Amazon’s sales are taking a hit in states that have recently started making it pay taxes.
New research out of Ohio State University found Amazon shoppers reduced their spending by 10% in states where the company has had to start charging sales tax. Purchases of more than $US300 also fell by 24%, according to the study, which we found on Bloomberg.
More states have started to push to collect taxes on Internet purchases, in an effort to treat online and offline retailers equally and, often, to make more revenue to cover budget shortfalls.
Amazon has fought these rulings, and instead supports federal legislation that would let states require sales tax from all e-commerce sites above a certain size. That makes sense, because Amazon’s loss of sales led to a 20% increase for competing online retailers. If Amazon has to collect taxes, other large e-commerce sites should have to too, the company argues.
The study also revealed though that the introduction of taxes led to a 61% increase in spending for expensive products on Amazon Marketplace. On Marketplace, merchants pay Amazon a fee to offer products through its website, but don’t have to collect taxes. Indirectly, Amazon still benefits, even if it’s not selling its own products. Brick-and-mortar retailers, on the other hand, only saw a 2% boost in purchases in states with an online sales tax.
Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.