Best Buy online sales rise as Amazon collects more sales tax

SAN FRANCISCO Thu Jan 10, 2013 2:38pm EST

SAN FRANCISCO Jan 10 (Reuters) - Best Buy Co, the world's largest electronics retailer, said its online sales have increased in certain markets as arch rival Amazon.com Inc collects tax on purchases in more states.

"In California, Texas and Pennsylvania where Amazon.com recently started collecting tax, it is very early, but Best Buy has seen a 4 to 6 percent increase in online sales observed in aggregate versus the rest of the chain," spokeswoman Amy von Walter wrote in an email to Reuters.

"While some people may still prefer to shop online, the sales tax parity has shown that people will shift their buying habits," she added.

Amazon, the world's biggest Internet retailer, began collecting sales tax in California on Sept. 15, weeks before the start of the crucial fourth-quarter holiday season. In the weeks leading up to the move, there were reports of binge buying of higher-priced items like flat-screen TVs by some California shoppers.

Amazon had started collecting state sales tax in Texas in July and in Pennsylvania in September.

Critics of Amazon have argued that it had an unfair advantage because big retailers, including Best Buy, Wal-Mart Stores Inc and Target Corp, have had to collect state sales tax on online sales for years because they have stores and other physical operations in these locations.

But many states, hungry for extra tax revenue in the wake of the 2008 financial crisis, have introduced new laws requiring that Internet-only retailers also collect sales tax.

Big retailers hope that the requirement to collect sales tax will reduce Amazon's price advantage and help them recoup some sales that have been lost to the Internet retailer.

Best Buy also saw an increase of 6 to 9 percent in online orders that are picked up in its stores in those three states, compared with the rest of its chain, von Walter said.

Best Buy, which has been among the hardest hit by competition from Amazon, is set to report holiday sales results on Friday.

An Amazon spokesman declined to comment when asked if the company saw an impact on fourth-quarter sales with the imposition of sales tax in California, Texas and Pennsylvania. In the past, Amazon executives have said there was little or no sales impact from such changes in other regions.

Several analysts have argued that shoppers use Amazon for its vast product selection and convenient, fast shipping and returns, and not just its low prices.

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