Amazon.com has become the world’s largest online retailer even though it has faced opposition from traditional booksellers and lawmakers throughout its short history. Seven months after its inception as ‘Cadabra’ in July 1994, founder Jeff Bezos opted to name his new company Amazon because the name represents the world’s largest river and his ambitions for the company. (Brandt, 59) Bezos also believed that the name would be beneficial because it was easy to spell and would come up high in listings. (Brandt, 60) Amazon is continuing to expand and redefine the idea of a traditional bookstore.
Amazon History:
Amazon.com was officially launched on July 16th, 1995 when internet traffic was at a high of 16 million users (Brandt, 81). Three days after its launch, Amazon was featured on Yahoo.com’s “What’s Cool” page which resulted in sales over $12,000 in week one (Brant, 83). By October, Amazon achieved its first day of 100 book sales and in less than a year it had its first hour with 100 book sales – all done without any paid advertising (Brandt, 84). Amazon’s shares went public in 1997 and brought the company to a value of $429 million (Brant, 96).
Dot-Com Bubble:
By March of 2000, the US had 371 publicly traded Internet companies which amounted to 8% of the stock market (Willoughby). When the bubble burst, Amazon’s stock prices suffered as a result and the company lost 320 million and Amazon stocks lost 90% of their value (Brant, 124). Bezos was able to react to the burst by implementing significant layoffs and spending cuts (Brandt, 129). As a result, Amazon survived the burst and in 2010 it reported revenue growth of 36 percent ($12.95 billion) and profits up 8 percent ($416 million) (Brant, 149).
Competitions with Traditional Bookstores:
Amazon’s famous 1-click Patent which allows purchases with a single click (Amazonia, 13) created controversy in 1999 with competitors and resulted in a legal battle (Brandt, 14). Barnes and Noble creation of Express Lane in May 1998 tried to circumvent the patent. Bezos sued for patent infringement and ultimately settled the suit outside of court in 2002 (Brandt, 149). Amazon’s dominance over bookstores has continued: since Amazon’s initial stock offering in 1996 to the end of 2010, Barnes and Nobles stock dropped 29 percent and Borders stock fell 96 percent whereas Amazon’s rose 10,320 percent (Brandt 152). Borders has most recently been taken over by Barnes and Noble.
In 2011, Canadian bookseller Chapters Indigo Books & Music announced it will refuse to sell Amazon-printed books in its stores. This was in response to Amazon’s introduction of exclusive selling rights from authors and publishers. Amazon has also announced the opening of a physical location in Seattle, intensifying the conflict (Haq).
Amazon Law:
The implications of a 1992 Supreme Court decision mean that Amazon is only legally obligated to charge taxes in Washington, which puts competitors at a disadvantage (Pierce, para 4) As such, Amazon does not charge sales tax in 40 states (Yang, 9). The National Governors Association estimated that states are missing out on nearly $22 billion each year in sales tax online (Peterson). Amazon has exploited loopholes by creating contracts with affiliates in states by linking websites in order to avoid charging taxes (Pierce, para 1).
The “Amazon Law” was legislation enacted in New York State in April of 2008 that targeted online sellers using in-state representatives to avoid charging sales tax (Ferguson, 7). The law requires retailers to collect taxes from in-state buyers despite the lack of physical presence (Yang, 5). Amazon argued that the law violates the Commerce Clause of the US Constitution by forcing taxing without a physical presence (Ferguson, 7). On January 12th 2009, the Supreme Court rejected these challenges and as of October 2011, eight states have enacted similar legislation (Peterson).
The Main Street Fairness Act introduced to Congress on June 30th, 2010 would allow subscribing states to oblige online retailers to collect and remit sales tax. (Pierce, para 9) Jeff Bezos has announced his support for the legislation as long as few companies are permitted to duck the requirements. The bill currently proposes to exempt online sellers with less than 500,000 in annual sales. (Peterson) The bill has yet to be approved as the online sales tax debate continues.
Word Count: 657
Works Cited List:
Basu, Subhajit. Global Perspectives on E-Commerce Taxation Law. Burlington, VT:
Ashgate, 2007. Print.
Brandt, Richard. One click : Jeff Bezos and the rise of Amazon.com. New York: Penguin
Books, 2011. Print.
Ferguson, Zelda. “Is the tax holiday over for online sales?” Tax Lawyer Summer 2010:
1279+. LegalTrac. Web. 24 Jan. 2012. <http://go.galegroup.com.myaccess.library.utoronto.ca/ps/i.do?id=GALE%7CA249223052&v=2.1&u=utoronto_main&it=r&p=LT&sw=w>.
Gall, Maryann B., Laura A. Kulwicki, and Kara R. Williams. “Web site linking explosion:
states respond to New York’s ‘Amazon Law’.” Journal of State Taxation Mar.
2009: 5+ LegalTrac. Web. 24 Jan. 2012. http://go.galegroup.com.myaccess.library.utoronto.ca/ps/i.do?id=GALE%7CA210920992&v=2.1&u=utoronto_main&it=r&p=LT&sw=w>.
Haq, Husna. “Indigo, Books-a-Million Boycott Amazon.” The Christian Science Monitor.
The Christian Science Monitor, 06 Feb. 2012. Web. 01 Mar. 2012. <http://www.csmonitor.com/Books/chapter-and-verse/2012/0206/Indigo-Books-a-Million-boycott-Amazon>.
Marcus, James. Amazonia. New York: New Press, 2004. Print.
Miller, Roger L. R, and Gaylord A. Jentz. Economics and E-Commerce: The Online Legal
Environment. Cincinnati, OH: West/Thomson Learning, 2002. Print.
Peirce, Neal. “Amazon, taxes–and us.” Nation’s Cities Weekly 5 Sept. 2011: 2. Academic
OneFile. Web. 24 Jan. 2012. http://go.galegroup.com.myaccess.library.utoronto.ca/ps/i.do?id=GALE%7CA267202523&v=2.1&u=utoronto_main&it=r&p=AONE&sw=w
Peterson, Kristina. “Amazon Tells Lawmakers It Supports Sales Tax.” 1 December 2011.
The Wall Street Journal. Online. 24 January 2012. <http://online.wsj.com/article/SB10001424052970204012004577070191865973750.html>.
Spector, Robert. Amazon.com: Get Big Fast. New York: HarperBusiness, 2000. Print.
Yang, James G.S. “What is New York’s Amazon Tax on internet commerce?” International
Journal of E-Business Research 7.4 (2011): 50+. Academic OneFile. Web. 24
Jan. 2012. <http://go.galegroup.com.myaccess.library.utoronto.ca/ps/i.do?id=GALE%7CA270150224&v=2.1&u=utoronto_main&it=r&p=AONE&sw=w>.
Willoughby, Jack. “Burning Up.” Barrons. 20 Mar. 2000. Web. 01 Mar. 2012.
<http://online.barrons.com/article/SB953335580704470544.html>.