Why Amazon is winning online retail and should fold on this silly sales tax fight

Rather than fighting it out on a state-by-state basis, Amazon needs to man-up and do what's right. Our IT jobs are at stake.
Written by David Gewirtz, Senior Contributing Editor

Dollar sign image courtesy Flickr user mikeporesky. Jeff Bezos image courtesy Amazon. Jerry Brown image courtesy State of California.

I am not your typical consumer. I don't normally buy very much. Every few years, I'll replace my suit and about twice a decade, my wife will decide my T-shirts are too ratty and she'll replace them. I do buy some consumer electronics and computer parts, but I generally buy from Amazon or Newegg, and that's about it.

But that's changed recently.

Two projects have required me to do a lot of purchasing. We're renovating our new house, so there's a lot of house-related items we've needed to buy, from shelving systems to hot water heater expansion tanks. I'm also building a studio for the radio programs and TV work I do, so that's necessitated buying a lot of custom lighting and sound management gear.

This has forced me to expand beyond the soft, warm, immediate gratification comfort of Amazon Prime. For those of you not familiar with it, Amazon Prime is a service you pay $80 a year for, and it gets you free two-day shipping or $3.99 overnight shipping. Not everything on Amazon is Prime eligible, but most of what my wife and I have bought has been.

The free shipping is a huge deal. We recently bought a headboard that, alone, would have cost over a hundred bucks to ship. With Amazon Prime, shipping was free. We often buy from Amazon first, before even checking with the local stores, because if Amazon has it, we don't have to take the time to go to the local store. Since it's free shipping, unless we need something perishable or now, Prime is the more optimal experience.

The other compelling advantage of Amazon is something I hadn't really grokked until this round of project purchases. Amazon ships things to you when you order them. You generally know that if you order something, it'll either be there tomorrow or the day after.

This, alone, is blowing away the other online retailers. I have been shocked at how long it takes to get products I've ordered from other places online. I ordered a set of cheap HDMI cables from a company who's entire business is HDMI cables, and it took a week for them to process the order, before they even began the pick-pack-ship process.

I ordered a set of wire shelves from a company who's primary business is selling wire shelves, and they can't tell you either the status of your order or when you'll get it. Generally, it takes about two-to-three weeks, but you never really know. Plus, the shipping costs are off the charts.

I ordered some studio equipment from a well-known online retailer in New York. Even though their Web site said everything was in stock, by the time they processed my order four days later, a few of the items were no longer in stock. They had no mechanism to cancel only part of the order, so I'm still waiting on a few items. The guy I talked to said they might arrive next week.

You can see why Amazon Prime is so compelling.

It's now a default behavior for me to check if the product is sold and shipped by Amazon, before ordering anywhere else. It's not really a price issue. I don't mind spending five bucks more. I don't even mind (as much) spending on shipping -- although that can add up. What I mind is that many of Amazon's competitors are taking days or even weeks to simply enter their order into their shipping system, and that's before the wait for the shipping.

So, not only am I paying a lot more for the shipping, I'm waiting days to weeks for the privilege.

And this is why Amazon's affiliate tax battle with the states is so silly.

First, let's be clear: the states are all hurting. They're not getting the financial help from the federal government they really need to provide basic services, and revenues from both income taxes and sales taxes are down. It's not just the economy, but Amazon and other online retailers are changing purchasing patterns and more and more people are like me. We prefer the convenience and practicality of ordering online rather than trying to get to a local store.

See also: RIP: Borders Books

Because the states are so hungry, because they see Amazon as the bad guy for many of their tax revenue problems, they're not going to give up. They see Amazon as stealing money from their states, money they need to provide services.

It may not happen this year, but it's inevitable. Amazon is going to lose this war. Too much is at stake in each of the states, and the feds aren't going to help. If Amazon goes to the federal government for a get-out-of-taxes free card, the feds will eventually figure out that if Amazon doesn't provide tax revenue to the states, the U.S. Treasury will have to make up the difference.

Our congress critters may be childish and generally useless, but they do understand that it's better for their careers to let the states raise taxes than to let their records show they raised taxes just to pay them out to the states.

Given that this is undoubtedly a lost cause for Amazon, and given that Amazon already has so many structural advantages (like shipping within, you know, a week) over their competitors, it's time for Amazon to bite the bullet (and us, too) and pay sales tax.

Rather than fighting it out on a state-by-state basis, and yanking on the incomes of their affiliates while they're doing it, Amazon needs to man-up and do what's right.

None of us like taxes, but we do like roads, police, fire protection, and public schools. Those services don't come for free.

By the way, if states don't get enough revenue from sales tax, one way they're able to save money is outsourcing jobs. Our IT jobs.

See also: Amazon Drops California In Growing E-Commerce Affiliate Tax Law War

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