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Why Amazon Wants To Pay Sales Tax 647

Posted by timothy
from the ubiquity-is-everywhere-tomorrow dept.
Maximum Prophet writes "A while ago, Amazon caved on paying individual states sales taxes. Now we know why. Amazon is setting up same-day delivery warehouses everywhere. They will put most normal retailers out of business." If that's a bet, I'll take it.
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Why Amazon Wants To Pay Sales Tax

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  • by Electrode (255874) on Thursday July 12, 2012 @06:02PM (#40632749) Homepage

    This all seems strangely familiar to me. Would be interesting if Amazon could pull it off, though.

    • by alexander_686 (957440) on Thursday July 12, 2012 @06:07PM (#40632795)

      Amazon bought Kiva Systems last year - a company that specializes in pick and pack robots. If I remember my dot.com history correctly it was the picking and packing aspect of the business that killed on-line grocery WebVan. (Which Amazon was an early investor in. I wonder f Amazon has any of the old WebVan stuff around.)

      • Robotic warehouses are not the nirvana that so many claim they are. The problem comes when demand falls off (all demand is cyclical) and your competition lets people go while your left with the same fixed costs. This is happening right now in the industry I work in, where the former leader is plunging out of control from large infrastructure costs, particularly their very sophisticated warehouses, that their competition doesn't have.

        The strategy also seems to overlook that thing where, you know, people don't wanna' pay sales tax. Here in California that amounts to an almost 10% savings for those consumers who violate state sales and use tax laws (of course, I don't).

      • by Animats (122034) on Thursday July 12, 2012 @08:11PM (#40633979) Homepage

        If I remember my dot.com history correctly it was the picking and packing aspect of the business that killed on-line grocery WebVan.

        Kiva Systems was founded by a former WebVan exec. He saw that Webvan was very popular with customers, but they couldn't deliver the service at a low enough cost. If they could eliminate the people...

        Webvan's real problem was botched expansion. They had 3% market share in 30 cities, when they needed 30% market share in 3 cities. Too much truck mileage per shipment.

        Safeway does grocery delivery now, but not very well. They just use order pickers picking from retail store shelves. So their systems don't really know what's in stock. Most orders thus lack some items ordered. A more automated system knows what's in stock, so the customer gets to decide when ordering how to handle out-of-stock conditions. (Ordering a different brand or size or item is an option then. Safeway doesn't do that.)

        Delivery uses less energy than shopping. There's some whining about the "thousand mile salad", but moving a 45,000 pound truckload of lettuce a thousand miles uses less energy per head of lettuce than the 5 mile trip in the 2 ton SUV that moves 20 pounds of groceries.

        A few more years, and automatic driving will meet up with automated warehouses.

  • Good. (Score:5, Insightful)

    by couchslug (175151) on Thursday July 12, 2012 @06:06PM (#40632785)

    Driving to brick-and-mortar stores is an expensive time-waster. The more online choices I have the better.

    • Re:Good. (Score:5, Insightful)

      by quintus_horatius (1119995) on Thursday July 12, 2012 @06:13PM (#40632861) Homepage
      Oddly enough, more and more online retailers are selling through Amazon. And many businesses, including online retail, are running their infrastructure in clouds, often serviced by (you guessed it) Amazon. If you thought Wal-Mart had a wide grip, you ain't seen nothing yet.
    • Re:Good. (Score:5, Insightful)

      by shutdown -p now (807394) on Thursday July 12, 2012 @06:32PM (#40633027) Journal

      Indeed. If Amazon can actually pull off same-day delivery with local warehouses close to everyone, I'd say that they deserve the market dominance. Right now the choice between online and retail a question of convenience vs getting your hands on the product faster. If I can have the former without sacrificing the latter, retail should damn well adapt or die.

  • by ackthpt (218170) on Thursday July 12, 2012 @06:06PM (#40632787) Homepage Journal

    Still, if brick and mortar specialize then can still do well for themselves. Just give up the bulk order stuff Amazon handles in volume.

    Sucks, if they threaten your meal ticket, but this whole trend has been going on since Sears & Roebucks sent out their first catatlog.

    • by westlake (615356) on Thursday July 12, 2012 @06:37PM (#40633071)

      Sucks, if they threaten your meal ticket, but this whole trend has been going on since Sears & Roebucks sent out their first catatlog.

      In 1897 and for years after the Sears catalog had a large grocery section --- a much better selection than the small country store could offer and very attractively priced.

      No perishable goods like fresh fruits or meats, of course.

