Amazon Reaches Tipping Point in Fulfillment Centers vs. Taxes
By Ina Steiner
Amazon announced plans to open a new 1.2 million-square-foot fulfillment center in Moreno Valley, California in what will become the fourth fulfillment center in the state. Amazon will ship small items such as books, electronics and consumer goods from the facility. Amazon's other sites in the state are located in Patterson, San Bernardino and Tracy.
Last week, Amazon also announced plans to open a 1 million-square-foot fulfillment center in Baltimore, Maryland for books, electronics and consumer goods and two million-square-foot fulfillment centers in Florida, one for large items such as kayaks and televisions and the other for smaller items such as books, electronics and consumer goods.
Amazon had been cautious in building fulfillment centers in certain states due to concerns about creating nexus that would mean it would have to collect sales tax. But the company has entered into agreements with many states to pay sales tax, such as New Jersey and Massachusetts, and has been building a network of fulfillment centers around the country. In July, Amazon said it had opened eight fulfillment centers in the U.S. in the last year.
Amazon currently collects tax on more than 50% of its revenue base and is pressing for federal legislation on the sales tax issue. An analyst with RW Baird recently noted in a section of a report titled "sales tax risks" the increasing number of agreements with states to collect sales tax. "Amazon is now able to set up increased local Fulfillment Centers, which they previously could not do, in order to satisfy the conditions for state tax exemptions."
Another analyst asked Amazon last week why the company had added 20 fulfillment centers in 2012, but had only added 5 in the U.S. and a handful internationally so far this year. Amazon CFO Tom Szkutak said the net number of fulfillment centers added this year was seven. "Included in that are several consolidations, we are building generally larger FCs and we are consolidating some of those." But he did not provide a square footage comparison or much else in the way of details.
Amazon has over 100 fulfillment center worldwide, and counting.
About the author:
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to firstname.lastname@example.org.
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