Amazon’s fourth quarter earnings fall: Did sales taxes hurt its business?

Amazon reported its fourth quarter earnings today and things were good or bad depending on how investors viewed things. The company posted a profit of 21 cents a share, which is good news, but compared to the same time last year, stocks pulled in 38 cents a share.

Investors still believe
In spite of the lower Q4 earnings, investors seemed to take comfort in the fact that Amazon still was able to make money for them to the tune of 21 cents a share. Amazon stocks actually rose to $24 a share or an increase of 9-percent in late trading today.

Jeff Bezos, CEO and founder of Amazon stated that everything was going according to plan:

“We’re now seeing the transition we’ve been expecting. After 5 years, eBooks is a multibillion-dollar category for us and growing fast — up approximately 70 percent last year. In contrast, our physical book sales experienced the lowest December growth rate in our 17 years as a book seller, up just 5 percent.”

Taxes may be to blame
Since its inception, Amazon has basically dodged the bullet in collecting taxes on purchased items for states and has fought vigorously not to be part of the tax collection machine.

But pressure from California, Kansas, Kentucky, North Dakota, Pennsylvania, New York, Texas, and Washington has changed Amazon’s policy and items purchased online are now subject to taxes in these and other states. Other vendors who sell on Amazon also have specific terms and conditions related to taxing goods.

The extra cost of buying on Amazon, which was once a tax shelter for purchased goods, is gone for shoppers in some of Amazon’s most populated customer locations.

Retailers happy
A long running complaint from retail stores was Amazon’s edge in avoiding the collection of sales tax. But now that this loophole has closed for Amazon, retailers are hoping that this will finally level the playing field.

But this still may not be enough to give retailers the advantage because Amazon’s high level of customer service, ease of returning just about anything purchased, and enormous variety of inventory may make up for the extra taxes bundled with things bought there.

Via New York Times