Region could prosper from Amazon operations in Ohio


By the numbers:

$1 billion: Amazon’s estimated investment in its Ohio expansion.

1,000: Jobs expected to be created in Amazon Ohio operations.

6,000: Jobs Amazon is hiring for at U.S. fulfillment centers.

$400 million: Potential annual online sales tax Ohio is estimated to lose out on.

Amazon’s announcement last week that it was expanding its cloud-computing operations near Columbus opened the door for this region to prosper from the projected $1 billion investment.

The Seattle-based online retail giant started collecting sales tax Monday on Ohio customer purchases that will help add to area county coffers and the company has plans to build distribution centers in the state, which is a plus for an area like Southwest Ohio that already has expertise in logistics, officials said.

Ohio taxpayers are supposed to report and pay sales tax on online purchases when they file their tax return, but only about 10 percent did so in tax year 2013, according to Ohio Department of Taxation data obtained by the is newspaper

More than 5.1 million Ohio residents filed tax returns for 2013, but only 50,947 reported tax liability for Internet or mail-order purchases, totalling $3.5 million, said Kristin Begg, a state tax department spokeswoman.

It’s not known how much Amazon’s collections will add in sales tax, but state tax department estimates Ohio will lose out on about $400 million in unpaid sales or use tax on so-called remote sales this year.

Amazon coming to Ohio and “playing by the same rules as traditional retailers” is great news for the state, said Gordon Gough, president and chief executive of the Ohio Council of Retail Merchants.

“The state is collecting the money that is already due. It is much easier for an online retailer to collect it and then remit it, as opposed to having each individual taxpayer report it on their income tax forms,” Gough said.

The sales tax collection is a plus for the state, but it also could end up costing Amazon business from Ohio residents, according to Ohio State University researchers.

An Ohio State study released last year found that sales fell nearly 10 percent at Amazon in five states when the Internet retailer began collecting taxes on online purchases.

The impact was more severe on big-ticket item purchases such as televisions and laptop computers. Consumers decreased their spending at Amazon by nearly 24 percent on purchases of $300 and above, the report said.

“If you’re shopping for a flat-screen TV, the tax component becomes important. You’ll spend more time shopping around and eventually you may decide to buy it somewhere else,” said Itzhak Ben-David, a finance professor at Ohio State’s Fisher College of Business, one of the report’s authors.

Before Monday, Amazon enjoyed a 5.75 percent or greater price advantage over brick-and-mortar retailers in Ohio because a current legal exception allows online retailers to avoid collecting sales tax in states where they don’t have a physical presence.

“The state is likely to collect much more revenue from sale tax, because before most sales tax was never reported, but Amazon will suffer some of the consequences by lower sales,” Ben-David said.

Gov. John Kasich hailed Amazon’s decision as a victory for the high-tech future of a state whose legacy was built on heavy manufacturing. Amazon will build a third data-computing center in New Albany, in addition to two previously announced centers in Dublin and Hilliard, all suburbs of Columbus.

The 1,000 jobs also will include positions at Amazon distribution centers, although those plans aren’t yet finalized. Amazon officials did not respond to requests for comment from this newspaper.

Amazon’s U.S. distribution network includes more than 50 fulfillment centers, over 15 sortation centers and more than 50,000 full-time employees. Last week, the company announced that it was hiring for more than 6,000 full-time jobs at fulfillment centers in 12 states, including Indiana and Kentucky.

The Wall Street Journal reported that Procter & Gamble Co. has allowed Amazon.com to set up shop in some of its distribution centers to make it cheaper and faster to fill orders for P&G products.

A spokesman for the Cincinnati-based Procter & Gamble declined to comment on whether Amazon is using P&G’s new 1.8 million-square-foot distribution center in Union, near the Dayton International Airport, or if there are plans for Amazon to set up shop there.

Dayton Development Coalition officials could not comment about a possible Amazon distribution center in the region, but said the logistics and warehousing hub built surrounding Interstates 70 and 75, and the CSX rail line is attractive for prospective companies.

“We’re always working to win business here, but landing a Fortune 500 company anywhere in the state is good news, and will lead to further growth and attraction of companies like Amazon,” said David Burrows, the coalition’s vice president of development.

Gough said locating an Amazon distribution center in Dayton or Columbus, which is located at the intersection of Interstates 70 and 71, would make business sense.

Distribution and logistics is a big part of retail operations, and many Ohio Council of Retail Merchants members have distribution centers in the region, including in Clark, Butler, Warren and Montgomery counties, he said.

“Ohio is in a really great geographic location to move items. Maybe we’re not making as many items as we had in the past, but if you want to move an item through the United States, chances are you are going to come through Ohio and that’s good for the state,” Gough said.

The Associated Press contributed to this report.

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