Amazon's -- and the Web's -- increasing tax woes are most definitely not limited to California. According to Cromwell, Conn.-based credit card fee research firm Cardfellow, there are nine other states with similar so-called Amazon taxes. Biggies include Colorado, Pennsylvania and New York. And these 10 Web tax-collecting states are just the leading edge of states wanting their cut of the online action. Approximately three dozen are in the middle of moving to so-called "streamlined online sales tax" collections that almost certainly will mean Amazon will need to collect more fees rather than less.
The blunt reality of Web retailing is this: Selling stuff online is not less expensive than at bricks-and-mortar stores ... it's more expensive. Don't believe me? Just compare Wal-Mart's ( WMT) cost to do business with Amazon's. Last year, the supposedly ultimately Web-efficient Amazon had something like 1.30 cents left over from every dollar it made after backing out all its costs. Wal-Mart had about double that for the same period -- 3.5 cents left over. And believe it or not, Amazon's efficiency is tending to decline. In the previous three months ending June 30, it had just roughly one half of one penny left over after all its costs were backed out. Either way, with these kind of razor-thin margins, where exactly will the nine-odd points California has rammed into Amazon's bottom line come from? Smart shipping lockers? I doubt it. Which essentially means these taxes will get passed onto customers -- which I strongly doubt consumers will stand for. Among the many tales of shoppers stepping away from online services as costs rose, The Texas Tribune ran a solid series on online retail loyalty as prices increase. "I do not think people who buy online buy online for the express purpose of avoiding the sales tax," said David Kruger, owner of Kruger's Jewelers in Austin, Texas, in a video about his store and the effect of taxes on his business. "But if you are talking about a big-ticket item, the savings in the sales tax is significant." What exactly Amazon becomes, who knows. Certainly, it's not heading into Chapter 11. But the Amazon investors know and love -- the once and future magical low-cost online retail delta that fetches equally magical valuations -- is almost certainly drying up under the blazing taxation sun. And that means, like the Colorado before it, Amazon will probably struggle finding its way to that languid ocean called profit.