Amazon Announces It's Leaving Texas In Tax Dispute; Governor Blames Comptroller, Says He'll Fix
from the politics-is-about-power dept
You may recall late last year that the state of Texas sent Amazon a tax bill for $269 million. The issue, as always, is the question of whether or not Amazon has to collect sales tax. Technically, e-commerce companies have always said they don't have to collect sales tax in states where they have no physical presence. Of course, Amazon actually has a giant distribution facility in Texas, and also bought Woot (based in Texas) last summer. It's still tried to avoid the tax issue by claiming those are subsidiaries, not Amazon.com itself.Apparently, that strategy wasn't working, so last week Amazon announced that it was leaving Texas over the issue, making sure to announce that it had planned to hire 1,000 additional workers at the facility. Hearing a major employer leaving the state is generally a pretty bad thing for state politicians and Governor Rick Perry realized that, because it took all of one day for him to throw the state comptroller under the bus and claim that the whole thing was a mistake by the comptroller:
"That is a problem and I would suggest to you that we need to look at that decision that our comptroller made," he said. "The comptroller made that decision independently. I would tell you from my perspective that's not the decision I would have made."In fact, Perry publicly began to explain why Amazon shouldn't have to pay sales tax on items shipped in Texas:
"You couldn't go in and buy anything out of that store, and that, historically, has been the way we defined whether you pay taxes or not -- if you had a storefront. This obviously didn't have a store front. It was specifically there to manage products that need to be shipped out."Perry then asked the state legislature to make sure that it crafts some new rules that keep Amazon from leaving. Looks like Amazon just successfully called Texas' bluff.
Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.
Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.
While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.
–The Techdirt Team
Reader Comments
Subscribe: RSS
View by: Time | Thread
So why isn't someone NOT from the tax office being investigated? Oh, wait, corporations aren't people, except that they are.
[ link to this | view in chronology ]
Re:
It's definitely tax evasion by threatening to leave a state and go to a better state where the company has more opportunities to grow ... definitely is.
/sarcasm off
It's like saying European companies setting up in Ireland are doing tax evasion ...
[ link to this | view in chronology ]
Re: Re:
facebook and google are in ireland too!
if texas wont accomodate them im sure there will be plenty of states willing to.
[ link to this | view in chronology ]
Re:
Wrong. Thats tax AVOIDANCE. Tax Avoidance is perfectly legal.
[ link to this | view in chronology ]
Re: Re:
[ link to this | view in chronology ]
Re: Re: Re:
[ link to this | view in chronology ]
Re:
More and more politicians are waking up to the fact that they don't have the final say anymore. They see a company that is thriving within the framework of the current laws and then they amend, twist or re-interpret the laws to their own financial benefit (government, not personal) while completely ignoring all other ramifications. That $269M would certainly help Texas out, but how much of that would go towards unemployment for the warehouse employees? How would it impact the local businesses? The question boils down to whether Texas needs the $269M or the jobs more.
[ link to this | view in chronology ]
Re: Re:
[ link to this | view in chronology ]
Re: Re: Re:
Which is good because it doesn't give an unfair advantage to some companies over others just because they happen not to have a store front (or can apply some other loophole).
[ link to this | view in chronology ]
Re: Re: Re: Re:
Yes I know all that - I live here!
VAT replaced most local sales(purchase) when it was introduced - so it is usually regarded as equivalent. Certainly it indistinguishable from a sales tax to the consumer, although its impact on business is somewhat different.
For simplicity I conflated "federal" with "country wide" because some European states have a federal system (eg Germany) whilst others have less powerful local authorities (France) and in the UK we have the Scottish, Welsh, and NI assemblies which approach US state levels of responsibility and power.
[ link to this | view in chronology ]
Re: Re:
[ link to this | view in chronology ]
Amazon
[ link to this | view in chronology ]
Re:
Wrong.
They are not required to pay any taxes on purchases their customer's make. Even the order from the comptroller was not to "pay" taxes it was to COLLECT taxes from the customers and send them to the state.
[ link to this | view in chronology ]
Re: Re:
USE Tax is required to be paid by the purchaser as a way to keep buyers from buying items out of state and then bringing them into the state tax-free and is the responsibility of the Buyer. Use Tax is very difficult to apply because it's hard-to-impossible to get people to declare what they've bought out of state. The only time you tend to get hit with Use tax is when you buy a vehicle which you then have to register in your home state and then they'll want to see the receipt and hit you with any USE tax you were trying to avoid.
[ link to this | view in chronology ]
Re: Re: Re:
Actually, this is also incorrect. Sales tax only needs to be paid if the seller has "nexus" in the state. Nexus used to be defined as a storefront but now includes any "presence", as in a building or employees located within the state. Amazon has argued that the "nexus" standard isn't well defined as some states are now claiming that affiliates are considered "employees."
I'm a little divided on this one. Amazon does have a physical presence in Texas and should technically be paying sales tax. On the other hand, our current state sales tax system is a HUGE burden for online retailers. Most people don't realize that different states have different tax rules and Texas is one of the most burdensome (along with New York, Alabama, and a few others). Sales tax is set based on state, city, county, school, transportation, and SPD (special purpose district) levels. For example, there is a slightly higher tax rate around most sports stadiums.
The other thing most people aren't aware of, most states do not provide any tools to help determine these tax rates. Texas publishes a pdf document about collecting local sales tax (http://window.state.tx.us/taxinfo/taxpubs/tx94_105.pdf) but nowhere will you find information on how to determine what tax rate to use. All of the laws on this assume that you have a store and you only need to worry about the tax at that location, which isn't true for an internet retailer.
Here is a 50 page pdf of tax rates for Texas (http://www.window.state.tx.us/taxinfo/local/jan11rates.pdf). Unfortunately, while it may help with city and county you are left to decipher all the other districts. And by the way, this is updated quarterly.
As long as states continue to make collecting sales tax so difficult they should expect internet retailers to avoid it. The problem could be easily resolved if states would simply change their sales tax laws to be a flat rate for the state (with MAYBE a county level rate).
[ link to this | view in chronology ]
Re:
[ link to this | view in chronology ]
Re:
[ link to this | view in chronology ]
Re: Re:
[ link to this | view in chronology ]
Re:
You miss the whole point that Amazon was being told to pay money that their customers would have owed. Read the article before you rant.
[ link to this | view in chronology ]
Re:
You miss the whole point that Amazon was being told to pay money that their customers would have owed. Read the article before you rant.
[ link to this | view in chronology ]
Amazon and the Texas-sized bluff.
[ link to this | view in chronology ]
The Hallmark of Our Society
. . . also, do you have any jobs? I can't seem to find anyone hiring."
[ link to this | view in chronology ]
Giants
Wow - Amazon sells Giants now!
Never knew that.
I suppose Texas (being a large state) is a good place for the distribution facility. I wonder how they will manage to fit it anywhere else if they have to leave.
[ link to this | view in chronology ]
Re: Giants
[ link to this | view in chronology ]
Re: Giants
Never knew that.
I suppose Texas (being a large state) is a good place for the distribution facility. I wonder how they will manage to fit it anywhere else if they have to leave."
Actually, two other states have tried to sell Giants as well, some with marginal success. A New York facility has been doing this for years, but there's been a major problem with both location and product quality. As it turns out, they were manufacturing their Giants in New York, but them distributing them as a product in New Jersey. It created almost as much confusion as the oddity of one of their most popular Giant lines having an enormous gap in its teeth.
Even more unsightly were the Giant products being produced in San Fransisco, California. One of their most expensive and popular lines were found to have been produced with a dangerous cocktail of growth chemicals that rendered the product undigestable. Most problematic was a nausea-inducing exponential growth in the Giant's cranial cavity, a direct result of said chemical compounds. They've since retired that particular product and are going instead for a more fasionable "Long-haired heroin-addicted teenager" line, which has proven to be more successful....
[ link to this | view in chronology ]
Re: Re: Giants
[ link to this | view in chronology ]
Re: Re: Re: Giants
Too...many...inapprpriate...jokes....
[ link to this | view in chronology ]
Re: Re: Re: Giants
like all the rest of the straight men in history, you will get no credit for any of the good and take all blame for all of the bad...
[ link to this | view in chronology ]
Re: Re: Re: Re: Giants
[ link to this | view in chronology ]
Re: Re: Giants
Teenagers never need heroin... Have you seen them on sugar?
This is why the product needs innovation. It has to live up to the standards of the 21st century!
[ link to this | view in chronology ]
Bottom line...
1. They sell things to people in Texas.
2. They have a physical presence in Texas.
3. They have a responsibility to collect and pay sales taxes in Texas because of items 1 and 2.
All they are doing is using a corporate shell game with subsidiaries to get out of doing what they are supposed to do. It's high time that lawmakers closed those loopholes, especially since a corporation is now a "person".
I can't get out of taxes by saying my mouth did the sales in one state, but my foot delivered the product from another state. A corporation shouldn't be able too either.
[ link to this | view in chronology ]
Re: Bottom line...
[ link to this | view in chronology ]
Re: Bottom line...
They have a subsidiary distribution center in Texas. If someone from Texas buys something from me in Florida, I don't have to collect taxes merely because Fedex, who I use to ship the product, has a facility in Texas. Separate companies.
It's high time that lawmakers closed those loopholes
If they think it's a problem then they should do so, and then companies can decide to stop doing business there. You're basically admitting with this sentence that what Amazon is doing is legal, and yet are still somehow arguing that they owe those taxes. So which is it?
[ link to this | view in chronology ]
Re: Re: Bottom line...
IT's a fair cognitive dissonance going on here.
[ link to this | view in chronology ]
Re: Re: Re: Bottom line...
If a person runs a mail-order (non-retail) business, they dont have to collect these taxes anyway. The PURCHASER has to (is supposed to) pay LOCAL taxes in THEIR state on their online/mail order purchases.
I've been in this kind of business for 2 decades, this is how it works. Amazon, by only having a MAIL ORDER DISTRIBUTION CENTER in Texas, doesnt have to pay or collect sales taxes.
The only wrinkle is, it can depend on the state. What I say above applies in MOST (but not all) states. All the states I have lived in work in, I never had to collect or pay sales tax on any mail-order type of business. If Texas were one of these, well then, I guess they would be subject to it, but as far as I can recall, they arent.
[ link to this | view in chronology ]
Re: Re: Re: Re: Bottom line...
[ link to this | view in chronology ]
Re: Bottom line...
Please post back when you've been into the physical Amazon store in TX, purchased a product, and walked out with it...I won't hold my breath.
[ link to this | view in chronology ]
Re: Bottom line...
[ link to this | view in chronology ]
[ link to this | view in chronology ]
Re:
the legislation changes he is looking for is something that more clearly defines the entire issue... and he is right in that respect.
[ link to this | view in chronology ]
Competition
[ link to this | view in chronology ]
Re: Competition
[ link to this | view in chronology ]
Re: Competition
[ link to this | view in chronology ]
Bottom line IMO, sales tax is a stupid way to collect revinue.
[ link to this | view in chronology ]
Lesson...
[ link to this | view in chronology ]
It would be an amount lower that state sales taxes in many cases, but at the same time would bring everything to a uniform level.
[ link to this | view in chronology ]
Re:
Sales taxes are outdated anyway as they only tax the final stage in the chain - VAT is the only practical solution in the modern world - although even it has its problems.
[ link to this | view in chronology ]
Re: Re:
[ link to this | view in chronology ]
Re: Re: Re:
[ link to this | view in chronology ]
Re: Re: Re: Re:
So there's no VAT on something produced and sold locally?
[ link to this | view in chronology ]
Re: Re: Re:
Strictly I would say that VAT is a particular mechanism for implementing a sales tax.
The trick with VAT - compared to other forms of sales tax is that it is levied at each stage of the production/distribution process and therefore the methods used by Amazon to avoid sales tax wouldn't work.
[ link to this | view in chronology ]
Don't really have any sympathy for them.
[ link to this | view in chronology ]
...in my experience
If they are trying to collect sales tax for all goods shipped out of Texas they are mis-collecting.
It is the equivalent of a John Deere Dealership in Kansas paying sales to Illinois because that is where the tractor was shipped from.
[ link to this | view in chronology ]
[ link to this | view in chronology ]
Maybe we should declare the internet the 51st state. Then it could collect whatever tax it wishes to levy (hopefully none).
