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Simplified Online Sales Tax Proposal Won’t Hurt Amazon

Sorry, retailers—Amazon’s sales aren’t likely to suffer if a recently proposed online sales tax reform comes to pass.

House Judiciary Committee Chairman Bob Goodlatte (R-Virginia) on Thursday drafted the Online Sales Tax Simplification Act of 2016, seeking to resolve a long-running dispute between retailers, state government and e-commerce companies over how to tax cross-border purchases made online.

As it stands, online sellers only collect sales tax in states where they have a physical presence, such as a store or warehouse. Goodlatte’s draft would have online sales taxed according to the tax base of the retailer and the tax rate of the consumer.

The National Retail Federation (NRF) and the International Council of Shopping Centers (ICSC) both welcomed the proposal, pointing out that it would level the playing field and force brick-and-mortar and e-commerce to compete on price, inventory and customer service—not sales-tax treatment.

Even Amazon, the arch-nemesis of tradition retail, voiced its support for Goodlatte.

“We urge Congress to act now,” Paul Misener, the company’s vice president for global innovation policy, said in a statement. “We recognize that there are multiple ways to draft this legislation, and, in addition to other bills, we also support Chairman Goodlatte’s new alternative approach.”

Given the fact that Amazon now collects sales tax in a lot more states than it used to, this backing isn’t exactly a surprise. According to InternetRetailer, items sold by the Seattle-based behemoth or its subsidiaries are now subject to sales tax in 28 states, thanks to its ever-increasing warehouse footprint. At last count, Amazon had 181 distribution facilities in the USA, with 34 more on the way.

Slice Intelligence, which puts together e-commerce data based on receipts from its Slice package tracking app, recently took a look at Amazon sales in Colorado and South Carolina—two states where the company had just started collecting sales tax—and discovered that little had changed.

In fact, the data showed that sales in Colorado were growing 8 percent slower than in seven neighboring states before it started collecting sales tax, and stayed the same afterward. Meanwhile, South Carolina’s sales were growing 3 percent faster than three nearby states before and accelerated to 5 percent faster after.

The reason? Amazon Prime, which Slice vice president and principal analyst Ken Cassar explained to InternetRetailer had made people less sensitive to prices.

“They value the convenience more than they value the tax saving,” he said. “The growing importance of convenience is one of the key trends impacting the e-commerce space today, beyond just Amazon. Price and selection are still key pillars of the channel, but they aren’t as dominant as they used to be.”

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