The Marketplace Fairness Act is a bill that is making its rounds in Congress this year. It will give states the capability to collect sales taxes from online businesses that aren’t physically in their jurisdiction. This could be a boon for state coffers, and it will likely shift the landscape of how online companies do business.
Amazon.com, Inc. (NASDAQ:AMZN), previously, was against having to collect state taxes from its customers. This was because the company had a distinct competitive advantage by not collecting taxes: lower overall prices, better sales numbers.
Now Amazon.com, Inc. (NASDAQ:AMZN) and other online retailers will likely collect taxes from customers in all states. As a result, there could be a shift in how goods are sent to customers. Logistics is a component of the retail business that every company must deal with. Online entities must deal with this differently than the brick and mortar stores, however.
Amazon.com, Inc. (NASDAQ:AMZN) doesn’t need to avoid physical presence in states it used to stay away from because of the tax threat. That means it no longer has any reason not to build shipping infrastructure practically everywhere. It can erect warehouses wherever it wants to, ideally as close as possible to its customers. It also has been experimenting with storage lockers to get items in to customers’ hands faster.
Let us ship it for you
That’s not good for shipping companies. Amazon uses both United Parcel Service, Inc. (NYSE:UPS) and FedEx Corporation (NYSE:FDX) extensively. Using these shipping providers is not cheap for Amazon.com, Inc. (NASDAQ:AMZN). If they want to save money on logistics, they might be better off doing it themselves.
That would cut the shippers out of the equation. United Parcel Service, Inc. (NYSE:UPS)’ earnings beat analysts estimates in the first quarter, and net income seems to be back in a big way. This after the company took a big fourth-quarter loss because of legacy costs related to pensions. While UPS is a stock to watch, investing in it is really more about value than growth at this stage of its business. Watch for what Amazon does in shipping. United Parcel Service, Inc. (NYSE:UPS) might not admit to it, but they get a lot of business from Amazon.
FedEx is also a shipper for Amazon.com, Inc. (NASDAQ:AMZN). This company might still have some room for growth. As we’re all aware, the U.S. Postal Service is experiencing major budget problems, leading them to do things like suspend Saturday service. But FedEx Corporation (NYSE:FDX) just got a big contract with the Postal Service to provide air cargo services.
Look for deals like this to continue to develop for FedEx as the Postal Service experiences more cutbacks. When comparing FedEx versus UPS as a growth investment, go for FedEx Corporation (NYSE:FDX).