The Associated Press reports that Amazon is closing its Texas warehouse due to—and this is a direct Amazon quote—the state’s “unfavorable regulatory environment.”
That farcical statement, made by an exec in an email to employees leaked to the AP, shows how roguish the $85 billion corporation Amazon is when it comes to collecting sales taxes.
The company—like other Internet and catalog firms, to be sure— takes advantage of a silly and outdated Supreme Court ruling that says states can’t collect sales taxes from retailers unless they have a physical “nexus” in the state. Remember when you could buy stuff from Apple.com and not have to pay sales tax? You can’t do that anymore in forty-two states now that the company has opened Apple Stores in just about every high-end mall in the country.
But Amazon has tried to get around having to collect sales taxes even when it does have a physical nexus in a state. This AP story is incomplete because it doesn’t tell us anything about the origins of the dispute. Amazon already has a distribution center in Texas, but it hasn’t been collecting sales taxes there. Why not?
Here’s all we get from the AP on the basis of the disagreement:
The comptroller’s office last year demanded $269 million in uncollected sales taxes from the company.
Why would Amazon build in a state—especially one like Texas, which has more potential customers than just about any other—unless it had some agreement not to tax sales or some other way to get around them?
The Dallas Morning News gives us a tease in its report:
Amazon, with $25 billion in sales last year, has operated the Irving center since 2006. It argues that a subsidiary company owned the center. The state audited Amazon after reporting by The Dallas Morning News questioned whether the retailer was complying with state law.
That’s giving short shrift to what ought to be a key component of the story: What the basis of the dispute is. I suppose it’s good enough for the close reader to get a handle on what’s happening, and it’s surely better than the AP, which doesn’t tell its readers anything.
But as a side note, it’s highly annoying that the Morning News references its own report that sparked the state probe but doesn’t bother to link to the thing. That’s a sign of a newsroom that’s out to lunch digitally. It’s one thing not to link out to other sources (though that’s bad), it’s quite another not to even link to yourself. The only links in the story are to those annoying topic pages ones that are almost entirely irrelevant.
So we turn to Slate’s Farhad Manjoo, who wrote an excellent piece a few months ago about Amazon’s tax chicanery (emphasis mine):
So, is Amazon’s tax-free status unfair? Of course it is. As Mazerov points out, Amazon has physical operations in 17 states in which the company and its employees enjoy the fruits of local taxes—police and fire protection, roads, hospitals, and other infrastructure that make its operations possible. Yet Amazon skirts tax collection in most of these places through clever legal tricks. For instance, it has incorporated its warehouses and Web site as separate legal entities in order to argue that it doesn’t really have a presence in Nevada, Texas, and other states.
And he pulled this Jeff Bezos quote to show how tax avoidance is in Amazon’s DNA:
“I even investigated whether we could set up Amazon.com on an Indian reservation near San Francisco,” Bezos told Fast Company. “This way we could have access to talent without all the tax consequences. Unfortunately, the government thought of that first.”
It’s too bad the Morning News didn’t link its 2008 report (which apparently you can’t even buy online), because it’s pretty darn interesting and a sweet piece of reporting to boot. Here’s what the Morning News’s Maria Halkias found then:
According to Dallas Central Appraisal District records, Amazon.com owned the distribution center at 2700 Regent Blvd. in Irving in 2006 and 2007. The building’s tax value is listed as $14.6 million.
Outside the huge facility, triple flagpoles display Amazon’s own flag next to the Lone Star and U.S. flags.
From the AP report:
"Spelce said Texas loses an estimated $600 million in Internet sales taxes every year."
No. Texas consumers save "an estimated $600 million" which, otherwise, would go to govt-corporate bribes and other wasteful and illicit govt "chicanery."
Thank you, Amazon, for doing what is mutually beneficial for yourself and consumers, even if it means moving jobs out of state. Thank you for not prostrating before the Guardians of Collectivist Correctness, thus helping Americans be less-looted.
#1 Posted by Dan A., CJR on Fri 11 Feb 2011 at 03:34 PM
@Dan A.
I encourage you to try this kind of thing with your own income - and then defend yourself in the resulting audit by saying you were just doing what was best for yourself and your customers.
I'm sure it will all work out for you.
The point is - there is a law, and Amazon is engaging in outright deception to avoid it. That might save their consumers a few bucks - but it means that all Texans end up subsidizing Amazon by providing them with state services at a cut rate.
Not like Texas is exactly rolling in cash these days. So a state forced to look at serious cuts in government services shouldn't call corporate deadbeats onto the carpet?
