virginia) that started collecting sales tax on Amazon purchases between 2012 and 2013. It also ruled out the possibility that study results were skewed based on online shoppers temporarily purchasing more online before state sales tax collection began, in anticipation of the newly collected tax.
Amazon currently collects sales tax in 21 states. Aside from the six mentioned earlier, those states are Arizona, Connecticut, Georgia, Indiana, Kansas, Kentucky, Massachusetts, Nevada, New York, North Carolina, North Dakota, Tennessee, Washington, West Virginia and Wisconsin.
The study’s conclusion finds that broader and more consistently applied online sales tax collection, such as those provisions in the Marketplace Fairness Act (H.R. 684, S. 743), will lead to an increase in national retailers’ online sales but will only modestly increase revenues for local brick-and-mortar sellers.
Bloomberg BNA recently published its annual Survey of State Tax Departments, which among other things provides an in-depth overview of each state’s sales tax policies with respect to remote retailers.
Continue the discussion on Bloomberg BNA’s State Tax group on LinkedIn: How might this shape the debate surrounding the Marketplace Fairness Act?
For more information about this and other state tax issues, sign up for a free trialof the Bloomberg BNA Premier State Tax Library.
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