To explain:
What effect that the difference in state sales tax collection has on amazon’s sales versus barnesandnoble.com sales.
Concept Introduction:
Sales Tax: Sales tax is a form of indirect tax, which is imposed by a state government on the sale of a good or service, within or outside that state.
Explanation of Solution
The state sales tax is imposed by the government on the sales by any company having a physical presence in that state.
A Company has physical presence in only five states, whereas B Company has physical presence in every state.
As a result, A Company has to collect sales tax only when it sells its goods in five states, while B Company has to collect sales tax on all its sales because it has physical presence in every state.
Hence, A Company has an advantage over B Company that it can sell its goods at the rates cheaper than that of B Company.
This shall result in higher sales by A Company as compared to the sales of B Company.
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