Amazon to start collecting sales tax in California

September 12, 2012 7:26:36 PM PDT
For years, you've been able to buy things online without paying sales tax. Well, the honeymoon ends this weekend. After a drawn-out battle with lawmakers, starting on Saturday Amazon.com will collect a sales tax. Until then, many people are cramming in some last minute tax free shopping.

Matthew Heminger bought 20 e-books from Amazon.com this week, more than he can possibly read at once, saying, "I have to admit, I'm buying more books lately."

It isn't just a penchant for reading. Heminger knows this is the last week of tax free shopping on Amazon. Beginning Saturday, the internet giant will begin collecting sales taxes on California purchases for the first time ever.

"Maybe subconsciously I'm trying to save that eight percent," Heminger said."

Depending on where you live, sales taxes in California range from seven and a quarter, to 9.75 percent. That can add a big chunk to a purchase price -- one Amazon never collected until now.

"I think consumers are going to see this as a price increase without a warning," said Michal Strahilevitz, Ph.D. Professor of Marketing with Golden Gate University. She thinks most consumers will be shocked to find the tax added to the price at checkout, "Most Amazon customers are not aware this is coming on September 15.

However, word is spreading fast on social media. Twitter is ablaze with warnings like ones that say, "Amazon begins collecting sales tax, go on a spree!" Amazon won't say if sales have spiked with last minute shopping, but some say it's inevitable.

"If somebody's on the fence about a product, this'll be the incentive they need to pull the trigger," said Kit Yarrow, Ph.D Professor of Psychology with Golden Gate University. She says that after Saturday, consumers may be less eager to buy, "They've gotten used to not paying tax and it's really hard to take things away from consumers without them becoming angry. What happens is that they spend more time thinking whether they really want to buy that product."

However, she and others say consumers won't avoid Amazon just because of the tax because they've come to appreciate shopping from home.

"A lot of the Amazon customers are obsessed with the convenience of not having to wait in line, get in the car, drive, park," Strahilevitz said.

Californians actually have been required to pay a tax on internet purchases all along, in the form of a use tax reported on their tax returns. However, few actually pay the use tax, and enforcement has been lax.

Starting Saturday a new state law requires major online retailers like Amazon to collect sales taxes right at checkout for items shipped to California.

Amazon says it isn't worried about losing business. It already adds the sales tax in seven other states. The company says, "We are pleased to say we are thriving in those geographies because Amazon offers low prices, vast selection, and fast delivery."

Heminger says it's just more money out of pocket, "Would I rather not pay taxes? I'd rather not pay taxes, but that being said, you got to do what you got to do."

Amazon isn't the only online retailer that will begin collecting the tax. The new law affects major out of state retailers that sell at least a million dollars worth of goods in California. One note, however, not everything is taxable. For example, e-books are not a physical product, so there's no sales tax.

The state expects to rake in $317 million more per year from internet sales.


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