Texas Sends Amazon $269M Sales Tax Bill; Could Woot Have Pushed Texas Over The Edge?

from the that's-one-expensive-bag-o'-crap dept

Mon, Oct 25th 2010 2:00pm — Mike Masnick

For years, we've had stories about battles between state governments and Amazon (and, to a lesser extent, other online retailers) over collection of sales tax. Under the law, mail order retailers only have to collect sales tax in states where they have a physical presence. In other states, the end users (the buyers) are supposed to report and pay the sales tax themselves, though almost no one does that. Some states, such as New York, have tried to get around this by declaring anyone who's a member of an affiliate program to represent a physical presence, leading Amazon to kill off affiliate programs in certain states. When the legal battle over this happened in New York, a reporter in Texas noted that Amazon appears to have a distribution facility in Texas, and asked lawmakers how come Amazon didn't collect sales tax in Texas. Amazon apparently tried to tap dance around this for a couple years, claiming that the distribution center is owned by a subsidiary, rather than by the e-commerce firm itself (yeah, nice try).

But things appear to have become a bit more complex since Amazon bought Woot at the end of June. Woot, of course, is based in Texas. So, that makes it even harder for Amazon to claim a lack of a presence in Texas... and now, the state has sent Amazon a whopping $269 million bill for unpaid sales tax, going back a few years. Now, it certainly does appear that Amazon was pretty clearly ignoring the law on sales tax here, but it seems like Woot may have to step up how many bags of crap it needs to sell to help cover the bill.

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Filed Under: sales tax, texas
Companies: amazon, woot

35 Comments

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bob, 25 Oct 2010 @ 2:40pm

I'm Sad
I have never been able to get a Bag O' Crap, bummer.
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Brad Hubbard (profile), 25 Oct 2010 @ 3:02pm

Re: I'm Sad
I've been a Woot devotee for many years. I've gotten a half dozen or so BoCs, and they really are crap.

My last one had a baby blanket, child-sized earbuds, crappy COBY headphones, and a pair of USB-powered Wootoff lights.

You're not missing much, don't worry.
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VoicesInMyHead (profile), 25 Oct 2010 @ 3:02pm

Here ya go... and from Woot!
http://www.rustybrick.com/woot-bag-of-crap-boc-pictures.html
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Brad Hubbard (profile), 25 Oct 2010 @ 3:05pm

About Woot
Well, if Woot was collecting/paying sales tax in TX, I'd assume that business unit has continued to do so.

It'd be interesting how they argued that Woot's presence in TX means that they really do owe taxes back for years where they didn't own Woot.
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Mike Masnick (profile), 25 Oct 2010 @ 3:15pm

Re: I'm Sad
I have never been able to get a Bag O' Crap, bummer.

I got one of the very first ones, and all I remember from it was a plastic paperholder that (*hey, look at that!*) is still on my desk, but still not holding any papers. Hmm. I should probably dump it.
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jace dees, 25 Oct 2010 @ 3:15pm

other states that will follow suit
that means other states like AZ, NV, WA, PA, OK, KY, IN, FL will all need to charge taxes... Amazon has distribution in all of those states.....
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Anonymous Coward, 25 Oct 2010 @ 3:25pm

well... they better pay up then!
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thinker099, 25 Oct 2010 @ 3:29pm

No one should pay sales taxes in the first place, because they are no more than double taxation. We have already paid taxes on our earnings as income tax. Why pay tax to spend the money you already paid taxes on?
As a democrat, I am beginning to think that the Republicans have a point in stopping too much taxation by the government.
One wonders how many times one would have to pay taxes: income tax, sales tax, dividends tax, capital gains tax, death tax. Of all these taxes, it could be argued that both sales and death taxes amount to double taxation.
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Jeff Dierking (profile), 25 Oct 2010 @ 3:29pm

Re: other states that will follow suit
Washington State already does for most things.
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Anonymous Coward, 25 Oct 2010 @ 3:32pm

Re:
Thank you Mr. Concern Troll. I have yet to find a Democrat who calls it the Death Tax.
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Koby (profile), 25 Oct 2010 @ 3:44pm

re:
claiming that the distribution center is owned by a subsidiary, rather than by the e-commerce firm itself (yeah, nice try).
Ownership does not mean presence a presence in a state. For example, if I bought Microsoft stock, that does not mean that I suddenly have a presence in Redmond Washington and I would be subject to their taxes.
that means other states like AZ, NV, WA, PA, OK, KY, IN, FL will all need to charge taxes... Amazon has distribution in all of those states.....
Doing business with a distribution company does not mean having a presence in those states. For example, if I ran a home business and shipped all of the products that I made by FEDEX, then it doesn't mean that I have a state presence in all the states where FEDEX has a presence, and I would still only have a presence in my home state.

