Thursday, August 13, 2009

The Death of Amazon

In The Huffington Post today, Alex Green, the owner of Back Pages Books, makes a — dare I say — wildly bold prediction regarding the future of Amazon. He writes, "With a margin of profit lower than the national sales tax average and countless Amazon Prime customers locked in at obscenely low shipping rates, Amazon founder Jeff Bezos saw the writing on the wall. He rapidly began seeking a way to avoid the third meltdown of his business in the last decade. He got out his Kindle, grabbed a list of vague numbers, jumped on a giant soapbox and tried to stave off the perception that his Kindle-fever was anything but panic. Then in June, Rhode Island passed a law following New York's lead. On Thursday, North Carolina jumped on board as well, passing a sweeping e-fairness law. Facing the greatest drop in tax revenue since the Great Depression, states across the country have decided that Amazon no longer needs its tax breaks.

"Amazon has responded by dropping its affiliates in North Carolina and rattling a saber engraved with the motto, 'We don't pay taxes.' The problem for them is that other states waiting in the wings are more destitute and powerful than North Carolina. California charges sales taxes that are almost double the national average. With a titanic economy on the brink of near-anarchistic failure, broadly despised Governor Arnold Schwarzenegger is almost all that stands between Amazon and the tax man.

"The consequences of enforcing a sales tax after such a lengthy period of legislative inaction, however, are devastating. Amazon simply cannot survive if it has to pay sales taxes. If nationally enacted today, enforced tax legislation would put at least $1 billion of Amazon's yearly operational costs and profits into state coffers. Under such pressure, Amazon would briefly comply and then collapse. Three weeks later you would find them on the nightly news, appearing before Congress for a bailout, "selling," as the poet Franz Wright says, 'the emptiness of their own hands.' Like the auto companies before them, Internet retailers used your roads, your government, and your tax subsidized infrastructure to support non-viable companies that killed your local businesses. Nothing in life, as the saying goes, is free."

Can it be true? Can we imagine a world of books not dominated by Amazon? After only, say, a decade or less of dominance in this market, I have difficulty conceiving of it.

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