Amazon, Forced to Collect Sales Tax, Aims to Keep Its Competitive Edge

The following is an excerpt from an article in:

The New York Times
Wednesday, September 12, 2012

Amazon, Forced to Collect Sales Tax, Aims to Keep Its Competitive Edge

By DAVID STREITFELD

PATTERSON, Calif. — At the moment, it is little more than dirt and gravel. But a sunbaked field at the edge of this farming town will play a significant role in one of the most ambitious retailing ventures of the era: the relentless quest by the online mall Amazon.com to become all things to all shoppers.

A million-square-foot warehouse stocking razor blades and books, diapers and dog food will soon rise on this spot, less than a mile from the highway that will deliver these and just about every other product imaginable to customers 85 miles away in San Francisco. It is hundreds of miles closer to those consumers than Amazon’s existing centers in Nevada and Arizona.

A similar distribution center is being built on the outskirts of Los Angeles. Others are under way in Indiana, New Jersey, South Carolina, Tennessee and Virginia.

This multibillion-dollar building frenzy comes as Amazon is about to lose perhaps its biggest competitive edge — that the vast majority of its customers do not pay sales tax. After negotiations with lawmakers, the company is beginning to collect taxes in California, Texas, Pennsylvania and other states. But Amazon hopes that the warehouses will allow it to provide better service, giving it the ability to up-end the retailing industry in an entirely new way.

Amazon will soon be able to cut as much as a day off its two-day shipping times, said Jeff Bezos, its chief executive, in an interview. This will put the much-rumored same-day delivery — the elusive aspiration of every online merchant — potentially within reach in some metropolitan areas.

“We want fast delivery,” Mr. Bezos said. At a minimum, “we can work on making it the next day.”

It is a monumental bet, even for a company that consistently defied skeptics on Wall Street and Main Street as it rose to become one of the country’s largest retailers. Amazon’s delivery of everyday objects needs to be fast enough and cheap enough to wean customers from their local stores. Yet it also must be economically feasible for the retailer, which is investing so heavily in the warehouses that it is barely profitable.

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