After Making Tax Deals With States, Amazon Inches Closer Towards Same Day Shipping

Posted Jul 12, 2012

The advantage that has from local retailers are lower prices and in many states, buyers do not have to pay a local sales tax.  According to a 1992 Supreme Court ruling, only firms that have a physical presence in a state are required to collect local taxes from the people that shop there.

For example, when you spend $1,000 to buy a laptop from Amazon, you are supposed to pay a $100 “use tax” when filing an annual return in California.  However most don’t do that.

Many states have passed laws that push Amazon to collect sales taxes, but the online retailer has filed numerous legal challenges against those initiatives.  Amazon fired their marketing affiliates in Colorado, North Carolina, California, and Rhode Island.  Amazon also launched a $5 million political campaign to get voters to turn back the law in California.  When the Texas comptroller hit Amazon with a $269 million sales tax bill, Amazon shut down their distribution center in Dallas.

Amazon recently stopped fighting the sales tax initiatives and signed a deal with lawmakers to begin collecting sales taxes later this year.  Within the next couple of years, Amazon will collect sales taxes from residents in New Jersey, Nevada, Indiana, Virginia, and Tennessee.  On July 1st, Amazon started collecting taxes from Texas.  They also started collecting taxes from people in Kansas, New York, North Dakota, and Washington.

Since Amazon collects sales taxes now, the company can legally set up warehouses in some of the largest metropolitan areas in the country.  Amazon wants you to get your stuff right away, possibly within a few hours after you hit Buy.  That’s right, same day delivery might be coming to Amazon soon.  As part of the deals signed with states, has promised to build at least one new local warehouse.

Some of those warehouses would be close to cities with large populations.  Amazon will be spending $130 million in new facilities in New Jersey, $135 million for two centers in Virginia, $200 million in Texas, $150 million in Tennessee, and $150 million in Indiana.  Amazon will open two massive distribution centers near Los Angeles and San Francisco.  In the next 3 years, Amazon may open 10 more in California.  Amazon will be spending $500 million and will hire 10,000 people in their new California warehouses.

Amazon will be investing in making those distribution centers more efficient too.  The company bought Kiva Systems, a manufacturing company that has built “picking robots” that improve the shipping times and reduce errors.  In Seattle, New York, and the United Kingdom, Amazon has set up automated “lockers” at drug stores and convenience stores.  If you order something from Amazon and live near one of the lockers, the company will let you drop off your item there.  You can stop by a Rite Aid, hit the security code, and get your products.