The Big Amazon Subsidy is Doomed

wolfstreet.com / by Wolf Richter • Oct 9, 2017

But for many retailers it’s too late.

Amazon battled states for years to avoid having to collect sales taxes. Walmart was on the other side of the fight, along with state revenue offices. Walmart had to add sales taxes to all its sales in California, whether online or brick-and-mortar, which at the time ranged from 7.25% to 9.75% depending on location. For shoppers, that price difference was reason enough to switch to Amazon. It was in essence a massive taxpayer subsidy for Amazon.

But Amazon lost that battle and started charging sales taxes in California in September, 2012. State after state followed. By early 2017, Amazon was charging sales taxes in all 45 states that have state-wide sales taxes and in Washington DC.

Still, even in 2016, online retailers dodged paying $17.2 billion in sales taxes on out-of-state sales, according to the National Conference of State Legislatures. For them, it’s a massive price advantage that other retailers didn’t get.

The fight over sales taxes is based on a Supreme Court case of 1992 – Quill Corp. v. North Dakota – that barred states from forcing companies to collect sales taxes if they didn’t have physical facilities in those states, such as stores or warehouses.

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