      On almost every page Sears pushed the notion of buying in bulk or "clubbing" your orders with neighbors to gain the most favorable shipping rates.

      • by ackthpt (218170)

        Sucks, if they threaten your meal ticket, but this whole trend has been going on since Sears & Roebucks sent out their first catatlog.

        In 1897 and for years after the Sears catalog had a large grocery section --- a much better selection than the small country store could offer and very attractively priced.

        No perishable goods like fresh fruits or meats, of course.

        On almost every page Sears pushed the notion of buying in bulk or "clubbing" your orders with neighbors to gain the most favorable shipping rates.

        A couple years ago I was mooching around a Nevada silver mine site (Rhyolite, it pretty much wrapped up about 1912) and found the tops to several rusting tins (which made great subjects for photographs) My favorite, I am not making this up, was something from Fred Fear in New York City -- Google tells me it could have been Maple Syrup or Clam Juice -- quite a luxury, possibly delivered 2,500 miles west, courtesy of Sears & Robuck's

        There were some other amusing tops, like one for Genuine Hog Fat -- Yum

  • by iveygman (1303733) on Thursday July 12, 2012 @06:06PM (#40632791)
    Local retailers (and apparently Walmart, too) were the leading forces in pushing such legislature through in many states. They obviously (and rightfully) fear that Amazon could completely destroy them. This legislation, they thought, would force Amazon to compete with them on an even playing field. Except the playing field was never even to begin with. Even if you force them to abide by the x% sales tax rule, they still completely dominate you in terms of convenience, selection, sheer operations efficiency and economies of scale. Only Walmart could really hold a candle to them. This is going to blow up in the brick-and-mortar retailers' faces and they'll have nobody to blame but themselves for their downfall.
    • by twistedcubic (577194) on Thursday July 12, 2012 @06:11PM (#40632833)
      Amazon likely would explore this possibility regardless of the sales tax issue. It's not anyone's "fault".
    • by Rich0 (548339)

      I'm not sure if this works out better for Amazon or not. I think it might just be a case of a company actually adapting to the real world and not just trying to change it. They fought off the tax changes, and made a fortune for while that lasted. Now they probably figured the writing was on the wall, so while they were ahead they probably cut deals to get tax breaks of one kind or another to implement this new strategy. I'll take that any day over lobbying Congress to keep the buggywhip manufacturers ar

    • I don't think so. The added costs of the warehouses everywhere, and the employees to staff them, will add a huge cost increase to their bottom line. They'll also have to carry much more inventory, since they'll have to keep the product in stock at each of these warehouses. This will likely result in more inventory write-downs. This is a move that opens a huge door for other online retailers, allowing them to step into the role Amazon is vacating.
    • by evilviper (135110) on Thursday July 12, 2012 @07:27PM (#40633555) Journal

      , they still completely dominate you in terms of convenience, selection, sheer operations efficiency and economies of scale. Only Walmart could really hold a candle to them.

      I shop Amazon.com quite a bit, but honestly, the shopping experience sucks. I pretty much have to shop other websites to find the product I want, and then I might visit amazon.com and search for the exact product to look at reviews, and/or see if I can get it cheaper than elsewhere. If Google Product Search ceases to include amazon.com, I'll probably never buy anything there ever again, and be perfectly happy about it.

      Trying to FIND what you want on amazon.com is a nightmare. A flood of irrelevant results, a "sort by" drop-box which just as often scrambles the results (try a big search, then sorting by price, and tell me you don't find several that are out-of-sequence), no connection between an item and related items or accessories, except for the few, fairly random "most people buy..." results on a page. etc., etc.

      Walmart gives you a much easier website to navigate, with consistent and proper metadata on each and every item, proper categorization, related products, etc.

      Walmart.com has a smaller selection, but that is actually a GOOD THING because you have less crap to wade through, and yet Walmart tries to serve everyone, so they always have at least one item from every possible product category.

      What's more, walmart's physical location advantage is huge... For YEARS, I couldn't have any products shipped to me, because I was living alone, working the same hours they delivered and that their officese were open, not to mention their nearest center being a crazy distance away, in horrible traffic. When shipping just doesn't work, store-pickup is an acceptable option, that Amazon can't offer without B&M stores in every city. Even their lock-box idea isn't going to suit large items, or save them money on shipping.

