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How Amazon Undersells The Competition

  • Slate, Tuesday, November 23, 2010 1:26 PM
As we approach the biggest online shopping days of the year, Slate investigates how Amazon exploits tax laws to undersell the competition. "It has to do with the regulations states use to determine which companies must collect taxes," Slate explains. "According to Quill Corp. v. North Dakota, a 1992 Supreme Court ruling, companies are only required to collect sales taxes from their customers when they have a presence in the state in which they reside."

In other words, Amazon has a "presence" in far fewer states than retailers like Apple and Best Buy, which operate brick & mortar stores nationwide. To retain this competitive advantage, Michael Mazerov of the Center on Budget and Policy Priorities says Amazon has long argued that the company's tax advantage is no biggie. However, "Mazerov argues that Amazon's actions suggest that taxes have always been a primary consideration," Slate notes. Amazon has also employed clever legal tricks like incorporating its warehouses and Web site as separate legal entities. Slate's conclusion? Advantage Amazon. Until the tax laws change, it would be silly for the company not to follow its present strategy.

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