Alibaba, the Asia-based online marketplace similar to the American site Amazon.com, went public on Friday, September 19, 2014.  The initial public offering raised over $21 million on the first day of sales.  As of Wednesday, September 25, the offering reached over $25 million raised, making it the largest IPO of all time, beating out the 2008 Visa offering.

So what is Alibaba?  As said before, it is an online retail site similar to Amazon.com.  The site sells everything, and, like Amazon, built its business based on having millions of products available at the click of a button.  One benefit of Alibaba, Amazon, and most online retail options is the lack of sales tax charged on items sold.  At least, that used to be the case.  As of 2013, several states had considered online sales tax requirements.  Further, the Federal government in 2013 proposed the first set of nation-wide regulations on internet retailers. The Market Place Fairness Act of 2013, if passed, would have allowed individual states to tax sales by companies not physically located within their borders.  While there was an exception for small sellers, with annual sales of less than $1 million in a particular state, the law would have curtailed one of the most attractive aspects of large online retailers such as Alibaba and Amazon–the ability to avoid state sales tax on purchases.  The law did not pass, and given the popularity of Amazon and the growth and new prominence of Alibaba, it seems unlikely that such a law would gain much traction in the future.

In preparation for their Initial Public Offering, Alibaba took steps to move into the American marketplace. In a direct challenge to Amazon and eBay, Alibaba has begun selling items in the United States.   Given the publicity their offering garnered, and the broad preexisting base of sales Alibaba has in the Far East, it seems unlikely that the domestic online market place will return to an Amazon only time.

Mike Sellner

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