Amazon: great Black Friday deals, but what about sales tax?
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Online retail king Amazon is ramping up for Black Friday, with sales leading up to their 鈥渨eek of Black Friday sales鈥 (which lead up to the big day itself).
Overkill? Maybe. But Amazon鈥檚 versatility as an online merchant makes it easy for the retailer to trot out Black Friday prices whenever it wants 鈥 a luxury that has allowed it to increasingly dominate the holiday shopping market over the years.
And that dominance is likely to continue. Shoppers spent $37 billion online last year, spiking 15 percent from 2010, according to comscore.com.聽
But Amazon鈥檚 renowned ability to offer the lowest prices faces a new wrinkle: new sales tax rules regulating online merchants. Right now, Amazon has to collect sales tax in eight states, including large markets like New York and California. Will this affect the company鈥檚 ability to match prices and compete with Walmart, Target, and Toys R Us?
Not really. 鈥淎mazon is just passing the sales tax on to the consumer, it's not like they're eating that 5-10 percent,鈥 Michael Brim, founder and CEO of the Black Friday deals watch site , writes via e-mail. "This won't affect their ability to price-match.鈥
What鈥檚 more, he adds, most Amazon customers have always had to pay a 鈥渦se tax,鈥 which is levied in most states on material purchases that are otherwise tax-free. Switching that out with a sales tax won鈥檛 change much. Couple that with Amazon鈥檚 super competitive shipping rates (orders above $25 are free, and Amazon Prime subscribers get free shipping on all orders) and the online giant remains tough to beat during the holidays.
Those free shipping perks will be available to a wider range of customers this year. Amazon Prime has always been an annual service, with subscribers paying $79 per year for free two-day shipping. Now Amazon is offering monthly Prime subscriptions for $7.99. So shoppers who do all of their online shopping during the holidays, and very little during the rest of the year, can pick and choose the months they want to subscribe a la carte (for slightly more per month than the annual rate).
And as far as the big deals go, Amazon is already getting competitive, according to Mr. Brim. BFAds has an 聽of televisions and home theater products that Amazon has plans to discount 鈥渟ometime in the very near future or through the holidays.鈥 The list already includes items that match the prices offered at Best Buy, Sears, and Kmart.
鈥淥nline is Amazon's bread and butter. It's their playground, and currently, they're calling all the shots,鈥 he says.
He鈥檚 less impressed with those pre-Black Friday deals, at Amazon and elsewhere: "These pre-Black Friday sales, on the whole, do not compete with the聽Black Friday sale. But there are individual items that are Black Friday caliber. [Last week] Amazon put its Kindle Firetablet/eReader on sale for $129, $30 below retail. That was a very good deal, one we might not see again until Black Friday.鈥
So Amazon鈥檚 prices will be competitive, and collecting sales tax won鈥檛 change that. But consumers in certain states will still have to tack the levy onto Amazon鈥檚 low advertised prices. Below are the sales tax rates for the eight states in which Amazon collects:
- California: 7.25 percent
- Kansas: 6.3 percent
- Kentucky: 6 percent (except groceries)
- New York:聽 7 percent
- North Dakota: 5 percent
- Pennsylvania: 6 percent
- Texas: 6.25 percent
- Washington: 6.5 percent