Get serious.
#2 Posted by murph, CJR on Fri 11 Feb 2011 at 04:40 PM
"[I]t means that all Texans end up subsidizing Amazon by providing them with state services at a cut rate."
No. It means that Amazon customers save money. Full stop.
How is (a) Amazon's refusal to charge customers a sales tax equal (b) a subsidy to Amazon? The only way Amazon benefits is by an increased number of voluntary purchases of its products.
"Not like Texas is exactly rolling in cash these days."
So, the govt needs money but taxpayers do not?
"So a state forced to look at serious cuts in government services shouldn't call corporate deadbeats onto the carpet?"
If a govt has so grossly over-committed (overspent), then it should look in the mirror, not at Amazon which, unlike the govt, actually produces a quality service at a competitive price (while maintaining a surplus). If those "government services" were worth the money spent on them, then the govt would not be so compelled to cut them, now would they. You should reconsider whom you call "deadbeat."
#3 Posted by Dan A., CJR on Sat 12 Feb 2011 at 12:28 AM
"But as a side note, it’s highly annoying that the Morning News references its own report that sparked the state probe but doesn’t bother to link to the thing. That’s a sign of a newsroom that’s out to lunch digitally."
Please, Internet gods, let this paragraph finds its way to the desk of Dallas Morning News publisher Jim Moroney.
I work in said lunchy newsroom and you're absolutely right. The paper is in the middle a massive digital reorientation (paywall, site redesign, all hope placed in an iPad app). In many ways we're moving in the right direction, yet basic principles discovered by online diarists in the 1990s, like useful linking, remain lost on the powers that be. I can only pray.
#4 Posted by None, CJR on Sat 12 Feb 2011 at 01:58 AM
"No. It means that Amazon customers save money. Full stop.
How is (a) Amazon's refusal to charge customers a sales tax equal (b) a subsidy to Amazon? The only way Amazon benefits is by an increased number of voluntary purchases of its products."
No, it means the (state) government is playing favorites by charging e-traders one tax and regular traders another. That can either mean that Amazon gets to increase its market share by charging the customer the price of goods minus the tax or it can increase its profits by charging the customer the same price as a regular trader and pocketing the tax.
Either way, the state is tilting the market if it does not charge vendors a consistent rate of sales tax.
"So, the govt needs money but taxpayers do not?"
No the taxpayers need money and the government needs money. Amazon has plenty of money it doesn't need (mainly by trying to rig the system - aren't we against that?).
"If a govt has so grossly over-committed (overspent), then it should look in the mirror, not at Amazon which, unlike the govt, actually produces a quality service at a competitive price (while maintaining a surplus). If those "government services" were worth the money spent on them, then the govt would not be so compelled to cut them, now would they. "
Man, it was just a short time ago that Texas was a conservative paradise for small government, tort reform, deregulated industry, etc etc..
Every state is in the crapper. For the majority, it has nothing to do with the way those states were run and everything to do with how a depressed economy reduces revenues while it increases demand for services (therefore increasing costs).
http://www.youtube.com/watch?v=Xoke1wUwEXY
No matter what you do as a state, deficits will be around - but, unlike the federal government, many states are banned from running a deficit. Therefore they have to cut services, even the ones that are already bare minimal, exactly when they are most essential.
That's the record of the conservative approach to government, it leaves the government too compromised and hobbled to prevent catastrophe and to hollow and weak to assist during one.
And let's also remember that it's these businesses that claim national status in order to circumvent state regulations that lead to this depressed economy in the first place. It was the national banks, with their predatory lending products, that state regulators were trying to rein in and it was the conservative Federal OCC that protected those criminals.
If Amazon has a business model that can't account for paying owed taxes, then it shouldn't be in business. Full Stop.
#5 Posted by Thimbles, CJR on Sat 12 Feb 2011 at 02:28 AM
Borders bookstore to file for bankruptcy.
Jobs at stake: 19,000
Amazon to close Irving,TX distribution center.
Jobs lost: 119
Does anyone connect the dots ?
Borders, like bookstores everywhere, have been facing the sales tax headwind as a competitive handicap for years vs. Amazon.
In contrast to the aggressive unethical tactics by Amazon, it is interesting to note that the much vilified WalMart collects sales tax on online sales even to states where it does not have a physical presence.
#6 Posted by Kumar, CJR on Sat 12 Feb 2011 at 09:47 AM
Like girlie man Schwarzenegger, Rick Perry, gov. of the "Don't Mess" state is kowtowing to the bullying tactics of Amazon.
