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Amazon is Busy: Kindle Discounts, iOS Video App, and Sales Tax Implications

It’s that time of year: Through August 15th, Amazon is offering a 40% discount on the current entry-level non-touch Kindle to holders of its Rewards Visa Card. As David Carnoy reports on CNet, you could get a basic Kindle for as low as $47 (with ads, or $65 without). Quantities limited, use promo code KINDLE40 and pay with your Kindle Rewards card to qualify. (I applied for one a few days ago, but with my credit I’m probably out of luck.)

Carnoy coyly hints that this might mean the new Kindles will be announced by the end of the month. I don’t know about that, but I do know that if Amazon’s past behavior is any indicator, when and if they come out Amazon will be knocking a decent chunk off of the prices of these very same models of Kindle—so don’t feel too bad if you miss out on this offer.

Meanwhile, from TechCrunch and a number of other sites comes the news that Amazon has just released an Instant Video streaming app for the iPad. This means that Amazon Prime subscribers who enjoy Amazon streaming, or those who pay to rent or buy individual digital movies from Amazon, can now enjoy them on their iPad.

Amazon has long been fairly platform-agnostic, even after it launched its Kindle ereader, providing Kindle e-reading apps for just about every other major platform. In that light, it’s a little surprising to me that the company took this long to come out with a streaming app for the iPad. But then again, considering how big video could be as a killer app for the Kindle Fire, perhaps it’s not so surprising after all. The app only supports the iPad so far, and doesn’t allow streaming to Apple TV, but who knows where it might go next?

And finally from PaidContent comes a report that Republican Senator Jim DeMint of South Carolina is making alarmist comments about the Marketplace Fairness Act, legislation intended to force online retailers such as Amazon to pay sales tax everywhere. DeMint thinks it could be an undue burden to online businesses which could have to deal with literally thousands of tax authorities nationwide.

While some online businesses such as Overstock are opposing the law, Amazon actually endorsed it earlier this summer. It seems a little odd for Amazon to start begging legislators to throw it in that briar patch, given how long and hard it fought to avoid sales taxes in the past (going so far as to drop entire states from its affiliate program or threaten to close facilities and lay off workers), but Amazon almost never does something without good reasons.

Going tax-free has been a big advantage for on-line stores such as Amazon with few physical presences anywhere. Other on-line expansions of physical big-box stores, such as Wal-Mart and Best Buy, have to collect sales tax on every order because they have physical stores in every state. Amazon has only had to collect it in locations where it has physical facilities.

But if Amazon has to start paying state sales tax anyway, there’s nothing stopping it from opening its own boutique stores, providing places for customers to view and buy the latest and greatest in Kindle and other big-ticket goods, and have packages shipped for pickup. You can bet Amazon has had something like this in the planning stages for months, and already knows exactly what it’s going to do once all its on-line competitors are suddenly under those same sales-tax burdens without having made those plans.

Who knows what effects that might have on the e-book market? Now, granted, as non-physical goods e-books probably wouldn’t be taxed anyway, but if Amazon adds physical locations it could counter one of the few advantages Barnes & Noble currently has in the e-book sales race—being able to use its own stores as “showrooms” to sell its own e-books as well as e-book readers.

We live in such interesting times…

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fjtorres August 2, 2012 um 9:25 am

A chain of PAYLESS-sized Amazon boutiques could hold digital lockers, offer up WiFi, order Kiosks, and stock a decent collection of top-selling electronics or media (CD,DVD, Games, books) essentially a Walmart without the Grocery/Clothing/Home&Garden. All fed from the same regional depots as the online operations (note the plural).
Even better, they could rotate the featured in-store merchandise according to local consumer habits and the time of the year.

One thing to consider, unlike other online retailers, Amazon is big enough that dealing with 5000 different tax regimes is not an undue burden. Other retailers–even prominent ones–aren’t. So throwing in with the (misguided) B&M retailers mightt help them cripple some of the online competition or drive them to Amazon’s fulfillment services.
Odds are Bezos boys crunched the numbers and figured 6 different ways forcing *everybody* to pay local taxes helps them more than anybody else.

Nate Hoffelder August 2, 2012 um 10:45 am

Yeah, but I’m not convinced that there would be enough demand to justify the high cost of the retail square footage. Plus I think you’re underestimating the square footage required to display even a tithe of Amazon’s catalog.

fjtorres August 2, 2012 um 1:19 pm

Oh, I’m not thinking of a big part of their catalog; just the high-profile promo stuff they might put on the front page off the website. Or weekly specials.
Like, for books, what you might find at Target or WalMart or Walgreens. ust current and recent "bestsellers".
The idea is the store is the tip of the iceberg.
The kiosks are for the rest of the catalog with Amazon local delivery.One example; come september, there might be an aisle dedicated to XBOX games (HALO!) and Xmas *hot* toys. The same aisle in january could feature Sharp HDTVs for pre-superbowl sales.
The real store is the regional depot, the storefronts are just physical "web pages".

Peter August 4, 2012 um 7:38 pm

Compared to the cost of their warehouses, a couple storefronts would cost next to nothing.

"Things are cheaper online because there is no overhead" is a line of economic nonsense that seriously needs to die.

Basic economics dictates that overhead doesn’t determine the price the consumer pays – the price that maximizes gross profits is the price the merchant will charge. That price point is lower for online sales because:

1) Demand is shifted toward lower prices.

2) Inventory turnover is faster (thus higher volumes are possible).

3) The cost of shipping TO the store isn’t rolled in to cost of sales.

Nate Hoffelder August 4, 2012 um 8:43 pm

Except a couple storefronts would only be enough for a pilot.Rolling them out nationwide would be considerably more expensive.

Sherri August 2, 2012 um 11:20 am

Physical or not, ebooks are taxed in Washington, and since Amazon is based in Washington, they’ve collected sales tax on every ebook I’ve bought from them. The definition of what is taxed, as well as the rate, varies from state to state. In Washington, for example, goods and services are taxed, as I discovered when I bought a dining room table and the delivery charge was taxed as well as the table.

Timothy Wilhoit August 2, 2012 um 12:00 pm

I’ve paid sales tax on every K book I’ve purchased in the last 2+ years. Amazon employs enough people (in Kentucky), it almost feels like "buying local." 😀

Amber August 2, 2012 um 12:05 pm

I have been paying tax on Kindle ebooks as well in Indiana. I believe it just started sometime in the last year, but I am not sure of that.

Bob Wilson August 2, 2012 um 1:48 pm

I think that electronic material is taxed according to the address on the credit card. So, if you have a friend in a 0 sales tax state like Oregon, use his address to open a credit card account in your name. Then pay the account online and you should be good to go. This is no more illegal than companies having their headquarters in Delaware or Nevada or other states that offer them tax advantages.

Basic Kindle for 40% Off with The Amazon Credit Card | Gear Diary August 2, 2012 um 8:46 pm

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