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January 12, 2013

The Impact of California taxes on Amazon

Best Buy recently announced a surge in California sales attributed to the deal that Amazon made with Amazon to start collecting tax in that state on September 15th.  The California state tax varies by municipality and starts at 7.25% and goes as high as 9.75%.

We dug into our data warehouse and generated the following chart.  What we've done is index the level of sales in California from all channels vs. Amazon.  The way the chart works is we index Amazon sales trends in California vs. other states.  Anything above 1 in the index, means that sales in California indexed above the other states.  Anything below 1 indexes below.

Disclaimers:

  • This is from ChannelAdvisor's Same Store Sales dataset that only includes Amazon third party sales.
  • Our customers tend to be larger and focused on non media categories (EGM in Amazon-speak)
  • Many third parties have their own tax structures and are not impacted the same as Amazon

Here is the Amazon California sales index from August 1 2012-  January 1 2013:

Ca_tax_chart_2

 

There are five areas of interest in the chart I wanted to highlight:

  1. In the pre-California tax era, California sales indexed 5-10% higher than other states.
  2. The week before the September 15th start of the tax, sales spiked as high as 70% compared to other states as Californians loaded up on tax-free shopping.
  3. After the spike, sales sagged a bit at first down to be level with other states and then around early November, they were down as much as 5-10%.  Note that this is probably a natural 'pull forward' of sales from the September surge of sales.
  4. Around the holiday period, sales dipped in California vs. other states a bit further.
  5. Towards the end of the holiday sales period, things recovered.

 

Where does it go from here

When we look at similar data for other states, there's about a six month period:

  • Surge before taxes
  • 2-3 months of under-indexed sales
  • 2-3 months of recovery that goes back to the previous levels of sales.

I'm sure it also takes the merchandisers at Amazon some time to tweak pricing to be competitive and respond to moves by the offline retailers.

 

This blog post was written by Scot Wingo, CEO, ChannelAdvisor where eBay is an investor.

 

 

 

 

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