Amazon is Now Collecting Sales Tax in California

Amazon_Prime_Free_3_MonthsIf you’ve been following this blog, you know how much I love a good deal.  So when I finally decided to upgrade my iPhone 4 to a Samsung Galaxy S3, I remembered a tip that Amazon wireless has no sales tax on smart phones.  If you’ve ever bought one of these suckers, you know how outrageous the taxes can be.  When you buy the phone in store, the phone only costs $200(since the price is subsidized by the carrier), but you have to pay tax on the full price of the phone(over $500).  That’s over $50 in taxes, yikes!

So when I logged on to Amazon wireless to upgrade my phone, I was shocked to see $50+ in taxes when I tried to checkout.  Unfortunately, the free ride at Amazon is now over for me and many other California residents.  I’ve been saving over 8% on all my Amazon purchases for years but it looks like that’s finally coming to an end.  

On September 14th, Amazon started charging sales tax on all purchases in California.  If you live in a state with no sales tax, you’re still ok, but it’s only a matter of time before residents of all tax paying states will have to pay tax on Amazon purchases.  It’s expected that Amazon will generate over $100 million in tax revenue for local and state governments in California.  I’m not sure what California with do all that money, but I’m sure it will go to a good cause(not!).

Is Amazon Still Worth It?

So now I have to decide if it’s still worth it to do the majority of my shopping on Amazon.  With no sales tax and a recent slew of Amex promotions, I was getting close to 20% off all my purchases plus free 2 day shipping to my house.  There’s nothing like coming home to a giant box of paper towels.  But in all seriousness, I buy almost all of my non-perishable household items on Amazon.  I may be able to get comparable deals through extreme couponing or deal hunting but I like doing other things with my free time.

I know Costco offers a lot of the same items I used to buy on Amazon but I think my local Costco might be the busiest one in SoCal.  I can’t go during the week days because of work, and when I go in on weekends or after work it’s a freaking mad house.  I love those free samples but I think I’ve been spoiled for so long by Amazon, it’s going to be hard to go back and wait in those long lines.  Even though Amazon wasn’t always the cheapest, the convenience factor of ordering on Amazon was what I loved most.  Now that there is sales tax on Amazon I’ll have to pay even more and I’m not sure the convenience factor outweighs the cost.

There’s Still Amazon Prime

Now that the sales tax loop hole has been exposed, Amazon’s best feature has got to be their Prime Membership.  It offers free two day shipping on all Amazon items and unlimited streaming of thousands of tv shows and videos among other benefits.  If you are a student, you can actually get a free 6 month membership.  For everyone else, I’d recommend signing up for Amazon Mom, it gives you a free 3 month membership to Amazon Prime.

I’ll most likely use a combination of shopping on Amazon, Costco and at my local grocery stores for whatever I need.  You can still buy 3rd party items and not have to pay sales tax but not all of these items offer prime and some are used/like new condition.

Amazon still has some of the best customer service and return policies around though.  You can usually get a hold of a representative by phone or e-mail very quickly and they are very knowledgeable.  I’ve had some great experiences with their customer service staff and I really like their business model and how they treat their customers.

I think it will be a while before I discover what the price difference is that will make me get off my lazy butt and go out to the store to get whatever I need.  But until then, I still have my free 2 day shipping and a few Amazon gift cards left to spend :)

Readers, do you plan on spending more, less, or the same amount at Amazon now that there is sales tax?  Are there any other good options other than Costco?

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-Harry @ PF Pro

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Hi, I'm Harry, the owner and head writer for Your PF Pro. I started this site back in 2011 in order to create a place where young professionals could come and get all of their financial questions answered. On the site, you'll find articles on everything from asset allocation for retirement to saving money at Chipotle! So enjoy..

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  1. says

    For now, I think Amazon still doesn’t collect taxes in Florida – but you know, technically we’re supposed to pay that tax independently to the state!
    FL doesn’t have an income tax, so I’m not sure exactly what the mechanism is for paying it, but we’re all supposed to be keeping track of how much tax we don’t pay and pay it every year =)

    I actually hope that all sites charge state sales tax soon – most state govts could do with the extra revenue, and it would make small local retailers more competitive with their internet competitors!

    • says

      Yea I’m kind of torn on the issue because I know it’s tough for a lot of small retailers to compete with sites like Amazon. But a lot of small/large retailers don’t do a very good job so I wouldn’t really mind if they went out of business. I like to support good businesses but they still need to have good prices :)

      • Justin Gordon says

        Online retailers shoudln’t be getting some special advantage just because you don’t think that small/large retailers do a good job and you want them to go out of business. The playing field should be level, and let the market decide which store goes out of business. The worst businesses will inevitably fail.

        • says

          It’s easy to say the playing field should be level, but there are tons of industries where that is not true. Amazon found a loophole, and they took advantage of it. Now that loophole is closed, that’s fine with me, I’m just sad b/c now I have to pay more, haha

  2. says

    It still confuses me how different taxes are added on in different states and how the tax online varies depending on reseller! Although we have much higher taxes in the UK, at least we know what we are paying! That said, there is less opportunity to find a loophole bargain!

    • says

      Not only do different states pay different taxes, but depending on what city you live in California, you will pay anywhere from 7.75% to 9.25% in sales tax!

      Taxes are way more complicated than they should be, haha

  3. says

    I heard about this a few weeks ago and think that it’s inevitable for the rest of us. I can see both sides of the argument, but in the end Amazon has had a pretty sweet deal of not having to collect taxes. I’ll continue to use Amazon, probably also when they start collecting in our state. I hate going to the store, and I love just being able to use it from the privacy of my own home.

    • says

      Yea I think Amazon actually benefited the most from not having to collect sales tax. They caved really easily though to Jerry Brown in CA which surprised me. They’re even building two huge facilities in NoCal and SoCal. I have a feeling Amazon probably got some really good incentives/exemptions to build these facilities though.

      Amazon is seriously so convenient, it’s not that I’m lazy. I’d just rather go exercise or go to the beach or do something fun than go shopping! I can get everything I need in 5 minutes on Amazon and it’s at my doorstep in 2 days.

  4. Bill says

    All good things do come to an end! I do not live in California but my state is on Amazon’s case about taxes. Personally I will pay sales tax through Amazon and not even think about it. Convenience outweighs the cost, though Amazon usually has the best prices.

    • says

      Good point, I’ll probably keep buying stuff on Amazon since it’s so convenient. Their return policy is also pretty awesome. You can send back opened items and get a full refund for any reason. I think they won’t even charge you for shipping it back! You just print a label from their site.

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