Sales Tax impact on business…


Kerry Rice, Needham & Co Internet Analyst, just stated on business news that the impact of having to collect and pay sales tax on internet sales would impact Amazon’s bottom line. Amazon just fell by $40/share after market closing today. Assuming a 5% reduction in revenue would result in a 19% reduction in EPS (earnings per share).

That brought a question to my mind. Most retail business in America is subjected to the requirement of collecting and remitting a sales tax to the states in which they do business. Business must bear the cost/expense to perform this collection for the state but is not reimbursed or compensated in any way. If they are one day late in filing their remittances, they are also subject to hefty fines.

In light of that business cost, evidently non-collecting internet businesses are garnering a higher profit per share. This is an example of the bizarre movement of market stock prices. What is really going on? Who benefits in this scenario?

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5 comments on “Sales Tax impact on business…

  1. shoreacres says:

    Clearly benefit has accrued to the internet businesses – one reason (in addition to eliminating more obvious overhead) that niche markets, such as antiques, collectibles and such have moved from brick and mortar to the web.

    As I understand it, certain states have taken it upon themselves to level the playing field by the imposition of internet sales taxes. I’ve paid little attention to that, since I neither sell nor buy much on the web, but there surely needs to be some revision in the system.

    It occurs to me that I’ve not heard anything in either Rick Perry or Herman Cain’s tax proposals about this issue. It would be interesting to see if it’s addressed.

    • Texasjune says:

      The income tax proposals by any candidate do not address or control state sales taxes. In the case of Mr. Cain’s 9-9-9, the consumption tax of 9% would be in addition to any sales tax assessed by any given state.

      There was a dispute between the Texas Comptroller and Governor about Amazon collecting and remitting the state’s sales tax. The Comptroller demanded they will to boost revenue, and Governor Perry demanded they will not, because he wants to keep corporations and jobs in Texas without adding additional burdens to their cost of doing business here. He puts jobs for our people ahead of increasing sales tax revenue. Haven’t read how the issue stands today.

      In my opinion, without enough jobs when people want them, sales tax revenues come from assistance budgets that are paid mostly by state taxpayers anyway. I’m sure glad I’m not a politician in this environment!

  2. This is an impressivly technical point which I don’t follow. I do know that the fall in Amazon profits was significantly aatributed to the launch of it’s new Kindle. In teh circulstances its hard to say wether this fall in profits is a trend or a one off. In europe we are waiting with bated breath to see if anything positve comes out of the new euro conference. Whichever issue you mention, we are largely in the hands of the government whether they get it right or wrong

  3. magsx2 says:

    Hi,
    I really don’t know how it all works, but it would be interesting to find out.

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