September 15 marks the first day Amazon (NASDAQ:AMZN) begins charging sales tax in California. The e-commerce powerhouse previously got away without charging the 7.25 percent to 9.75 percent sales tax. In California, if the merchant does not charge the tax, the consumer is required to keep track of it and remit a use tax directly to the state. Understandably, many Californians were not reporting their Amazon purchases, and the government didn’t have the means to enforce the tax policy.
Jason Brewer, a spokesman for the Retail Industry Leaders Association, claims this as a victory. “Every retailer has the ability to match a price,” he said, “but no brick-and-mortar retailer can say to a consumer, ‘Don’t worry, I won’t collect that sales tax.’ That 6 to 10 percent is a huge problem and distorts the free market.”
Amazon seems confident that even on a level playing field they will beat out the competition. “We offer customers the best prices with or without sales tax,” said Amazon spokesman Scott Stanzel. “We collect sales tax, or its equivalent, in more than half of the areas where we do business, and we’re pleased to say we’re thriving in those geographies.”
Now that the Seattle company has no reason to avoid a physical presence in the state, it is expected to open up two warehouses and bring more than 1,000 jobs to the area.
Amazon had sales of $48.1 billion last year, and its share price is up over 42 percent for the year to date. And, although Amazon won’t say, it’s likely that the company saw an increase in sales the last few weeks as people tried to avoid the tax before it went into effect.
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