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Amazon will soon collect sales tax from 74% of U.S. consumers

January 26, 2015 12:54 PM
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Illinois shoppers have until Feb. 1 to shop sales tax-free on Amazon.

Amazon.com Inc., No 1 in the Internet Retailer 2014 Top 500 Guide, will begin collecting sales tax in the nation’s fifth most populous state starting on Sunday, in accordance with a new state law. Illinois has a base sales tax rate of 6.25%.

Once Illinois comes on board on Sunday, Amazon will collect sales tax in 24 states, including from eight of the top 10 most populated states. Ohio and Michigan are the only states in the top 10 where Amazon does not collect sales tax.

According to population estimates from the U.S. Census Bureau as of July 1, 2014, 73.8% of the United States population lives in the 24 states where Amazon will collect sales tax as of Feb. 1.

An Amazon spokesman declined to comment on how collecting sales tax has affected Amazon’s sales.But one analyst says it’s not likely to slow Amazon down much in the longer run, and could lead Illinois shoppers this week to buy more tax-free from Amazon this week, ahead of the Feb. 1 deadline.

“Our checks have suggested there is a short-term benefit to their business in the months leading up to the start of tax collection, followed by a slowdown that lasts a few months after they begin collecting,” says Colin Sebastian, an analyst with Robert W. Baird & Co. “However, there is little data to support the view that taxes have a longer-term negative impact on Amazon.”

Sebastian says he thinks any negative overall impact that adding a sales tax might have on Amazon is mitigated by the fact that people shop the site primarily for convenience and selection.

 

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