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Stores restored

With a sales tax on purchases, online retailers lose advantage

An Amazon.com distribution center.
An Amazon.com distribution center.Ross D. Franklin/Associated Press/File 2010

JUST IN time for the holiday shopping season, online behemoth Amazon.com has increased its prices to Massachusetts residents by over 6 percent — 6.25 percent, to be precise. The mall or the corner store look ever more attractive.

The price hike is not something Amazon wanted. Since the dawn of the Internet age, online retailers with no physical presence in a state were able to avoid charging their customers sales taxes. In places like tax-free New Hampshire, that didn’t matter much. But it was a big deal in Massachusetts. Buy a $100 coffeemaker at the mall, and it’s really $106.25. Buy it online, and it’s just $100. For most customers, the choice is easy, and so Internet sales boomed — leaving brick-and-mortar retailers struggling.


The rules have now changed. Amazon owns a few properties in the Bay State, enough for state tax officials to start making demands. After some negotiation, Amazon agreed to start charging a sales tax, which went into effect last Friday.

The agreement applies only to Amazon. Unless they too are located in the state, other online stores are still exempt. And oddly, even Amazon doesn’t always charge the tax. As most frequent users likely know, other vendors often sell products through Amazon’s website. From a user’s point of view, it’s seamless. You’re still buying through Amazon; the company usually fulfills the order, in fact. But those other storefronts don’t charge sales tax. Amazon, it appears, has put itself at a real disadvantage.

Yet the company went into this with eyes wide open. As it has expanded, setting up new offices and distribution centers across the country, it’s had to cut deals with officials in other states. Massachusetts is hardly alone; Amazon now charges sales tax to residents of 15 other states as well.

It could be that Amazon is just cleverer than everyone else. The world, it figures, is changing, pushed by the demands of in-store retailers for tax parity and the hunger of state tax officials for ever more revenue. Indeed, breaking ranks with most Internet retailers, Amazon now supports federal legislation that would effectively close the tax loopholes online stores have long enjoyed. With large inventories, a robust infrastructure, and the ability to deliver quickly, Amazon figures it will have a significant edge over its Internet competitors.


Perhaps. But having been down so long, it is the brick-and-mortar competitors who may now have the edge.

Local retailers know well the galling phenomenon of consumers coming in, checking out the products on display and then — using apps such as PriceCheck — going online to make their purchases. But if there’s no difference in price, why not just buy at the store?

Consumer surveys, such as a recent one conducted by Wanderful Media, find that customers generally like online stores for their pricing but otherwise prefer the in-store shopping experience. There’s good reason for that. Brick-and-mortar stores offer immediate gratification; no one likes waiting a few days for their package to be delivered. They allow you to feel and touch a product as well. And, of course, it’s easier to make returns or exchanges in-store. Yes, if the shoes you got from Zappos.com don’t fit, you can always send them back. But that requires a lengthy round-robin of exchanges until you finally find a size that works. It’s a lot easier to just go to a real store.


One thing online stores do well, however, is product research. Look up an item on Amazon, for instance, and you’ll find full specs, possible alternatives, and often hundreds of consumer reviews. Thus it is that online and brick-and-mortar stores could someday find their positions reversed: Customers will look for products online, but then drive into their local store to pick them up. The end of the sales tax loophole may mean that Cyber Monday is soon be a thing of the past. Black Friday rules.

Tom Keane can be reached at tomkeane@tomkeane.com