National Jeweler Network

Financial Reporting

Sales up, but Amazon losing ground in some states

By Michelle Graff

April 28, 2014

Seattle--Quarterly sales continue to climb for Amazon.com Inc. though a new study shows the online retailer is losing sales--particularly of larger-ticket items--in states where it collects sales tax.

The Seattle-based e-tailer reported Thursday that first quarter net sales rose 23 percent year-over-year from $16.07 billion to $19.74 billion. Operating income for the period, which ended March 31, fell 19 percent while net income increased from $82 million to $108 million, a 32 percent increase.

In the second quarter, Amazon expects sales to increase between 15 percent and 26 percent but anticipates operating losses will range between $455 million and $55 million, compared with income of $79 million in the second quarter 2013.  

s first quarter sales were not impacted by the harsh winter that proved detrimental to so many retailers, two studies from researchers at Ohio State University show that the e-tailer suffers in states where it has to collect sales tax.

In one of the studies, researchers discovered that Amazon’s sales dropped 10 percent in five states--Texas, Pennsylvania, California, New Jersey and Virginia--after it began collecting sales tax there. The researchers conducted their study by examining retail transactions for about 1.3 million households in 2012 and 2013, when these states began collecting sales tax on Amazon purchases.

Larger purchases were impacted more, with consumers decreasing their spending on Amazon by 24 percent on purchases of $300 and above, with one of the researchers noting that sales tax incentives are “much stronger for large purchases than for small purchases”--a fact of which brick-and-mortar retailers already are well aware. 

However, the study also found that the sales tax collection laws, designed to help level the playing field for brick-and-mortar retailers, didn’t always have the desired effect. Only half of households went to a physical store to buy the item they avoided getting on Amazon because of sales tax issues.

Overall, the study found that there needs to be national sales tax legislation to truly level the playing field; until then, consumers will continue to find shop online to avoid paying sales tax.