      Don't think I'm endorsing walmart, I'm just using them as the example of the polar opposite of amazon, and pointing out where amazon's flaws become huge disadvantages... A few years ago, I wouldn't be caught dead in a Walmart store. But as other retailers have actually conceded the fight (Ever gone into a Target to find they don't have ANY men's shoes? Ever gone into a pet store to find they don't have ANY flea collars?), and are perfectly happy to REQUIRE their customers to shop at walmart because the margins on many items their customers will need just aren't big enough, or the merchandise doesn't sell quickly enough, I've found myself with no other choice, and have only begrudgingly made peace with buying from Walmart, and happily stop buying from many other B&M's who apparently don't care about their customers...

  • Cant Wait (Score:4, Interesting)

    by Wingfat (911988) on Thursday July 12, 2012 @06:08PM (#40632813)
    I have a prime membership with them. main app on my phone is the Amazon store and code scanner, go into Wal Mart see an item touch and play with it. if i like it then i check how much on Amazon and then buy it, it is then at my home with in 2days (1day on most things). My wife is disabled and can not drive, so Amazon has been a wonderful thing for us and our kid.
    • Re:Cant Wait (Score:5, Insightful)

      by hawguy (1600213) on Thursday July 12, 2012 @06:26PM (#40632989)

      I have a prime membership with them. main app on my phone is the Amazon store and code scanner, go into Wal Mart see an item touch and play with it. if i like it then i check how much on Amazon and then buy it, it is then at my home with in 2days (1day on most things). My wife is disabled and can not drive, so Amazon has been a wonderful thing for us and our kid.

      I know lots of people do that, but I think it crosses the ethics boundary. It costs a lot of money to have a physical store and physical product.

      There are some things I don't like to buy without seeing them in person (running shoes and TV's to name a couple), if I go to the store to try on running shoes and find ones that I like, I always make a purchase from that store. When it comes time to buy a new pair, I have no qualms about buying them online, but when the store is paying someone to help me find the right shoe, I want to support them for that purchase.

      Likewise, if I go to the store to check out a TV, I buy from that store to compensate them for having enough TV's in stock to do a comparison.

      But for most other goods, Amazon (with their excellent review structure) is all I need.

      I'm usually ok with buying clothes online (though rarely from Amazon), but my wife ends up sending so much stuff back because she doesn't like the fit or the look after she tries it on, she rarely buys online.

      • Re:Cant Wait (Score:5, Interesting)

        by couchslug (175151) on Thursday July 12, 2012 @06:39PM (#40633091)

        "I know lots of people do that, but I think it crosses the ethics boundary."

        I have no ethical obligation to Walmart.

        Walmart are wealthy enough to compete with Amazon in the same way, and could even do better by using their local stores (or areas they own but vacated to upsize their stores) as shipping hubs.

  • Jobs (Score:5, Insightful)

    by Eyezen (548114) on Thursday July 12, 2012 @06:16PM (#40632895)
    First manufacturing was destroyed, and the economy is still barely adjusting. Now retail is being threatened. Whats left for 300 million people to do? Interesting times indeed.
    • Re:Jobs (Score:5, Funny)

      by Anne_Nonymous (313852) on Thursday July 12, 2012 @06:36PM (#40633069) Homepage Journal

      >> Whats left for 300 million people to do?

      Buy stuff? Online?

    • Re:Jobs (Score:4, Insightful)

      by shutdown -p now (807394) on Thursday July 12, 2012 @06:37PM (#40633075) Journal

      There is a difference between manufacturing and this. Manufacturing was not destroyed, because it provides a valuable service for our society without which it cannot function - so it was outsourced (which is bad, but it's a whole different thing). Here, though, we are talking about one business model subsuming the other by virtue of being more convenient and more efficient. It's not fundamentally different from online/downloaded media replacing audio CDs and video DVDs. In the end, you end up paying less for better service - why wouldn't you prefer that?

      And note that the warehouses are still in US, and so is the delivery. So to the extent these jobs require working hands, they will be sourced locally. Yes, it'll certainly require fewer hands than traditional retail did, but why should we all be paying for a bunch of people doing useless work? It's a very twisted and flawed way of implementing socialized welfare; we might as well just do the real thing instead.

    • Re:Jobs (Score:5, Insightful)

      by ShanghaiBill (739463) on Thursday July 12, 2012 @07:02PM (#40633321)

      First manufacturing was destroyed, and the economy is still barely adjusting.

      Manufacturing was not destroyed. We (USA) manufacture as much as we ever did. It is just that manufacturing is much more automated today, so manufacturing employment is down.

      Whats left for 300 million people to do?

      They could spend their time reading about economic fallacies. [wikipedia.org] Prosperity and economic growth come from more efficient production of goods and services. Not from "keeping people busy."

      Interesting times indeed.

      Seems more like a slightly interesting continuation of a process that started with the invention of agriculture (destroying hunter-gather jobs).

      • Re:Jobs (Score:4, Insightful)

        by ChatHuant (801522) on Thursday July 12, 2012 @07:31PM (#40633607)

        Prosperity and economic growth come from more efficient production of goods and services

        Don't forget distribution though. If the current trends continue, most of the extra prosperity brought by productivity growth will be concentrated to a relatively small percentage of the population. If this happens, the total output may be larger but many people could conceivably do worse then they do now.

    • Re:Jobs (Score:5, Interesting)

      by Proudrooster (580120) on Thursday July 12, 2012 @07:03PM (#40633333) Homepage
      America is still the #1 manufacturer of all globally produced goods. We manufacture 60% of all globally produced goods and China/Japan account for the majority of the balance. The difference is that the scale of manufacturing has shrunk from 10,000 person factories to small shops that employ under 50 people. The real issue I see is training. If you open the want ads you will see many, many worker wanted ads for machinists, CNC operators, lathe operators, CAD detailers etc .... The problem is that the small shops don't have training facilities or do apprenticeship programs or journeyman programs anymore.

      While the US doesn't do large scale industrial widget manufacturing anymore, we still do lot's of manufacturing for the military, oil/gas industries, medical industry, auto and aerospace industry. Many companies are now pulling out of China as the cost benefit is vanishing as the Yuan has been allowed to float. These companies are creating automated assembly lines and pulling as much labor out as possible to produce goods here that are higher quality and at the same cost (or lower) as manufacturing in China. Additionally, companies are finding they can have much more agile supply chains and can cut lead times tremendously.

      My advice to the 300 million people is find something that you like to do and get good at it. Competency is a rare commodity these days. And if you can't find something you love to do, then find a field and specialize in something that can't be outsourced, examples: pipe-fitter, welder, electrician, plumber, amazon warehouse picker robot repairer, physical therapist... and the list goes on.

      Let me give you a brief list of the items in my home (purchased in the last 2-years that are Made in USA) * Garage Doors * Garbage Disposal (InSinkerator) * Entry Doors * Lumber to Construct Split Rail Fence * Roofing Shingles * Insulation (for Walls) * Drywall * Craftsman Tools (with lifetime breakage guarantee) * Spatula (for cooking, yes I found one made in USA) * Ford Mercury Mariner * Step2 - Playground Equipment * Open Sprinker Valve Controller * Paint * Various adhesive products * Worktables * Furniture * Mattresses * Toothpaste/Shampoo/Deodorant/BandAids and the list goes on and on. While the USA is not producing electronics (which is really stupid for national security reasons) we still produce lots and lots of stuff.
    • Re:Jobs (Score:5, Insightful)

      by PolygamousRanchKid (1290638) on Thursday July 12, 2012 @07:09PM (#40633379)

      Whats left for 300 million people to do?

      Deliver packages, for Amazon. Sell delivery trucks, to Amazon. Perform maintenance on trucks, for Amazon. Build warehouses, for Amazon. Design and build better delivery systems, for Amazon . . .

      Hey, if they are growing, and investing a lot of money . . . they must be spending it somewhere. Think of ways you can help them, and ride their success.

      Ask not what Amazon can do to you, ask what you can do for Amazon . . . ?

    • There are 300 million people in retail? I had no idea.

      It's not as if retail will go away with Amazon's success, since there are plenty of brands that refuse to sell via Amazon and still enjoy abundant success. That said, clearly they aren't supporting "300 million" employees all by themselves, but if you put that many people out of work, do you know what happens? They find something else to do. They'll even invent new things to work on if they can't find work. That's what happens. I'd be excited to see what

  • by Necron69 (35644) <[jscott.farrow] [at] [gmail.com]> on Thursday July 12, 2012 @06:25PM (#40632987)

    If there is a king of efficiency and lost cost in distribution and retail sales, it is Wal-Mart. You don't think they are just going to sit there and do nothing while Amazon moves in, do you?

