Amazon wants your business this holiday shopping season. If you use its Price Check app while you’re out shopping on December 9 or 10 in the US, the e-commerce giant will give you a 5% discount on up to three products you ‘price check’ – for up to $15 in total savings.
Understandably, brick-and-mortar retailers aren’t exactly thrilled. In fact, the Retail Industry Leaders Association (RILA) appears downright angry.
As reported by GeekWire, RILA’s executive VP of public affairs Katherine Lugar issued the following statement this week:
Retailers compete on price 365 days a year, and at no time is that competition hotter than during the make-or-break holiday shopping season. However, by continuing to evade collecting state sales taxes, Amazon’s exploitation of a pre-Internet tax loophole is resulting in a 6-10 percent perceived price advantage over their competitors on Main Street.
Amazon’s aggressive promotion of its Price Check App shows the lengths they are willing to go to exploit this tax loophole, and is a stark reminder of why Congress needs to act to protect retailers on Main Street. A failure to act is an implicit endorsement of a subsidy of Amazon, a subsidy that distorts the free market and puts jobs on Main Street at risk.
Whether such a comment is a bad move or not, it’s most certainly ironic. Why? Because Amazon is one of the staunchest champions of federal sales tax legislation. In fact, Amazon supports the very same Marketplace Fairness Act that RILA is asking for.
The logic is simple. There are states where it is impossible for Amazon to avoid collecting sales tax, so rather than fight the good fight, primarily benefiting other online retailers, it makes more sense for Amazon to push sales tax legislation that would actually help it increase its dominance.
After all, it’s smaller online retailers that will be the ones hurt most by the cost and red tape of complying with a national sales tax regime. Online retailers with fewer physical locations across the United States would be forced to deal with something that they shouldn’t have to according to the US Constitution.
Amazon, as online retail’s 800 pound gorilla, won’t have any trouble dealing with a national sales tax collection law, and retailers that believe such a law will level the playing field have another thing coming.
Amazon is only proposing this because it already knows it will still be able to compete on price even if it has to collect sales tax everywhere.
Retailers complaining about Amazon ‘evading’ the collection of sales tax seem absolutely oblivious to this, and that could prove fatal because such problems go far deeper than the fact that it’s inconveniently unconstitutional to force out-of-state retailers to collect sales tax.
Amazon’s Price Check app, and other apps that can poach customers away by presenting them with better deals, are likely to be an increasingly common part of the future of retail. Levelling the laying field when it comes to the collection of sales tax doesn’t mean that brick-and-mortar retailers will actually get this when it comes to efficiency, economies of scale and customer experience. That’s precisely where the Amazons of the world know they can win.
The reality is that brick-and-mortar retailers not prepared to innovate and compete with online retailers are going to find it hard to maintain their positions in the future, even if their online (and multichannel) competitors are charging the same sales tax. The sooner they recognise this, the better off they’ll be.