President Trump on Thursday tweeted criticism of Amazon, implying that the administration may be mulling some type of regulatory action.
I have stated my concerns with Amazon long before the Election. Unlike others, they pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!
— Donald J. Trump (@realDonaldTrump) March 29, 2018
Amazon’s founder, CEO Jeff Bezos, is also the owner of The Washington Post, one of the top newspapers in the United States and a major thorn in the president’s side since his administration came to power.
The president recently has been “obsessing” over the company and exploring different regulatory possibilities, Axios reported on Wednesday.
Asked during the White House press briefing on Wednesday whether the president wanted to go after Amazon, Press Secretary Sarah Sanders said the White House had “no announcements and no specific policies or actions” regarding the company.
When asked about Treasury Secretary Steve Mnuchin’s earlier comments regarding the potential for creating an Internet sales tax, Sanders provided some additional context.
“Look, the president has said many times before he’s always looking to create a level playing field for all businesses, and this is no different,” she said at the briefing. “And he’s always going to look at different ways, but there aren’t specific policies on the table at this time.”
It’s more likely that the president’s tweet reflects his issues with Bezos over politics than serious concerns about Amazon’s business model, Paula Rosenblum, managing partner at RSR Research, told the E-Commerce Times.
Trump’s concerns have more to do with politics and The Washington Post than e-commerce, Rick Edmonds, media business analyst at Poynter, also told the E-Commerce Times.
Echoes on Main Street
Concerns over Amazon taking business away from brick-and-mortar retailers have led to efforts in local state legislatures and in Congress to find ways to make sure e-commerce can thrive without breaking the back of local retail operations.
States could gain anywhere from US$8.5 billion to $13.4 billion in additional revenue if they were allowed to mandate sales tax collection from all remote sellers, including B2B and B2C companies, according to a Government Accountability Office study released last fall.
The U.S. Postal Service generated about $19.5 billion in revenue in 2017. Although the amount that Amazon accounted for is unknown, the Postal Regulatory Commission sees Amazon’s arrangement with the service as profitable, according to a source familiar with the relationship.
However, “Amazon is continuing to drag its feet rather than collecting taxes on the ‘marketplace’ portion of its business, where it partners with third-party sellers,” said Carl Davis, research director at the Institute on Taxation and Economic Policy.
“Amazon has all the information it needs to begin charging those taxes right now, but it is delaying doing so in most states so that it can keep a price advantage over most businesses,” he told the E-Commerce Times.
Amazon doesn’t have to pay sales taxes in many cities, Davis noted, but that is due to flaws in state and local laws rather than to Amazon flouting tax regulations.
The U.S. Supreme Court is expected to rule later this year on South Dakota v. Wayfair, which could give local and state governments more authority to mandate sales tax collection by online retailers, Davis said.
“This is essential to leveling the playing field between traditional retailers and Internet retailers,” he added. “States are increasingly frustrated that out-of-state businesses are not collecting the same amount of sales taxes that local businesses have been collecting for decades.”
The Wayfair ruling effectively could overturn the 1992 Quill v. North Dakota ruling, which found that only retailers with a physical presence in a state were required to collect sales taxes, observed Joyce Beebe, a fellow in public finance at Rice University’s Baker Institute for Public Policy.
At the end of the day, Trump’s comments are unlikely to have a major impact on Amazon’s bottom line, said Thad Peterson, senior analyst with the Aite Group.
“If there is an economic impact on Amazon.com from Mr. Trump’s comments, I don’t believe it will have a significant impact on their business,” he told the E-Commerce Times. “The value that Amazon delivers is variety and convenience ahead of price.”
Ultimately, that proposition won’t change, said Peterson, and it’s unlikely that Amazon Prime members, who are considered the best and most loyal Amazon customers, will change their buying habits.
As for the e-commerce world at large, even if all online retailers ultimately have to collect the same taxes that local retailers do for physical transactions at the checkout counter, customers are unlikely to balk, he argued, because online commerce in general is more about convenience and variety over price.