Seattle-based Amazon, a Fortune 500 company, has emerged from being an online book retailer to a powerhouse that produces and distributes a multitude of products. Its influence on publishing continues as rumors fly regarding the possible opening of a brick-and-mortar store. One reason for the move may be the requirement to collect sales tax.
Performance report
When Amazon released its performance figures for its fourth quarter on January 31, 2012, results were less than expected. The performance results were disappointing because analysts assumed that the launch of the Kindle Fire tablet would result in record-breaking sales. Amazon has been silent as to the actual sales figures, which could mean that sales were worse than expected. Another profit center for Amazon, its Prime membership, is expected to grow this year as more consumers take advantage of the ability to borrow over 80,000 books and get free shipping on most purchases for a mere $79 per year.
Wireless News reported on Amazon’s plans in a February 5, 2012 article titled “Amazon.com Posts Fourth Quarter Financial Results.” The article outlined Amazon’s video sales and rentals performance as well as instant video streams, which now offer more than 13,000 movies and TV shows from companies such as Fox and NBCUniversal.
“Amazon continued to expand its catalog of title offerings for Prime Instant Video, announcing licensing agreements with Twentieth Century Fox Television Distribution, which added the popular FOX and FX television shows Glee and Sons of Anarchy, and Disney-ABC Television, which added popular television shows including Lost and Grey’s Anatomy,” the article said.
You’ve come a long way
What started out as a little bookstore online has morphed into a monolith that engages in retail sales, publishing, distributing, printing, packaging and electronic downloads. For all its success, Amazon is reviled by many in the publishing industry. Its imprints have been banned by Barnes & Noble and Canada’s Indigo Books.
Sales tax dilemma
Because of empty coffers, many states looking to increase tax revenues have been working on ways to receive sales taxes from online sales activities. Amazon has been engaged in battles with California, Virginia and South Carolina regarding the collection and payment of sales taxes. So far it has been able to postpone tax collections but it’s just a matter of time before online retailers have to comply. Perhaps for that reason Amazon has supported federal efforts at a solution.
Tax solution
Rather than dealing with a multitude of state taxing schemes, legislators have introduced three bills that could help solve the problem for all concerned. They are:
- Mainstreet Fairness Act
- Marketplace Fairness Act
- Marketplace Equity Act
Marielle Segarra described the workings of these bills in her February 16, 2012 post for CFO.com titled “States Grab Taxes from Online Retailers.” The first two bills would require states to sign on to the Streamlined Sales Tax and Use Agreement (SSUTA), which would standardize the tax system.
“Under the SSUTA, each state must offer one central database or location for companies to file their taxes, to lower business expenses. The agreement also offers an exemption for small retailers that make $500,000 or less in national remote sales per year,” Segarra explained.
Amazon stores
Rumors that Amazon would open retail brick-and-mortar stores have been floating around since 2009. Lately, however, the rumor mill has been humming loudly that there might be a store opened in Seattle within the next few months in order to test the waters. The buzz is that the store will sell books, Kindles and Kindle accessories. Ryan Tate explored the implications of Amazon stores in his February 6, 2012 post for Gawker.com titled “Amazon Stores Might Invade Your Neighborhood.”
Tate speculated, “On the bright side, a national retail chain would accelerate the inevitable process of Amazon remitting sales tax to local governments. And at least there’s one company with real money and a clear future that’s considering stepping into the vacuum left by the liquidations of Borders Group. Amazon’s carpets will probably be much more tasteful, too.”
In a world where brick-and-mortar bookstores are going the way of the dodo, a powerhouse retailer like Amazon could be a welcome addition to the retail landscape, especially for writers and publishers seeking distribution venues. If Amazon has been waffling over the decision to build, perhaps the impending sales tax compliance is going to seal the deal.
