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If Amazon taxes in Mass., will buyers bolt?

Despite local retailers’ hopes, many say they’d still shop online

Jenny Weymouth of Boston says she would still shop on Amazon even if it were to charge for Massachusetts sales taxes.

Aram Boghosian for The Boston Globe

Jenny Weymouth of Boston says she would still shop on Amazon even if it were to charge for Massachusetts sales taxes.

Area merchants cheered the news last week that state officials are considering requiring Amazon.com to start collecting sales tax on purchases made from Massachusetts, saying it would make their businesses more competitive with the nation’s biggest online retailer. But would a 6.25 percent price hike be enough to discourage some consumers from shopping on Amazon?

A recent survey of Amazon shoppers by Citigroup researchers found that 51 percent would be at least “slightly less likely” to use the site if it charged sales tax. The survey also said 67 percent of Amazon shoppers cited avoiding local sales taxes as an important factor in their decision to use the site.

“If there is no tax, you’ll buy more, of course. . . . But when you shop at a local retailer, you get attention, you get people to assist you. So I think you get something for that tax money,” said Juan Arias, 23, of Boston.

The Boston Globe

“If there is no tax, you’ll buy more, of course. . . . But when you shop at a local retailer, you get attention, you get people to assist you. So I think you get something for that tax money,” said Juan Arias, 23, of Boston.

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But retail analysts say online shoppers are motivated by convenience, not just bargains. In a Nielsen poll of US consumers this month, 68 percent said it was the “easiest” way to buy goods.

Sucharita Mulpuru, a retail analyst at Forrester Research in Cambridge, said local merchants should not count on big gains if Massachusetts mandates that Amazon collect sales tax, as the Internet company has done in some other states where it operates distribution centers or offices.

“Physical retailers have been a little bit misguided in thinking that the sales tax issue is going to save their businesses,” Mulpuru said. “Amazon is not going to roll over and let the sales tax cause them to lose customers.”

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Amazon may simply tweak its sophisticated computer pricing algorithms to account for local sales taxes, Mulpuru said, lowering the prices of items and effectively absorbing some of the tax cost to retain customers.

“They can even underprice Walmart,” she said. “It’s a completely radical approach to business, and that’s frightening for a lot of companies.”

Amazon, based in Seattle, did not respond to a request for comment.

Jon Hurst, president of the Retailers Association of Massachusetts, acknowledged that the sales tax alone doesn’t dictate people’s shopping decisions.

Hurst wants Congress to pass a bill that would require all US online retailers to collect state sales taxes.

“Government shouldn’t be picking winners and losers,” he said. “If you’re here [in Massachusetts], you should be playing by the rules.”

Online retailers have been protected by a 1992 Supreme Court ruling that held that e-commerce companies need only to collect sales taxes in states where they have a physical presence.

Amazon recently opened an office in Cambridge, which means Massachusetts could require Amazon to collect sales tax, generating as much as $45 million in annual revenue for the state.

As states budgets have tightened during a slow economy, governments have become more aggressive in collecting sales tax from Amazon. The company has struck deals with at least eight states — most recently, New Jersey — to begin collecting state sales taxes at various dates over the next four years.

06/11/2012 BOSTON, MA David Oksman (cq) 31, of Boston, talks to a Globe reporter along Newbury Street (cq) in Boston about the possible Amazon (cq) sales tax inclusion. (Aram Boghosian for The Boston Globe)

The Boston Globe

”Sales tax doesn’t factor in for me. It’s more about the convenience. Avoiding the tax is a perk, but not a driver for me, personally,” said David Oksman, 31, of Boston.

In the five states where Amazon already collects sales taxes, it has been difficult to assess whether the tax has driven shoppers back to traditional brick-and-mortar retailers, according to retail trade groups and analysts.

Consumers themselves are motivated by many variables, like convenience, selection, and price.

However, shoppers in the Back Bay who spoke with the Globe this week seemed undeterred by a potential tax on their Amazon purchases.

“If I was going to buy something in Massachusetts, I’d pay sales tax anyway,” said Jenny Weymouth, 33. “So [paying tax on Amazon] wouldn’t stop me from shopping there — it’s all the same.”

A Globe comparison of some popular products found that Amazon’s prices were generally lower than those charged by independent and chain stores, even with the 6.25 percent Massachusetts sales tax.

For example, a hardcover copy of Walter Isaacson’s popular Steve Jobs biography lists for $35 and last week was priced at $16.85 on Amazon. Shipping — charged on orders under $25 — added $3.99, bringing the total $20.84.

The same book, with the sales tax, was being offered for $37.19 at the independent Brookline Booksmith store, and for $29.75 at Barnes & Noble’s Prudential Center location.

But online and traditional retailers don’t always stock the same models of products, and depending on bulk and weight, shipping charges can substantially increase the price of goods purchased online.

Further complicating shopping comparisons, traditional retailers often sell the same products in their stores and online, but at different prices.

“You’re always going to have a cost disparity,” said Hurst of the Retailers Association of Massachusetts. “Cost is very much important, but so is service. The local store has a local service advantage that’s never going to go away.”

Dan Adams can be reached at dadams@globe.com and on Twitter at @DanielAdams86.
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