This just sounds like a desperate tax grab by states that are in financial trouble when online companies have become efficient and profitable, in contrast to the states themselves which have become bloated and more costly during the same time period.
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nasch (profile), 25 Oct 2010 @ 3:54pm

Re: Re:
I have yet to find a Democrat who calls it the Death Tax.

That's because it's a stupid name. Regardless of your opinion of the tax, it isn't a tax on dying or death. It's a tax on inheritence.
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Pangolin (profile), 25 Oct 2010 @ 3:56pm

Somebody is being stubborn
I live in Tennessee. I pay sales tax on Amazon purchases.

What's the big deal with Amazon? The sales tax is nothing more than administrative and not onerous. They even get to earn interest on the money before they pay it. They SHOULD have been collecting it and passing it on. I'm willing to bet that they turn on the sales tax collection in Texas (anyone from Texas want to try to buy something to see?) and then settle with the state.

The letter of the law is on the states side here - not because of Woot but because of the distribution center.

Why even try to hide it as I said - the consumer is paying the sales tax.

Now if Amazon really wanted to get froggy they could go after their past customers for the back sales tax....
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out_of_the_blue, 25 Oct 2010 @ 3:57pm

If income tax was paid only by top 1%, who wouldn't be for it?
That's the way the income tax was begun, and it's a *good* idea. I say put an upper limit on incomes regardless of source, at time of transfer.

It's only by taxing the heck out of The Rich that any country has ever avoided plutocracy and high general tax rates that actually feed directly into The Rich. It was established in the Reagan administration that the income tax system in fact *all* goes directly to bankers without a cent going to pay for gov't operation. It's merely a re-distribution scheme from poor to rich, they're the ones who own Treasury notes and other sheerly financial instruments that funnel general revenues into the accounts of a few.

Starting needless wars is another way to funnel general revenues to the rich. Next time you're paying the quarterly to the IRS, remember the TRILLION dollars at least -- so far -- squandered murdering people in far away places. You are going to get put on austerity programs and your taxes raised to pay for that, along with the Wall Street bailout.

As to Amazon: they clearly need to be fined and charged interest too for non-payment during this nonsense dispute. A subsidiary still owes taxes. I frequently mention here that avoiding taxes is a major element of modern "business models": screwing the public for private gain, that's "capitalism" for you.
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Eric, 25 Oct 2010 @ 4:13pm

How many jobs will Texas lose
Along that line, how many jobs will Texas lose if they would to move that facility North to Kansas or Oklahoma? Direct wages to indirect impact such as UPS shipping, etc.
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Ryan Diederich, 25 Oct 2010 @ 4:47pm

Re:
You sir, are my favorite person today.

Anyways, I think that they should abolish the income tax and just make a big fat sales tax. That way, illegals cant get out of it. No one can escape it, and it would be fine.
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Anonymous Coward, 25 Oct 2010 @ 4:50pm

Re: Re: Re:
I prefer "Estate Tax".
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Anonymous Howard, 25 Oct 2010 @ 4:50pm

I had a bag o'crap $5 for an irobot vacuum.
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Bryan, 25 Oct 2010 @ 5:24pm

Distribution centers
It's gonna be funny when large companies use one central distribution center and make people wait the extra day or two for shipping. The job loses, commercial land devaluation, LESS TAX REVENUE due to fewer people having a job, etc., will make the decision seem stupid in a couple of years.

It is hard enough as a business owner in california to figure out all the different county / city taxes when something is bought intrastate.
I can't imagine having to worry about 50 states with 100's of county taxes. That would be one hell of a database to keep up with.
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wallow-T, 25 Oct 2010 @ 5:45pm

Yah, Bryan nailed the big problem above. 50 State sales taxes are no problem to deal with, but the multitude of sales taxes for local jurisdictions -- jurisdictions which are not evident from the mailing address -- is an overwhelming problem, especially for a small merchant. It's not just that the tax has to be collected for all of these small jurisdictions, but it has to be remitted to the taxing authority, and that could eat up most of the profits from the 1 sale to Moose Skull, ID, or Roadkill, TX.
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Greg G, 25 Oct 2010 @ 5:46pm

Re: Re: Re:
That's because it's a stupid name.

No, it's not. It's a truthful name. Someone dies and leaves me something, I have to pay a tax on it. If they hadn't died and just gave it to me, I wouldn't be paying a tax on it at all. A death has to take place in order for taxes to be confiscated by the government. Therefore, it is a death tax.
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charlie potatoes, 25 Oct 2010 @ 5:48pm

Good luck taxing any business ...
Government can't tax or levy a fine against a business, assuming the sales tax actually cost the company money, which it does not, as has been pointed out. The company simply passes the tax (or fine) on the customer, who has no option but to pay up if it is a necessary product or good.
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nasch (profile), 25 Oct 2010 @ 6:00pm

Re: Re: Re: Re:
A death has to take place in order for taxes to be confiscated by the government. Therefore, it is a death tax.

