Amazon reported higher than expected third quarter profits and a 41 percent increase in revenue, a good enough showing to push its stock price back to tech bubble peaks. One item missing from the accounts of Amazon's good news is the continuing subsidy that it gets from taxpayers.
While most stores must charge customers state sales tax, Amazon and other Internet retailers enjoy a special subsidy. They need not charge sales tax except in the states where they have a physical presence. (I believe that list is Washington and Utah.) That's great news for Amazon, if we assume that state sales taxes would average 4 percent on annual sales of $15 billion a year, then taxpayers are subsidizing Amazon to the tune of $600 million a year, more than its annual profits.
It would be nice if this subsidy was occasionally discussed in news reports on Amazon. There is no obvious economic or policy justification for having Wal-Mart shoppers subsidize Amazon, and the relatively more affluent people who shop at Amazon and other on-line retailers.
It is often reported that Amazon's president, Jeff Bezos, is a brilliant businessman. I suppose getting this sort of subsidy, and not even having it be a serious topic of political debate, does earn him this title.
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