As we’ve previously chronicled in this space, Bezos is building a clock in the desert he hopes will last for 10,000 years and plans to have his own rocket take him into space. The man who has done more to speed the decline of print bookstores than anyone else recently confounded everyone by scooping up a venerable print dinosaur, the Washington Post.
On Sunday’s 60 Minutes broadcast, Bezos gave us all a sneak peak of his most outlandish scheme to date: the Amazon titan showed off a couple of prototype mini-drones. Bezos says the remote-controlled devices, which look like toy helicopters you might play with in the back yard, soon will be capable of delivering packages weighing 5 lbs. or less to your doorstep in five minutes or less from an Amazon fulfillment center up to 15 miles away.
Bezos thinks he might get these mini-delivery systems aloft as soon 2015, pending FAA approval. Memo to FAA: before you clear Amazon for takeoff, talk to our neighbor’s kid: the remote-control plane he got last Xmas ended up stuck in a tree branch after it terrorized several neighborhood pets, skirted the power lines and narrowly missed conking the mailman in the head [of course, Jeff probably will offer to deliver the mail with his mini-copters to eliminate the latter concern].
But this week comes news that a central element of the rocket fuel that has powered Amazon’s meteoric rise over the past two decades soon may be withheld from the Internet giant.
One of the keys to Amazon’s amazing growth has been its ability maintain a price advantage by avoiding the payment of state sales taxes on the purchase of goods it delivers to consumers. Bezos has shrewdly played states off against one another by often making collection of state sales taxes a deal-breaker which ensures a state won’t be chosen as a location for a new Amazon fulfillment center. It’s not a coincidence that tax-hostile Texas landed three of them in the past year.
Amazon fulfillment centers are built to scale–they’re usually the size of about five football fields. The E-commerce behemoth has more than two dozen of the giant warehouses currently in operation, each employing up to 2,000 workers; it’s adding several more each year. An Amazon fulfillment center is one of the biggest perennial prizes in the economic development sweepstakes.
But Amazon’s long-term sales tax holiday soon may come to an end. While Congress thus far has avoided imposing a federal tax on Internet sales to help plug the deficit, several states have not been shy about demanding that Amazon collect sales taxes from its customers in their states.
The importance of the sales tax issue to Bezos’ empire was made clear when Amazon appealed a New York law requiring it to collect tax money from NY customers and fought it all the way to the U.S. Supreme Court. Seattle-based Amazon argued the New York law violates the Constitution because it applies a tax to a business that doesn’t have facilities in the state (another non-coincidence). The company also objected to the law’s selective targeting of a handful of large Web retailers and to the stiff fines and even criminal charges it imposes on violators.
The nine justices now have spoken–or, to be more precise, they’ve chosen to remain silent. Without comment, the Supreme Court refused to consider Amazon’s appeal, leaving the NY law intact.
Bezos appears to recognize that his company’s sales tax-free status eventually will be eliminated. In the past few years, Amazon has agreed to collect sales taxes in 16 states, in part to enable the company to place new distribution centers in densely populated markets like New Jersey. Amazon now publicly supports federal legislation that would explicitly let states require tax collections by all online retailers above a certain size.
But Bezos knows that a Congress paralyzed by partisan gridlock is unlikely to produce a federal mandate on collection of state sales taxes anytime soon. So he tried, and now apparently has failed, to circle his wagons around a significant portion of his tax-free territory by raising legal challenges aimed at preventing states from unilaterally imposing taxes on large Web retailers regardless of whether they host one of Amazon’s warehouses.
The overall stakes in the dispute over sales-tax collection on Web purchases is huge: nationwide, states are losing an estimated $23 billion a year in uncollected sales taxes from Web retailers, a number that continues to rise as E-commerce expands. You can buy a lot of toy helicopters with $23 billion.
Not that we’re shedding any tears for Jeff as he prepares to pony up the 7 or 8 percent surcharge we all have to pay whenever we buy some chewing gum–Mr. Bezos’ net worth is said to be in the neighborhood of $25 billion. He could personally pay the sales taxes on every Internet purchase made in the U.S. and still have enough moolah to buy what’s left of Barnes & Noble.