It's been estimated that their entire lifetime profit is about equal to their tax discount (lower price due to not having to collect and pay state and local tax) - makes one wonder what Bezos's genius is other than taking advantage of a tax loophole - and one which may very well go away in the future.

There's an argument that Bezos is forgoing short-term profits by re-investing those into growing the business (expanding into AWS, marketplaces, Zappos, Kindle, streaming media, etc, etc) and into aggressively competing on price to not leave much excess oxygen in the room for competitors.

That's very different from the potential profit profile if Amazon were seeking to maximize near-term profit as opposed to maximizing near-term growth, with the expectation that that maximizes long-term profit.

If Amazon loses it's tax exempt status in all jurisdictions it may well also lose profitability - the long term plan of cornering an unprofitable market is still unprofitable.

Amazon has no tax exempt status.

It merely has no obligation in most jurisdictions to collect sales tax on behalf of the local taxing jurisdiction. Those purchases aren't tax-exempt; it's just that it's the buyer's problem to comply, not Amazon's problem to comply. That many buyers "forget" to comply does not make them exempt. (And Amazon is not exempt, rather they never had an obligation in the first place.)

This could easily change if laws are passed requiring a online retailers like a Amazon to collect such taxes. The absence of such a requirement now gives Amazon a de facto tax exempt status.

Amazon collects sales tax here in Texas and it hasn't changed my buying habits at all as far as I can tell.

Pro-tip, see if Amazon fulfills a desired product for a third party merchant. If you don't buy directly from Amazon, but they still fulfill logistics for the third party, you can get an item shipped via prime without sales tax if the third party is located outside Texas.

Note: I'm also a Texan who hasn't decreased his Amazon spend since sales tax started, if anything I've increased my Amazon spend over the last few quarters.

This is Amazons sneaky way of getting around the sales tax issue. Have the exact same item available at the exact same price from a third party.

This way they can build local fulfillment centers (which force them to collect sales tax), and yet not actually have to charge it.

It doesn't work for every item, but it does for quite a few of them.

no it won't but it doesn't need to. I worked in a retail grocery store and was amazed at how low the margins were, shrjnkage and theft can really kill a business because of those small margins. I realised that I would never open such a business that depends on razor thin margins, but to your question, there are items that you will break even on or lose money such as bread, because you know that consumers will buy more goods. Its the same for Amazon, they need to get the purchase first. Diapers.com actually loose in their diapers but make their money on all the other products.

Probably when they stop buying half of downtown Seattle real estate.