Shares of Amazon dropped 6% after a report that president Trump plans to “go after” the company. Axios is reporting that Trump is trying to change Amazon’s tax treatment.
President Trump again took aim at Amazon, blasting it for hurting retailers as well as the U.S. Postal Service. Do his criticisms ring true?
Brick-and-mortar stores have closed by the hundreds, as retail chains struggle to compete with the convenience of online shopping, a transformation led and dominated by Amazon.
The U.S. Postal Service has been roiled by the same gale-force technology winds, as Americans abandoned mail for email and other electronic communication. But the post office has benefited, more than suffered, from Amazon, financial analysts and its own staff say.
Along with UPS and FedEx, the Postal Service helps deliver packages in the “last mile” of their Amazon journey.
That’s translated to more packages and package-related revenue, in part thanks to Amazon.
In the October-December 2017 quarter, the service handled 7% more packages than in the same period a year before, while mail declined about 5%. “Although we continue to win customers and grow our package business, these gains are not sufficient to offset continuing declines in our mail business, which is our main source of revenue and contribution,” Postmaster General and CEO Megan Brennan said last month.
The service has a decade-long string of fiscal net losses, which has led to more than $120 billion in unfunded liabilities, mostly retirement health and pension benefits. In 2006, Congress mandated that the postal service prepay benefits, a special requirement other agencies do not face.
“We’re trying to pass reform legislation that will allow USPS to compete without the multi-billion dollar burden imposed on it by Congress in 2006,” Rep. Gerry Connelly, D-Va., a member of the House Oversight Committee, said in a statement to USA TODAY. “Singling out favorite Trump villains like Amazon is a distraction from our bipartisan effort.”
The Postal Service and Amazon declined comment on their business relationship. The postal service’s contract with Amazon must be approved by regulators and must generate a profit for the service.
Amazon could hurt the postal service — and other package companies — if it successfully shifts more of its delivery to its own network, which it’s been slowly building out over the past few years.
But with that network in its early stages, it’s a paying customer of the post office.
“Amazon has been a huge cash flow generating machine for the U.S. Postal Service given the scale and scope of the company’s global distribution,” said
Daniel Ives, chief strategy officer & head of technology research for GBH Insights.
Amazon, among tech companies, is Trump’s favorite target, and not just for package delivery.
On Wednesday, a news report in Axios, citing five unnamed sources, said the president is considering whether to change Amazon’s tax treatment because the online retailing giant doesn’t pay its fair share of taxes and has hurt smaller competitors. Shares (AMZN) dropped 4%, but they rebounded Thursday.
Trump tweeted Thursday that he had voiced concerns about the company before his election. “They pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!” he tweeted.
Amazon did not initially collect state sales taxes when it began selling books online in 1995. However, Amazon and other big e-commerce companies now routinely collect state sales taxes.
Stifel analyst Scott Devitt said the e-retailer collects sales taxes in the 45 states that have state sales taxes and the District of Columbia.
There has been talk in Washington of taxing online commerce more. Treasury Secretary Steven Mnuchin has said the White House supports an Internet sales tax. Some in Congress support legislation to require all e-commerce companies collect state sales tax.
One possible change could affect the growing number of third-party retailers that sell through Amazon. Should Amazon and other services be forced to collect sales taxes on those sellers’ transactions, it would likely make Amazon’s own inventory look better price-wise and hurt rivals such as eBay, he said in a note to investors Thursday.
Overall, the Twitter attacks by the president do “not seem well-informed or detrimental to Amazon,” said Devitt, who has a Buy recommendation on Amazon shares with a target price of $1,800.
White House spokeswoman Sarah Sanders said Wednesday no specific policies were currently being considered in regards to Amazon.
Trump’s Thursday tweet echoes one from August 2017 in which he said, “Amazon is doing great damage to tax paying retailers. Towns, cities and states throughout the U.S. are being hurt – many jobs being lost!”
He has also criticized The Washington Post, which is owned by Amazon founder and CEO Jeff Bezos, lumping it into the “fake news” category of media. “Is Fake News Washington Post being used as a lobbyist weapon against Congress to keep Politicians from looking into Amazon no-tax monopoly?” he tweeted in July 2017.
Follow USA TODAY reporter Mike Snider on Twitter: @MikeSnider.
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