Tom Gramegna, owner of the Bergen County Camera stores in New Jersey, has been
waiting for July 1 to arrive for years.
It is the day e-commerce giant Amazon.com Inc. will begin charging sales tax on purchases by New Jersey residents. New Jersey will become the 10th state where Amazon collects sales taxes as part of an agreement reached with New Jersey Gov. Chris Christie's administration.
As a portion of that deal, Amazon promised to invest $130 million in two state-of-the-art distribution centers, and the state said the e-commerce retailer will be eligible to apply for economic incentives to build those facilities. No incentive grants to Amazon have yet been announced.
Amazon in the past has contended that it should be required to collect sales taxes only in those states where it has a physical presence. But states such as New York have required Amazon to collect tax because it allows affiliate retailers, who are based in that state, to sell on its website. Retail groups have argued over the years that by that standard, Amazon did have a physical presence in New Jersey.
The Christie administration estimates that Amazon will collect between $30 million and $40 million in sales taxes within the first 12 months.
New Jersey residents still will not be charged sales tax on orders filled by Amazon affiliates based outside of the state.
"What should have happened a long time ago is finally happening," said Gramegna, who has no doubt that the sales-tax change at Amazon will help his business. He said about 75 percent of his New Jersey customers at his e-commerce website abandon their orders when the sales tax is added. "They can go shop around and get it without sales tax," he said, and many of those lost customers end up at Amazon.com.
For some of the high-ticket camera equipment Gramegna sells, such as Leica lenses that can cost as much as $10,000, sales tax can add $700 to the price.
After years of aggressively fighting efforts to make it collect sales taxes _ with hardball threats to close warehouses and kill jobs in sales-tax states _ Seattle-based Amazon has surrendered the sales-tax fight in favor of a new strategy that could prove equally troublesome for Gramegna and other merchants. Amazon now wants to out-local the local stores by building distribution centers that will enable same-day delivery in most of the country.
Customers apparently don't mind paying the sales tax once they discover how quickly they can get deliveries when Amazon puts distribution centers in their state, said Scot Wingo, chief executive officer of ChannelAdvisor, a North Carolina company that sells software that helps affiliate retailers sell on Amazon.
ChannelAdvisor, by tracking the impact of sales-tax collection on Amazon's affiliate sellers _ third-party sellers who hawk goods under the Amazon.com umbrella _ has been able to measure what typically happens when states impose sales-tax collection, Wingo said.
First, Wingo said, there is a surge in orders immediately before tax collection begins, as customers in the affected state take advantage of the final no-tax-added weeks. When "tax day hits," Wingo said, the impact on a state usually occurs in these phases. ChannelAdvisor found that for Amazon third-party sellers in California, sales rose by as much as 70 percent compared with other
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