    Necron69

  • by kheldan (1460303) on Thursday July 12, 2012 @06:31PM (#40633015) Journal
    Wouldn't Amazon have to maintain a gigantic inventory across all these so-called "same day delivery warehouses" in order to make it work? Wouldn't that cost huge amounts of cash? More to the point, wouldn't there be a huge tax liability from all that inventory?
  • by BorgAssimilator (1167391) on Thursday July 12, 2012 @06:35PM (#40633049)
    The concept of having people go to their local Best Buy to "try" out a product, then going home and ordering it online, only to receive it from a local warehouse is kindof humorous.
  • by pubwvj (1045960) on Thursday July 12, 2012 @06:49PM (#40633189)

    Perhaps what we need is for people to get back in the business of producing. Our family business maximizes vertical integration and just-in-time manufacturing to make it so we control our process, product and profits. We do work with retailers and they take about a 50% cut. To make it we have to make sure that we keep as much as possible of that other 50%. Unlike many businesses, our family actually does the work. We farm. We turn sunlight into food.

  • Sad (Score:3, Insightful)

    by Experiment 626 (698257) on Thursday July 12, 2012 @07:03PM (#40633327)

    So as a result of Amazon caving to my state on the tax thing, I pay 8% more for my purchases, but might eventually get them a day faster. Not being the impatient and impulsive sort, I liked the old system a lot better.

    This could however make other online retailers a lot more attractive. If I want to buy, say, an iPad, the cost is the same from any merchant thanks to price-fixing. So I could buy it locally for instant gratification, or online to save the tax. Before Amazon was my go-to for online purchases, being the fastest of the tax-free options. Now, however, I would go to a competitor with no physical presence in the state in order to save good money for waiting a couple extra days.

    • Re: Sad (Score:4, Insightful)

      by PeanutButterBreath (1224570) on Thursday July 12, 2012 @09:07PM (#40634407)

      If your state has a sales tax, it almost certainly requires you to calculate and pay any tax not collected and remitted by sellers that you do business with (for relevant purchases). In most cases this is called a "use tax", and it appears on personal income tax filing forms.

      Buying from out of state might be more convenient than under reporting income or taking improper deductions, but it is just a illegal. Chances are that if your state is interested in nailing you, they can analyze your banking and credit card records and compare your spending habits to your use tax declarations.

      However, if none of that bothers you, you don't need Amazon's help. There are plenty of ways to pay less tax than you owe.

  • by mbaGeek (1219224) on Thursday July 12, 2012 @07:10PM (#40633397) Homepage

    it is worth pointing out that Amazon will start COLLECTING sales tax not PAYING sales tax. The consumer is the one who will PAY the tax.

  • by assemblerex (1275164) on Thursday July 12, 2012 @09:21PM (#40634485)
    I would rather wait a week than pay the 10% sales tax I have to endure in my state.

    Once they start charging sales tax, bye bye amazon for me.
  • Say goodbye... (Score:4, Insightful)

    by luckymutt (996573) on Thursday July 12, 2012 @10:30PM (#40634981)
    ...to Best Buy.
    But not Radio Shack...somehow they always survive.
    Radio Shack is the cockroach of the retail world.
  • by fm6 (162816) on Thursday July 12, 2012 @11:07PM (#40635195) Homepage Journal

    They will put most normal retailers out of business.

    What's your definition of "normal"? If you only shop at big-box stores that compete solely on price and provide little or no customer service then yeah, shopping as you know it is dead. And good riddance.

    But there are lots of retail businesses for which customer service counts a lot more than price or convenience. Here's an independent bookstore [oregonlive.com] that's doing well despite being in a declining business in an economically depressed area. Why buy books here when you can order anything online, usually for less? Because sometimes it's fun to go into a space staffed by people who love books and just browse their well-curated collection.

    (I often wonder if Borders might not have survived if they'd stuck with their original browser-oriented business model instead of only stocking books that were easy to move. Once price and popularity became their total business model, they had no hope of competing with Amazon.)

    Another example: I recently bought a vacuum cleaner. Having wasted a lot of time shopping for vacuums both online and in department stores, only to end up with expensive, overmarketed ("doesn't lose suction!) crap that conked out after a year or so, I decided to give a small specialty chain [starks.com] a try. Some woman in a shop apron asked me about my needs and my budget and showed me a simple machine that was just the ticket. She took it apart and showed me how it worked (always a good sales technique when selling to a technogeek) and walked me through procedures for replacing the bag and the fan belt. An easy sale for both of us.

    Of course, the first thing I did when I got home was look for the same model online. I would have been OK with having paid a little extra for the local expertise — but as it turned out the model I bought similar competitors were all hard to find online and actually a little more expensive.

    The role of brick and mortar stores is shrinking, but there will always be things they know how to do better.

I'd rather just believe that it's done by little elves running around.

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