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Tax-Free Party's Over for Amazon (NASDAQ:AMZN)

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But caving in to states' demands opens a whole new opportunity for next-day delivery.

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Moreover, a survey by Wells Fargo suggests that Texas consumers didn't bat an eyelash after Amazon started charging them sales tax in July. They cited convenience ahead of any sales tax savings as reasons for shopping on Amazon.

The analyst concluded that "Sales tax collection is not likely to materially impact Amazon's sales even as the company starts collecting in more states."

Good thing, since other states perked up at California's victory. Just this week, Massachusetts chimed in, with the state's mayors sending an open letter to the governor advising him to put the screws to Amazon right now, so they get the benefit of the upcoming holiday season.

At this point, the states are hurting so bad that Amazon looks like a good citizen for caving in. As sfgate.com puts it in an editorial: It's one thing for small businesses to avoid the hassle of collecting sales tax on out-of-state customers. But it's high time the giants stepped up to collect a fair share."

That hasn't stopped anybody from offering advice to consumers on how to keep evading sales taxes. For instance, some third-party Amazon affiliates may not be collecting sales tax outside their own states. Same goes for many of the small stores on eBay (NASDAQ:EBAY). And the California tax collectors haven't caught up with Overstock.com yet.

But these handy tips always come with this stern warning: If a retailer does not collect sales tax on your purchase, you still are obligated to pay it with your state income tax return. There is anecdotal evidence that several taxpayers have actually done this.
No positions in stocks mentioned.
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