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Discussion Paper

Economies of Density in E-Commerce: A Study of Amazon’s Fulfillment Center Network

Published: April 2017
This paper studies economies of density in Amazon’s network of distribution facilities and their implications for nexus tax laws that compel online retailers to collect sales taxes only in states where they are physically present. The paper finds that Amazon’s expansion of distribution facilities substantially reduced its shipping costs on account of economies of density, and that nexus tax laws distort Amazon’s distribution center network in a manner that increases shipping costs by 28%.
Abstract and Citation