Are eBook sales taxes the next target for cash-strapped states?

Now that more states are getting Amazon to agree to collect sales tax, SmartMoney reports that their next target may be digital media, including eBooks. Deloitte forecasts that U.S. eBook sales will reach $3.19 billion by 2015, an amount that's very enticing to state and local governments. Nearly half of all states already collect sales tax on some digital content, but the rules vary by state. For example, Idaho, Kentucky, Vermont, Washington and Wisconsin collect sales tax on eBooks, digital music and movies. Texas, Arizona and Maine also do so by defining digital goods as "tangible personal property" subject to sales tax. Florida exempts eBooks from sales tax, but not digital movies or television shows. New Jersey collects sales tax on digital content, but not apps.

Republican governors drop opposition to online sales taxes

The Wall Street Journal reports that Republican governors are dropping their opposition to imposing sales taxes on online purchases in order to raise revenue for their state governments. The first breakthrough was New Jersey Governor Chris Christie, who cut a deal with Amazon to collect sales tax in return for state financial support for new distribution facilities. The National Conference of State Legislatures estimates that states could receive an additional $23 billion in revenues if all online purchases were subject to sales tax. Virginia, Texas and Nevada--all states with Republican governors--have done similar deals with Amazon.

According to the article, the Republican Governors Association opposed online sales taxes as late as last February. Republican Senator Lamar Alexander and Democrat Dick Durbin are using the change in attitude to build support for a bill they've co-sponsored that would require online merchants to collect sales tax. Amazon supports the bill, but most other online-only retailers oppose it.

Amazon's emerging strategy: Same-day delivery

Slate's Farhad Manjoo has written an article that explains Amazon's recent change of tactics over sales tax. For several years, Amazon did everything it could to avoid collecting state and local sales taxes, including filing suit against states, cutting off affiliates, threatening to close distribution facilities, and offering to build facilities in states in order to avoid collecting sales tax. In the last year, however, Amazon has begun to agree to collect sales tax on a state-by-state basis, and is even building distribution facilities in many of those states. (In some states, Amazon is getting development funds and tax incentives to build and operate its warehouses.) So why the change in tactics, when it means that Amazon is giving up a significant price advantage?

Based on an analysis of Amazon's strategy done by the Financial Times, Manjoo writes that Amazon's new strategy is to build warehouses near every major metropolitan center, improve their efficiency using Kiva Systems' technology (Amazon acquired the company earlier this year,) and offer same-day delivery to most of its customers. Manjoo believes that this strategy will enable Amazon to offer the same "instant gratification" that consumers get from going to local brick & mortar stores, with the advantage that they don't need to leave their homes or places of work. He also believes that this ties into Amazon's test of automated lockers in 7-Eleven stores and other 24-hour retail outlets in Seattle, New York and the U.K., where consumers can have their packages securely delivered and stored, and then pick them up on the way home from work. (It also ties into Amazon's test of groceries in Seattle, which is another application for same-day delivery.)

Manjoo believes that brick & mortar retailers are deluding themselves if they believe that forcing Amazon to collect sales tax will put them on an equal footing.