Online retailer Amazon.com (AMZN - Free Report) so long was not bound by statute to collect sales taxes on behalf of state governments, except in certain cases. Naturally, consumers gained every time they shopped online. However, this privilege was withdrawn from many states recently.
Come Apr 1, and Amazon will start collecting 5.5% sales tax from customers in Maine for shopping online. This will put an end to the cost benefit that Amazon has been enjoying over brick-and-mortar retailers in the state.
Besides Maine, the company will also collect sales tax in New Mexico from the same date.
The news came on the heels of the announcement made by Amazon to collect sales tax in Wyoming. The online giant has been collecting sales taxes in at least 10 other states since Jan 1. The names include Louisiana, Iowa, Nebraska, Utah, Mississippi, Missouri, Rhode Island, South Dakota, Vermont and Wyoming.
Undoubtedly, it is a big win for the state government, which is heavily dependent on sales tax collection.
Coming to the price performance, in the last one year, shares of Amazon outperformed the Zacks categorized Electronic Commerce industry. While the industry gained 40.11%, the stock returned 54.70%.
Amazon has been taking various measures to avoid sales tax collection because that would increase the price of items sold on its website. This is likely to impact results initially, as consumers will reduce purchases until they get used to the higher prices. However, a significant long-term impact is quite unlikely.
Zacks Rank & Stocks to Consider
Currently, Amazon carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector include ON Semiconductor Corporation (ON - Free Report) , Alibaba Group Holding Limited (BABA - Free Report) and Advanced Energy Industries, Inc. (AEIS - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
For the current year, estimates for ON Semiconductor went up 7.8% in the last 60 days, Alibaba estimates increased 23.3% and those for Advanced Energy increased 18.2%.
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