And remember, the tax advantage doesn't hold everywhere (certainly not in California anymore). Amazon has to offer something better other than price, and I think Prime is a large part of that.
FTA, Amazon's core business is "build[ing] a massive online database and offline infrastructure to transport boxes from warehouses to hundreds of millions of doorsteps", and I would argue that Costco's physical presence, existing warehouse efficiency, and brand identity positions them well for a foray into Amazon's business.
As for "offer something better other than price", most people point to customer service, and in my experience Costco's customer service completely blows away Amazon.
As for "offer something better other than price", most people point to customer service, and in my experience Costco's customer service completely blows away Amazon.