The proper venue where this should be addressed is Washington, but in the present political climate anything labeled "Tax" will be regarded as Toxic for the political careers of our elected officials. Even if Washington were to resurrect the “Sales Tax Fairness and Simplification Act,” H.R. 3396 which died on the vine in the last congress and its principal sponsor Bill Dellahunt (D-MA) is now retired, it gives the force of law only to states which enacted the “Streamlined Sales Tax Agreement” which 24 states have so far passed. But Texas hasn’t yet. So, state legislators should focus on this step first.
Big box retail and their commercial real-estate landlords must regard the present competitive handicap from online competitors as an existential threat and crank up their lobbying efforts.
As a tactic to bring the issue to a speedier resolution, I suggestions the following:
For the major brick & mortar retailers who also have online operations, if they reorganize their online efforts copying the Amazon playbook of "Entity Isolation" to dodge the "Nexus" issue so they too can dodge the responsibility of collecting sales tax, the states will then face the specter of revenues drying up in a major way and this tactic will raise the political profile and urgency of this issue.
In contrast to the aggressive unethical tactics by Amazon, it is interesting to note that the much vilified WalMart collects sales tax on online sales even to states where it does not have a physical presence.
This joke illustrates the pathetic lack of urgency by the states & the brick & mortar victims:
A dog is lying on the porch whining softly.
A passerby asks the owner what is wrong with the dog.
"thar’s a nail stickin’ up outta da porch tha’ he’s laying on.”
"Why doesn't he move?"
“Donno. I reckon it don’ hurt bad enough.”
#7 Posted by Kumar, CJR on Sat 12 Feb 2011 at 09:52 AM
If there are loopholes in the laws, the legislatures probably put them there to benefit their friends. If they don't like benefiting others as well, they need to change the law.
#8 Posted by Procopius, CJR on Sat 12 Feb 2011 at 08:39 PM
The entire country spends inordinate amounts of time and money trying either avoid taxes or to minimize taxes. What is so horrible about Amazon doing it. Check with the residents, and registered corporations in Nevada and Florida. How about the Isle of Man, Cayman Islands, Switzerland, etc., etc. Are you being hypocritical, naive, ignorant? What?
#9 Posted by robert thornton, CJR on Mon 14 Feb 2011 at 02:07 PM
It's not about morals, it's about paying bills - and if the corporation wants public schools for its employees to attend, if they want strong bridges to ship their goods upon, if they want services to clear roads and fight fires in times of natural crisis, then those enterprises need to foot the bills.
Or they can end up like Nevada and Florida
http://www.rgj.com/article/20110105/NEWS/101050381/Reno-2020-Long-term-deficit-likely-in-Nevada-report-says
http://articles.orlandosentinel.com/2011-02-07/news/os-mike-thomas-scott-budget-020811-20110207_1_teacher-pensions-firefighter-pensions-police-pensions
#10 Posted by Thimbles, CJR on Mon 14 Feb 2011 at 06:35 PM
It may not matter that Amazon leaves Texas. Our governor and Republican-dominated legislature are in the process of gutting public education, eliminating so much funding that we won't have anyone able to read well enough to place an order online, much less have an interest in buying books.
#11 Posted by TomB, CJR on Tue 15 Feb 2011 at 03:22 PM
How times have changed now that our esteemed leader and anti-tax desciple wants to make a corporation funnel sales taxes it collects back to the state government.
Perhaps Perry and his republican buds in the legislature haven't received their monthly bribes (...errr... campaign contributions) on time from Amazon. That would explain a lot and make any politician cranky.
BTW: The "don't mess with Texas" slogan was originally coined to help prevent litter.
#12 Posted by dpjbro, CJR on Wed 16 Feb 2011 at 11:21 AM
I hear a lot of people exclaiming that Amazon should do something that MOST online companies do not. Washington needs to make it easy to collect taxes for all the states but they refuse to act (i.e. Sales Tax Fairness and Simplification Act mentioned by Kumar above).
I would like to point out that Amazon did not collect the taxes that are being disputed and therefore it is like Uncle SAM digging in your pocket for loose change. I would also like to point out that most states have a use tax that requires the customer to submit the tax for items purchased out of state for which local sales tax was not collected. How many of the people on here crying foul about Amazon pay their states use tax for all online purchases? You are actually the one who should be paying the $269 million not Amazon.
#13 Posted by Tony, CJR on Mon 21 Mar 2011 at 05:09 PM