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Californians go 'Amazon crazy' before onslaught of state sales tax

By Catholic Online (NEWS CONSORTIUM)
September 7th, 2012
Catholic Online (www.catholic.org)

Amazon, the world's largest Internet retail center, will soon be instigating sales tax to all residents of California on September 15. In response, many Californians are going "hog wild" with some Internet purchases. This includes major ticket items like big-ticket electronic gadgets, as well as inexpensive items such as DVDs, food and household goods.

LOS ANGELES, CA (Catholic Online) - Californians presently pay 7.25 percent to 9.75 percent in sales taxes, so the savings are substantial on tax-free Internet items do add up.

Amazon has declined comment on whether sales in California have spiked in the recent weeks. Comments on social media sites and increased buying activity in other states before similar sales tax laws go into effect imply that many consumers are striking while the iron is still hot.

Internet shopping could likely increase as word spreads about the looming deadline, Kerry Rice, an analyst at Needham & Co. says.

"I assume there will be a network effect that will drive more people to go online," he said. "It's reasonable to assume that as we head in, you'll see a pickup in volume."

Amazon, in a fight with state lawmakers came to a close last year with the Internet retailer agreed to start collecting sales taxes on purchases a year from then.

It's not just Amazon. More than 200 other out-of-state companies with major business in California may also be on the hook to collect sales taxes on items shipped to the state.

Tax revenue from these online sales is being heralded as a major victory for the debt-ridden state, which estimates it will see an additional $317 million annually as a result. More than $83 million of that is expected to come from Amazon -- alone.

It's also being seen as a victory for locally owned businesses, the mom-and-pop shops and big bricks-and-mortar retailers. These stores have complained for years about Amazon's unfair sales tax advantage. Merchants including, big box retailer Best Buy Co. were especially hurt when shoppers would "showroom," or check out products at the company's stores, but ultimately buy them online to avoid paying sales taxes.

This puts everyone on an even playing field, they say.

"Every retailer has the ability to match a price, but no brick-and-mortar retailer can say to a consumer, 'Don't worry, I won't collect that sales tax,'" Jason Brewer, a spokesman at the Retail Industry Leaders Association says. "That 6 to 10 percent price advantage is a huge problem and distorts the free market."

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