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Gov. Christie, Amazon Take Money Out of Your Pocket

NEW YORK ( TheStreet) -- Amazon (AMZN - Get Report) and Ebay (EBAY - Get Report) are aggressively competing for market share and earnings. In the process they are attempting to shorten the delivery time by adding distribution centers and retailers in key locations.

Amazon has recently become especially aggressive in exploiting their competitive advantage over small retailers that include advocating an increased tax burden on their own customers.

I spent a considerable amount of time researching the motives with Amazon and found the recent agreement between Amazon and New Jersey Gov. Chris Christie especially troubling.

The CliffNotes version goes like this: Amazon has conspired with Christie to collect sales tax beginning in 2013 for some sales placed on Amazon by state residents. Also, Amazon will build two distributions centers in New Jersey. In exchange, Christie agreed New Jersey taxpayers and businesses will help subsidize Amazon and assist in a scheme to increase the amount Amazon is able to charge small businesses who sell on Amazon's site.

What's not to love about a deal that increases the amount of taxes paid by residents, increases the operating costs of small businesses and gives tax breaks to a $100 billion dollar company? If you think that's crazy, hang on because it actually gets better.

After reviewing Amazon's stock chart you may not initially realize it, but the company is running into a wall and needs greater profits to maintain its lofty stock price. In fact, the word lofty doesn't really give Amazon's CEO Jeffry Bezos full credit. Bezos has successfully pushed Amazon's stock price so high in relation to earnings, that if Bezos worked for NASA, he could probably send the space shuttle to the moon and back on a gallon of gas with fuel to spare.

Bezos is miles ahead of most other retailers. He knows that the sales tax collection issue is a relatively small part of why people shop online. If states start to collect sales tax for online purchases, three things will happen. Consumers will pay more in taxes (because they will continue buying online), retailers claiming they can't compete will have to come up with a different excuse and Amazon will have a new revenue stream. The more sales tax paid by online shoppers, the more money Amazon makes.
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AMZN $659.64 -1.70%
BBY $31.45 -0.16%
EBAY $23.86 0.27%
TGT $78.06 -2.10%
WMT $66.75 -0.65%


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