A story out of Indianapolis reported Wednesday that the Indiana House Ways and Means Committee may vote as early as next week on a bill to move up the effective date of a sales tax deal Amazon (NASDAQ: AMZN) struck with former Indiana Governor Mitch Daniels.
The bill, if passed, could move the date Amazon was to begin collecting Indiana's 7% sales tax from January 2014 to as early as July of this year.
Amazon says it needs all of 2013, per the original deal, to convert its systems. Indiana Chamber of Commerce vice president Bill Waltz says that request doesn't hold water since four other states have cut deals with Amazon that take effect sooner than the Hoosier State's agreement. Brick and Mortar retailers express the belief that they continue to lose customers to the online giant because of the 7% price advantage for shopping online ... via Amazon's avoiding the collection of Indiana sales tax.
Indiana's Fiscal Policy Institute estimates $100 million a year in Indiana sales taxes go uncollected on Amazon purchases. Those numbers imply that Indiana's approximate 6.5 million residents are buying, on average, about $220.00 worth of stuff on Amazon each year. What will paying an extra $15.40 in sales tax mean to Hoosiers' online buying habits?
Some research indicates "nada."
A study of the online shopping habits of Texans by Wells Fargo analyst Matt Nemer showed that consumers in the Lone Star state, the second most populous state in the nation, did not significantly change their buying habits when that state's online sales tax went into effect in July, 2012.
Mr. Nemer found that among 1,000 Texans surveyed, 27% shopped regularly on Amazon.com, down from 30% in June. That, he noted, was within the margin of error of 3% to 4%.
What will Indiana's attempt to change the agreement have on Amazon's business relationship with the state? That has yet to be determined. Work on what was Amazon's fifth large Indiana facility started just weeks after Daniels' January 2012 announcement of the original sales tax collection agreement. Previous comments from Amazon had stated that the Jeffersonville, Indiana, facility could have some 1,000 employees by 2015. Whether or not those hiring numbers will now be met is unknown at this time.
How will Amazon's experience with Indiana impact its negotiations with the 30 odd other states it has yet to negotiate the sales tax issue with? Does it really matter? Are the cost of state sales taxes really that important to online shoppers?
According to Mr. Nemer's Texas study, a lack of sales tax was less important to shoppers than convenience stating: "Sales tax collection is not likely to materially impact Amazon's sales even as the company starts collecting in more states."
With convenience trumping sales tax and Amazon now aggressively testing the convenience of same day delivery as well as looking at expanding into previously only experimental lines of additonal sales and services, Brick and Mortar retail outlets like Target (NYSE: TGT), Costco (NASDAQ: COST) Wal-Mart (NYSE: WMT) and now even grocers like Kroger (NYSE:KR), Safeway (NYSE:SWY) and SuperValu (NYSE:SVU), may have much more to worry about than equalizing the playing field when it comes to state sales tax collection.
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