I have a brief message for the many thousands — perhaps millions — of Massachusetts shoppers who will buy stuff from Amazon.com this holiday season:
The days of the sales tax dodge are numbered.
Governor Deval Patrick has spent months trying to convince Amazon it should collect the 6.25 percent tax when it sells products to people in Massachusetts.
Amazon executives, who have a deserved reputation for caginess, are acting the way you would expect.
Other Massachusetts retailers in the brick-and-mortar world, who complain bitterly about a sales tax double standard, would love to see Amazon cave.
And there will surely be some kind of deal. Not this holiday season, and perhaps not for some time beyond that. But inevitably, a deal will be made.
All three camps — even Amazon — have something to potentially gain in these discussions. But most of those opportunities come with a caveat: Be careful what you wish for.
Internet retailers have been able to dodge the responsibility of collecting the sales tax thanks to a 1990s-era court decision that initially applied to catalog businesses — as long as they don’t maintain a physical presence in the state in question.
People who buy products online are supposed to keep track of purchases and send the tax to the state themselves. You could probably count all of the people in Massachusetts who do that on the fingers of one hand.
The governor wants to change the Amazon sales tax policy for several reasons. The obvious one: millions of dollars in tax revenue. Of course, he wants the money.
Another reason: Patrick would like to convince Amazon to build a new distribution center in Massachusetts and hire lots of local people in the process. Nothing would prevent that, once sales taxes cease to be an issue.
In fact, I’d bet that Amazon really wants to operate a facility in Massachusetts. The world’s biggest Internet retailer sees faster delivery as the new frontier in online commerce, and that requires more distribution centers closer to customers.
Amazon is experimenting extensively with same-day and next-day delivery in California and other states. It struck a sales tax deal in New Jersey and plans to build two giant distribution centers in that state. It’s hard to imagine why Amazon wouldn’t want to be in Massachusetts, near a huge online customer base.
But what would that mean for our economy? I’m much less convinced an Amazon expansion would result in lots of good jobs.
Amazon recently bought Kiva Systems, a Massachusetts robotics company, as part of its efforts to improve the retailer’s automation systems. (The governor’s modest negotiating leverage with Amazon is based on that transaction, because it technically gave the company a physical presence in the state.)
In the world of online fulfillment, efficiency means having as few people as possible. Your antenna should go up when the governor or anyone else talks up those distribution centers as important job creators.
Conventional retailers believe a competitive disadvantage would evaporate the day Amazon started to collect sales taxes. Of course, many other online companies also compete against them, but Amazon is the unquestioned leader.
It’s hard to argue with that point of view. A state deal with Amazon would level the tax field and address an obvious fairness problem.
But it might also turn Amazon into an even more powerful online competitor. Imagine that Amazon builds a Massachusetts distribution center and figures out how to deliver merchandise to customers on the same day or one day after an order is placed.
That would hurt some brick-and-mortar retailers more than others. It depends on the merchandise. But there’s no doubt Amazon would become a stronger, tougher competitor.
Finally, Amazon itself appears committed to faster delivery, and the physical presence that requires around the country. The Massachusetts negotiations are just one small part of a much bigger story.
Perhaps this is something Amazon must do. But many stock analysts and other experts who follow the company question how much profit that strategy will produce.
Amazon already operates on very thin profit margins. It will cost the company a lot of money to speed up the delivery of merchandise. It simply may not be worth it.
The Amazon story is full of unknowns. But a deal on sales tax in Massachusetts isn’t one of them. That’s going to happen.