I've already written extensively on how there are significant clues that Amazon.com (AMZN) is seeing an impact from having to collect sales taxes both in California and Texas. Previously at the same price Amazon.com was cheaper than B&M retailers, now it isn't and B&M retailers have other advantages such as ease of returns, immediacy, warranties and service. So either Amazon.com lowers prices to regain competitiveness and eats lower margins, or Amazon.com keeps prices steady and sees lower revenues and lower growth.
However, there's reason to believe that the sales tax impact doesn't stop there. As I've shown in my previous article, ChannelAdvisor - which collects 3P sales statistics - saw an impact from the introduction of sales taxes in California. Also, in the comments, commenter alloo confirmed, as a 3P seller, that California sales grew 10% less than the national average. Now here's the problem: although Amazon.com started collecting sales taxes, it did so only for 1P sales. And alloo's business was already collecting sales taxes because it was California-based.
What does this mean?
It means that the impact seen by ChannelAdvisor on its members revenues from sales tax happened even when most of them didn't actually have to collect sales taxes! It also means the impact alloo saw on his revenues took place even though he was already collecting sales taxes!
Think about it for a while. The impact these sellers saw did not happen because Amazon.com started collecting taxes in their products. It happened because Amazon.com, overall, saw a loss of sales because it generically started collecting sales tax. It was as if Amazon.com was seen as a "duty free" destination and lost that designation for everything it sold.
This also means something else. If lower-value products that didn't actually begin being taxed or were already taxed were impacted to the tune of up to 10%, what could have happened to higher-value products which actually started being taxed? What is reasonable to expect here is an even larger impact.
Also, it's likely that the uncertainty of now having sales tax led to more careful consumer behavior and more price comparison at a time when physical stores such as Best Buy (BBY) and Target (TGT) were rolling out price matching initiatives, leading to an even larger loss of revenues or margin impact.
There is reason to believe that not only did sales tax collection impact the products that were now subjected to it, but it also impacted Amazon.com as a general shopping destination, since even products not taxed or already taxed saw sales erosion.
Over time, as sales tax spreads to the entire U.S., it's likely that this impact will be even larger. It's also likely that the impact Amazon.com saw in these States (Texas, California) exceeded 10% in 1P sales (since it was up to 10% in 3P sales that were untaxed or already taxed). Texas and California are the two most populous States in the U.S., comprising 20.2% of the U.S. population. They're also richer than average States, so they probably represent more than 20.2% of Amazon.com's U.S. revenues. If we estimate a 15% impact on 1P sales, with the U.S. representing 57% of Amazon.com's overall sales, 15% of 20.2% of that would be enough to produce a 1.7% impact on Amazon.com's overall revenues. It's still within a range where Amazon.com could easily compensate by using more promotional activity - a lot of which was observed during the quarter, as Firstadopter chronicled. However, promotional activity does not come for free - it has earnings impact.
Given what was explained here, it seems likely that Amazon.com will have further negative earnings impact in this quarter or alternatively, markedly slower revenue growth. Neither of these seems discounted in the share price, which continues to discount an entirely rosy future.
Disclosure: I am short AMZN.