Amazon.com begins collecting sales tax from Georgia residents; retailers welcome long-sought change but say price, tax advantages afforded online sellers for years may have permanently altered consumer habits
September 2, 2013
(The Atlanta Journal-Constitution)
– Online retail giant Amazon.com begins collecting sales taxes from Georgia customers on Sunday, a move that may annoy shoppers but one that merchants with physical stores have long sought as a fairness measure.
The retailers have complained that the lack of sales tax gave Amazon an unfair advantage as it grew into a juggernaut for books, electronics, clothes and just about any other item under the sun.
But while retailers welcome the addition of Georgia sales tax by Amazon, few think it will dramatically change the game. They say that after years of undercutting the competition -- with both low costs and by not collecting sales taxes -- Amazon has permanently altered the industry by forcing prices lower, putting shipping costs on the shoulders of merchants and dominating categories such as books and music.
For instance, Charis Books and More of Atlanta pays publishers $16.20 for new hardback books while Amazon can charge as little as $9.99, said Elizabeth Anderson, executive director of Charis Circle. Even with sales taxes tacked on, consumers often find cheaper prices at Amazon.
"We can't compete with that and we understand that customers see that they can buy a book for true retail cover price $26.99 or they can buy it for Amazon's rigged price of $9.99," Anderson said. "It's a false choice."
Georgia becomes only one of a dozen states where Amazon has added sales tax, and there is no research that suggests the move has changed the shopping behavior of Amazon customers, said Rachelle Bernstein, a spokeswoman for the National Retail Federation, which supports sales tax collections.
Those who don't like paying the taxes simply look for other e-tailers, such as overstock.com, that still offer sales-tax free buying.
"(Amazon's sales tax collection) is a step in the right direction, but it still leaves an unlevel playing field," she said. "The only way to solve that unlevel playing field is with federal legislation" that would require sales tax on all online purchases.
Amazon agreed to collect Georgia sales taxes after a Georgia law mandating their collection from online retailers went into effect in January.
Prior to the state law, Amazon declined to collect the taxes in the past because it does not have a physical presence in Georgia, such as one of the distribution centers it operates in a handful of states, including California, Arizona, Texas and Tennessee.
To date the company collects sales taxes in Arizona, California, Kansas, Kentucky, New Jersey, New York, North Dakota, Pennsylvania, Texas and Washington. Like Georgia, it will also begin collecting them in Virginia today. It has reached agreements with other states, such as Tennessee, Nevada, Indiana and Florida, to begin collections there over the next few years.
Amazon could not be reached for comment.
Some retailers speculate privately that the company is complying now because it is considering opening a Georgia distribution center in an effort to make plans to offer same-day delivery of some items a reality. Others think the company's hand was forced by its ownership of Georgia-based fabric.com, which it purchased 2008, though Amazon has argued that that company operates independently.
Amazon has supported the Marketplace Fairness Act, which would require all online retailers to collect sales taxes nationwide. The bill passed the U.S. Senate earlier this year and is waiting for House consideration.
But at the same time Amazon is continuing a fight it has had over the sales tax collection requirement in New York, filing a petition with the U.S. Supreme Court recently to challenge the state's law and pointing out that it doesn't have a physical presence there. It also has pulled affiliate programs -- businesses that sell products through Amazon -- in some states to avoid collecting sales taxes.
Mary S. Moore, founder and chief executive officer of Atlanta's The Cook's Warehouse, said Amazon sales taxes will help the state's bottom line and that the company has the technology to make the tax collections happen.
It's estimated that collecting tax from all online retailers operating in Georgia would net the state about $16 million annually, with the biggest chunk of that coming from Amazon.
Other retailers, such as T.J. Callaway, are conflicted on the issue.
Callaway, chief executive officer of Athens men's clothing store, Onward Reserve, collects sales taxes from customers who shop in his Athens store and from Georgia residents who buy online at onwardreserve.com. He thinks its the right thing to do.
But he doesn't collect sales taxes in states where it is not required. He thinks the Marketplace Fairness Act, will hurt smaller retailers who can't afford to hire the personnel to collect the taxes for each state. As long as Amazon is fighting the measures, he thinks smaller retailers can ride the company's coattail until the legislation can be rewritten to address their concerns.
"If we have to collect sales taxes in all 50 states, that is going to be hard on us as a small business," said Callaway, who plans an Atlanta store in the West Paces Ferry Road area.
He said some customers, including parents of students, put off buying big ticket items at his Athens store if they live in states where the sales tax is not applied. Instead they wait until they return home and buy tax-free online, an advantage he would lose if sales taxes are applied nationwide.
The change by Amazon in Georgia comes as big retailers also face the challenge of integrating online sales with brick-and-mortar strategies .
Kevin Hoffman, president of Atlanta-based home improvement leader Home Depot, said growing online is critical because it ensures that customers can find you on any platform, including the Internet.
About 2 percent of Home Depot's sales comes from online purchases. The company hopes to grow that number by pushing customers to buy at homedepot.com and pick up items shipped to stores.
"Really your goal as a retailer now is to be everywhere," Hoffman said. "We want to be just a finger swipe from you walking into our stores."
But that takes training both the customer and Home Depot employees, he said. The typical Home Depot store stocks about 35,000 items, but there are as many as 600,000 items available online. Store clerks are instructed to help customers find products online if they are not available on shelves.
"It's about changing shopping behaviors," he said.
Jonathan Johnson, executive vice chairman of overstock.com, said collecting sales taxes won't change the fundamentals in brick-and-mortar stores. In addition to being limited by square footage in what can be offered, they still don't have the online focus of companies like overstock. For instance, online stores recognize the importance of search optimization because that is one of the biggest guides to their websites.
Overstock supports the Marketplace Fairness Act, but like Amazon has fought measures to force it to collect sales taxes in states where it does not have a physical presence.
"If small brick-and-mortar companies are saying this (Amazon collection of online sales taxes) will save us, that is a fool's hope," Johnson said.
(c)2013 The Atlanta Journal-Constitution (Atlanta, Ga.)