What is being taxed?

A) A death
B) An inheritence

If A, why are not all deaths so taxed? Why is the tax proportional to the amount inherited, when one death is equivalent to another? If B, why call it a death tax when what is taxed is not a death, but an inheritence?
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ofb2632 (profile), 25 Oct 2010 @ 6:22pm

corporate taxes
i have no problem at all paying taxes that i owe. I also find no problem with any corporation having to pay their fair share of taxes.
I guess this means i am not a republican.
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sum guy, 25 Oct 2010 @ 7:18pm

this would be funny if i didn't live in texas. they're gonna start charging me sales tax aren't they?
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The Real Zano, 25 Oct 2010 @ 7:47pm

Re: Somebody is being stubborn
Texas goes after amazon because they are one of the big fish, but many of the smaller sites out there aren't in the net yet. The likely result of this is that the consumer will pay higher prices on the same goods bought from one of amazon's smaller competitors who charges higher prices than amazon but has less of a markup than what the sales tax is.

The result: the consumer, as always, gets screwed.
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The Real Zano, 25 Oct 2010 @ 7:50pm

Re: Somebody is being stubborn
Texas goes after amazon because they are one of the big fish, but many of the smaller sites out there aren't in the net yet. The likely result of this is that the consumer will pay higher prices on the same goods bought from one of amazon's smaller competitors who charges higher prices than amazon but has less of a markup than what the sales tax is.

The result: the consumer, as always, gets screwed.
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Lyle, 25 Oct 2010 @ 7:54pm

Re:
Actually you use the zip+4 as the factor. Wal-Mart.com charges taxes in all 50 states since they have stores in all 50 states, and can figure it out. I refuse to believe that Wal-Mart has smarter IT folks than Amazon. If you look for sales tax software there are many folks in the business. The question is would you rather have college tuition go up or pay the sales tax? The services also will remit to the state. I suspect the states would set up a service if they have not already to allow one to pay the state, and it would divy the money up (Texas does this already). So its just Amazon getting an advantage over Wal-Mart in the catalog and web order business.
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Lyle, 25 Oct 2010 @ 7:57pm

Re: Distribution centers
The delay depends on the shipping method chosen, from none if you pay extra for next day delivery to a couple of days for the free version. Note that if the center were to be built Missouri or Kansas (Near Kansas City would be the place to build it)
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Lyle, 25 Oct 2010 @ 8:00pm

Re: Re: Re: Re:
If you are fortunate enough to get a gift of over 13k in a year from a person there is something called the gift tax that is due, (actually for a while it just reduces the estate tax exemption if you give over 13k per person per year). So its not possible to give a lot away before you die and beat the taxes.
Of course if you choose to donate to charity there is no tax due.
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mattarse (profile), 26 Oct 2010 @ 12:53am

Re: How many jobs will Texas lose
From the article it is 267 million over 4 years so roughly 67 million in taxes (although this includes interest and fees so the real amount would be less) - I doubt that Amazon has enough workers in a distribution center to offset this tax loss.
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Anonymous Coward, 26 Oct 2010 @ 3:14am

Re: Re: Somebody is being stubborn
The consumer just goes elsewhere. There are literally 200+ other online retailers to Amazon anyone can use...
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Johnny, 26 Oct 2010 @ 4:03am

Re: Re:
Furthermore it taxes spending, regardless of how one earned the money (even on undeclared income).
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FarSide (profile), 26 Oct 2010 @ 5:54am

Re: corporate taxes
You sound like an upstanding citizen.

What makes you comfortable with accepting that what you owe is YOUR fair share?

Is there any valuation on the services provided to you, or to others, that seems like what you pay is 'fair'? Or is it because it's more-or-less what you've paid all your life, and you have survived just fine, so it must be ok?

If your taxes were to suddenly double, would you feel the same way? What about triple?

No, this isn't likely, I am just trying to highlight the point - what makes you comfortable with the current level you are taxed at?
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ofb2632 (profile), 26 Oct 2010 @ 8:24am

Re: Re: corporate taxes
Here is how i look at taxes. I don't like to pay them, BUT i love this country and recognize that to keep this country safe, we need to hand over part of our income to states and federal to subsidize certain things.
I also recognize that taxes help keep people alive, they pay the police to help keep my family safe, the fire dept, etc.

If i had to pay more in taxes, i think EVERYONE should pay the exact same amount. Corporations have decided they should have the same rights as private citizens, so tax them the same rate i do. If i don't get a tax break for being in NC, then corporations shouldn't either. If i am paying 28% in taxes, so should they, and everyone else.

I do understand your question on how much taxes is acceptable, but taxes would be at a very fair minimum if everyone paid the same.
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