Best Buy (BBY) released a statement today regarding the Marketplace Fairness Act introduced in the U.S. Senate. It should come as no surprise that one of the retailers that has become Amazon.com's (AMZN) "showroom" would "welcome" the proposed piece of legislation:
The proposal grants states the authority to apply sales tax collection laws fairly to all sellers, which levels the playing field between brick-and-mortar and online-only Internet retailers.
Best Buy believes states should be granted the right to update their laws to reflect 21st Century commerce, creating a fair and competitive marketplace for all sellers to succeed and grow jobs. Best Buy continues to support and encourage Congress to pass this long overdue reform to a collection system created before e-commerce existed.
Unlike Amazon, Best Buy did virtually nothing to pioneer or help shape what "21st Century commerce" would be like back in the mid-1990s. Now that Amazon has eaten Best Buy and most other brick-and-mortar retailer's lunches, Best Buy applauds federal intervention.
As an investor, this type of attitude tells me to do one thing -- and that's run away. I hope Best Buy truly does not believe that if the government forces Amazon to collect sales tax in all states that impose one the playing field will somehow magically level. The sales tax issue does not explain - even a bit - Amazon's dominance over companies like Best Buy. Instead, the latter's lack of any sort of vision back in the day when Amazon was innovating does.
I'm not sure if Apple (AAPL) has or ever will issue a statement on this. If it does, it certainly will not be the same cry for help Best Buy just put out. Apple provides a brick-and-mortar retail experience like no other. It packs (actually gracefully lines) its stores with tangible and subconscious reasons for you to come in, stay awhile, possibly buy something and come back. In contrast, Best Buy sticks to the soulless mold of the brain-drain, sterile retail environment. Simply put, Best Buy has much more to worry about than whether or not Amazon.com collects sales tax from me when I pre-order Kindle Fire.
In fact, laws do exist to cover the issue. Technically, I and millions of others break these laws when we buy things from Amazon, who does not have a brick-and-mortar presence in California and the other states where it does not collect sales tax. If Amazon does not charge sales tax on an item that a brick-and-mortar retail store would have, California requires that I pay it when I file my year-end income tax return. Yet, Amazon gets punished for somebody else's mistake, but, more so, California's refusal to enforce its own laws.
Of course, when Best Buy speaks of "level(ing) the playing field" it makes no mention of the possible consequences for small businesses that will be forced to play by these new and unnecessary rules. That aside, the federal government appears ready to punish Amazon.com for making sound business decisions while the less innovative sleepwalked into retail's future.
Amazon.com played by the rules. It built its business the way it did for a reason. Best Buy could have done what it's doing now a decade ago. It could have shed real estate, sub-leased space and let rental contracts expire in a hasty fit to downsize, but it did not. Instead, it did what so many inferior companies do -- it reacted, feebly, long after it realized it had been not only beaten and out-innovated, but dominated and borderline embarrassed, fair and square.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
