Amazon Charges Sales Tax To Texans This Sunday
by: Laurie Johnson, June 29, 2012 8:06:00 pm
Texas struck a deal with Amazon, requiring the online retailer to collect sales tax and eight other states followed suit. The idea is that online companies like Amazon shouldn't have a competitive advantage over brick and mortar stores.
Of course, there's also the issue of a strapped Texas government missing out on millions of dollars of potential tax revenue from sales to Texas customers.
Rice University Management Professor Utpal Dholakia says when Texas consumers see the added tax this Sunday, they may react negatively at first.
"In the short term, in circumstances like this, consumers react very adversely. So they sense the difference and they feel some kind of a sticker shock and it impacts their consumer behavior. They will either go to other sites, they will either postpone purchasing, they might either buy less of whatever the item is."
But Dholakia says the interesting thing is what happens in the long run, when consumers get past their initial sticker shock.
"What tends to happen is after consumers have gotten used to the new prices, they revert back to their buying behavior. A good example of this is when airlines started charging money for checking in luggage. What we saw is a lot of consumers were very dissatisfied in the beginning. But within a few months, most consumers had adjusted to this price change and they went back to pretty much behaving the way they used to."
The Texas Comptroller's Office estimates the state misses out on as much as $600 million a year in potential tax revenue from online sales.