Customers Abandoned Amazon in Droves When They Had to Pay Sales Tax

Facts matter: Sign up for the free Mother Jones Daily newsletter. Support our nonprofit reporting. Subscribe to our print magazine.


Adam Ozimek posted an item yesterday making the case that Donald Trump is wrong about something. Shocking, I know. But in the process he points to an interesting paper from a couple of years ago about the effect of sales taxes on Amazon purchases. A trio of researchers compared purchases from Amazon in five states both before and after Amazon started collecting sales taxes there:

They found that brick and mortar retailers saw a 2% increase in sales, and a decline of 9.5% for Amazon. This is hardly enough to save brick and mortar stores or stop Amazon.

True enough. The move to online retail is bigger than Amazon, and it’s unlikely that anything would have stopped it or even slowed it down substantially. Still, here’s the data from the paper:

These are…big effects. For costly items, the paper concluded that Californians reduced their Amazon purchases by a third. Even in low-tax Virginia, households reduced their Amazon habit by 11 percent. For all items, households reduced their Amazon purchases by 9.5 percent overall, but by 15 percent in California and 11 percent in Texas.

This coincided with an increase of “only” 2 percent at brick-and-mortar stores, but that’s to be expected. As big as Amazon is, it’s still a small fraction of the size of the entire retail market. A decline of 9.5 percent in Amazon sales spread among all brick-and-mortar retailers adds up to a small number.

Obviously this hasn’t put Amazon out of business. But I think that misses the point. I wonder what effect it would have had on Amazon’s growth ten or fifteen years ago? If sales tax has this much effect even now, when Amazon is practically a habit for millions of consumers, what effect would it have had back when Amazon was still relatively new in the non-book space? Bigger, I assume. And what effect would that have had on Amazon’s growth? Substantial, I think.

One study doesn’t prove anything, but this one sure suggests that an awful lot of Amazon’s initial stratrospheric growth was due to Quill v. North Dakota. Maybe Jeff Bezos should send a thank you note to the Supreme Court.

THE TRUTH...

is the first thing despots go after. An unwavering commitment to it is probably what draws you to Mother Jones' journalism. And as we're seeing in the US and the world around, authoritarians seek to poison the discourse and the way we relate to each other because they can't stand people coming together around a shared sense of the truth—it's a huge threat to them.

Which is also a pretty great way to describe Mother Jones' mission: People coming together around the truth to hold power accountable.

And right now, we need to raise about $400,000 from our online readers over the next two months to hit our annual goal and make good on that mission. Read more about the information war we find ourselves in and how people-powered, independent reporting can and must rise to the challenge—and please support our team's truth-telling journalism with a donation if you can right now.

payment methods

THE TRUTH...

is the first thing despots go after. An unwavering commitment to it is probably what draws you to Mother Jones' journalism. And as we're seeing in the US and the world around, authoritarians seek to poison the discourse and the way we relate to each other because they can't stand people coming together around a shared sense of the truth—it's a huge threat to them.

Which is also a pretty great way to describe Mother Jones' mission: People coming together around the truth to hold power accountable.

And right now, we need to raise about $400,000 from our online readers over the next two months to hit our annual goal and make good on that mission. Read more about the information war we find ourselves in and how people-powered, independent reporting can and must rise to the challenge—and please support our team's truth-telling journalism with a donation if you can right now.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate