Taxes Matter XI: The Amazon Tax and Business Location

Who is that man with all those bags?
Creative Commons License photo credit: Paul-in-London

As if we need more evidence that taxes influence behavior . . . check out this story from the Chicago Sun-Times: “Amazon Directs Business Toward State Not Collecting Online Sales Tax.” Inc. says it plans to open a fourth Arizona distribution center, giving the state a nod for its hands-off stance on the issue of pressing online retailers to collect sales tax on shoppers’ purchases.

Seattle-based Amazon’s new 1.2-million-square-foot facility, planned to open in an existing building this fall, will join three existing distribution centers on the west side of the Phoenix metro area.

Amazon declined to provide specific figures but said the new facility will add hundreds of jobs, giving the company an Arizona work force of more than 3,000.

As some states facing budget squeezes press for online retailers to collect sales taxes, Amazon is steering business toward states that are not.

Amazon also announced last week that it would open a fourth Indiana distribution center just outside of Indianapolis. Indiana officials four years ago offered not to push the tax issue in recruiting Amazon to the state.

My own research has also found that sales taxes can influence shoppers to not only jump on the internet to buy, but to also jump across state-lines to engage in cross-border shopping in order to avoid the sales tax.