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Abu Dhabi, UAEMonday 10 December 2018

Trump takes more potshots at Amazon

But what US president claims against the online retailer often does not tell the whole story

US President Donald Trump. Mr Trump has launched another attack against Amazon. Evan Vucci/AP
US President Donald Trump. Mr Trump has launched another attack against Amazon. Evan Vucci/AP

US President Donald Trump lobbed another Twitter bomb at Amazon on Thursday, criticising the world’s biggest online retailer for, in his view, failing to pay enough state and local sales tax revenue, hurting the retail job market and abusing postal rates. But the president’s criticisms omit some important facts.

Trump’s claim: Amazon doesn’t pay its fair share of taxes to state and local governments.

Amazon’s response: The online retailer collects sales taxes on its direct sales in all 45 states that charge them, and is in favour of federal laws governing online sales taxes rather than a hodge-podge of state laws.

The facts: About half of the items sold on Amazon come from independent merchants who use the site as an online marketplace, and many of those sales are not taxed. The rules on such transactions are murky and states such as South Carolina and Washington have taken different approaches to collecting the taxes. Meantime, state governments lost an estimated $13 billion in online sales in 2017, according to the Government Accountability Office. The US Supreme court may clarify the issue with a case before it in the coming months.

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Trump’s claim: Amazon is putting “many thousands of retailers out of business,” hurting the job market.

Amazon’s response: The online retailer aids small businesses by exposing their products to 300 million customers around the world and helping them ship merchandise more efficiently than they could on their own. Amazon employs more than 500,000 people worldwide, many of them in its vast US warehouse network.

The facts: Amazon, and the shift of consumer spending from stores to websites, have transformed the labour market. Since 2000, about 400,000 people have lost jobs at department stores such as Sears, Macy’s and JC Penney, about the same number that have been created in the warehousing industry that largely supports e-commerce. The Amazon effect has been to consolidate thousands of jobs at its distribution centres that were previously more geographically dispersed in the department store model. Still, Amazon accounted for just about 4 per cent of total US retail sales in 2017, according to One Click Retail, an e-commerce consultant.

Trump’s claim: Amazon is free-riding on the US Postal Service, causing “tremendous losses to the US”.

Amazon’s response: The postal service makes money on Amazon package deliveries.

The facts: Part of the reason the Postal Service is losing money is that it has high employee costs and it must, by law, deliver to every address in the country six days a week. Package deliveries are growing and provided the second-largest revenue source in fiscal 2017. The Postal Service might as well deliver for Amazon as long as it’s making a slim profit on those deliveries. Amazon, however, often receives better delivery rates from the Postal Service than it does with private sector partners such as United Parcel Service Inc. and FedEx.