Why The Last Thing Big-Box Stores Want Is An Internet Sales Tax

Senior Contributor
04.19.13 6 Comments

You might have heard that the Senate is circling around passing an Internet-wide sales tax. Backed by “hometown” organizations like, uh, Wal-Mart, it’s supposed to erase the “unfair competitive advantage” Amazon and other retailers technically hold with sales tax.

Big-box stores are hailing this as a leveling of the playing field. In reality, if this law passes, for them it’ll be the beginning of the end.

So, wait, it’ll be a nationwide Internet sales tax?

Not quite. The bill as proposed would essentially give tools to states to forcibly collect sales tax from you, as opposed to the current system where you lie on your tax form and say you never buy anything from the Internet, gosh, honest.

How likely is it to pass?

The Senate? It’s a lock. The tax-allergic House? It’s up in the air.

Why do stores like WalMart care?

Their argument is that by not requiring sales tax, Internet stores have an unfair competitive advantage. The argument loses a bit of credibility because it’s not like Wal-Mart and Target are A) bleeding money or B) particularly shy about acting on an unfair competitive advantage when it benefits them.

Let me guess, Amazon.com is the main opposition?

Nope. Big fans. They fully support the measure.

Wait, wait, wait… don’t they have the most to lose?

Not even remotely. That would be smaller online retailers like Newegg, who would have to put sales tax collection apparatus in place. Amazon welcomes this because it caters to their master plan.

Which is…?

To crush WalMart with Amazon Prime.

Essentially Amazon’s plan is to open lots of tiny fulfillment centers selling big ticket items, and start delivering anything you order the same day you order it, whether it’s a pallet of Doritos or a new TV. You tick down the list, put it on your card, take delivery, and go about your day. And it’ll be dirt cheap or free with Amazon Prime.

How will this end stores like WalMart?

Have you ever been to a Wal-Mart?

Essentially what Amazon wants to do is make it possible for you to get the crap you generally buy from big box stores without losing a few hours out of your day. Ask anybody with kids how much they enjoy dragging the rugrats to the strip mall, and you’ll quickly see there’s a market for this.

True, not everybody would use the service, but it would essentially mean that Amazon’s competitive advantage would switch from being cheaper to saving you time, aggravation, and, most importantly, gas. It’s hard to see Wal-Mart winning in this scenario.

Clothes and food will probably always be stuff we buy in person. But if you have to get, say, plastic bins or patio furniture, stuff that you don’t need to try on or kick the tires, where are you going to get them, the store full of crazy people and screaming brats you have to drive half-an-hour to get to and may not have them in stock, or the website where you click, order, and they show up at your door?

So essentially, whether this passes or not, Amazon ultimately wins?

Yep. Something the big box stores might want to take note of.

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