The Government is inventing new ways to get your money. Time to short Amazon?
Shares of Amazon.com (AMZN) have been on quite a roll lately, surging from the low 60s at the end of February to today's close of $81 (with an eye-popping P/E ratio of 69). I came across the following article this afternoon and it got me thinking about the future of on-line retailers: State tax man is taking on Amazon.com. The premise of the article is that New York state is going to start charging sales tax on Internet purchases starting June 1st. I hadn't heard this before, so I did some additional research on the subject and came up with this: Tax law may cause problems for online business.
Apparently the Federal government is considering getting in on the act as well. A newly proposed law called the Streamlined Sales Tax Project would require businesses that sell stuff on-line to charge a sales tax in every state where they do business. If I am not mistaken, on-line retailers currently only have to charge sales tax on sales to people who live in states where they have physical operations. I don't know whether the proposed law will pass, but it seems to me as though the chatter about charging sales tax on purchases through on-line retailers is growing louder. Even if the federal law doesn't pass, several states may end up jumping on the bandwagon. I'm not surprised that the government is looking for new ways to generate revenue given the strong possibility of declining tax revenue.
If the charging of sales tax on on-line sales becomes commonplace this will be a major negative for companies like Amazon. Not only will people have to pay for shipping on Amazon purchases, but they now will have to pay sales tax as well. I've always felt that one of the nice things about buying stuff on-line was the fact that the shipping costs and sales tax savings were often pretty much a wash.
This doesn't even get into the fact that one would think that shipping charges are going to continue to rise if oil settles up here at the $118 level, or even goes higher. Or the fact that I strongly believe that higher food and fuel costs are going to put a significant damper on consumer spending on discretionary items like a number of the things that Amazon sells.
I'm not going to short Amazon in real life. That's not how I roll, but I think that I'm going to have to clear out a spot in my stuffed CAPS portfolio for an Amazon short.
No position in AMZN