[ link to this | view in chronology ]
If other companies that have distribution centers have to pay taxes, so does Amazon.
[ link to this | view in chronology ]
Everyone missed the point....
The morals and general consensus of the population change with time, laws change as well. Historians often use the state of the laws to determine what the moral thoughts were of the people at the time. If divorce was frowned upon, we would see strict laws regarding it, quite simple.
But if laws change, then someone or some even must change them. I side with amazon, that a company which has no physical presence should be free from having to charge sales tax. I dont consider a distribution facility a physical presence, it is merely a logistics building.
The main point is that this facility does not serve texas in any way, it serves a large portion of the united states. That being said, the building could have been anywhere, obviously amazon understands that which is why they have decided to move out. Might as well put the facility in the state with the lowest internet sales, to make sure to keep taxes paid to an absolute minimum.
Maybe the government should consider an internet sales tax (i know this sounds scary, but its not so bad if put in place INSTEAD of state level taxes). That way, all internet companies could be treated the same way, and they would place their logistical buildings in the most convenient place.
This has positive effects, it allows states to compete for businesses without having to modify their tax system. Texas can vie for Amazons facility by being in the center of the country, having cheap land and construction, etc.
[ link to this | view in chronology ]
Actually...
Whether or not Amazon should collect sales tax is another issue. It's obvious that their system is setup for it because it shows a $0 for sales tax. So, if need, they could potentially begin to collect. Whether or not they should is another issue. But, in this particular case, I would have to agree with Amazon.com in that if you are going to tell me that I owe you nearly $300 million in taxes, you better show me the documentation you used to come up with the number. If you refuse, then I have no choice but to take my business elsewhere to a place where they will provide me with said information should it come up again.
[ link to this | view in chronology ]
Re: Actually...
any links to that information?
[ link to this | view in chronology ]
All we get is a race to the bottom with the burden being placed on the people. NJ gives tax benefits for a company to locate in NJ which increases the burden on the people. Everything is fine because the people get jobs, then NY gives out better benefits, which screw the people more and then you have a tax war.
While this is good for companies, it isn't so great for the people.
[ link to this | view in chronology ]
Re:
[ link to this | view in chronology ]
Re:
* I am assuming for the sake of argument that this would be a burden
[ link to this | view in chronology ]
Amazon
Therefore I really don't blame Amazon as much as I blame the lawyers, who have stolen the substance of 'the people', reducing them to slaves. Jesus Christ even had something to say about this.
[ link to this | view in chronology ]
As a small business in Texas...
Amazon is basically just throwing it's weight around in a bad economy and threatening jobs as a way to get out of paying taxes. Now I'm not saying that I think they should have to pay it, but that's the way the law is written and if the Governor wants to allow anyone without a storefront to avoid paying sales tax to Texas residents, fine by me, but focus on changing the law rather than throwing your Comptroller under the bus for attempting to apply the law correctly. If they do change the law it could be a good move for Texas in continuing to grow middle-class jobs as I could see many companies moving their distribution centers to a tax-friendly, centrally located state as a result.
[ link to this | view in chronology ]
Wait a second, let me get Gov. Perry on the phone...
http://www.youtube.com/watch?v=6OwJXbfElVE
[ link to this | view in chronology ]
Logistics and Choosing the Right State.
http://www.dailytech.com/Amazon+to+Cease+Operations+in+Texas+over+Tax+Collection+State+Gov +Looks+to+Change+Retailers+Mind/article20901.htm
Let's do some mapwork. Assume that Amazon relocates its distribution center for Texas to Texarkana, Arkansas, and compute additional driving distances and delivery times to the principal cities of Texas:
-----------------------
Dallas: 177 mi. from Texarkana v. local to Dallas, 177 extra miles, three hours additional.
Houston 292 mi. from Texarkana v. 247 mi. from Dallas, 45 extra miles, two hours additional reflecting going over a rural U.S. route instead of an Interstate.
Austin 372 mi. from Texarkana v. 195 mi. from Dallas,
San Antonio 454 mi. from Texarkana v. 277 mi. from Dallas, in both cases, the route runs through Dallas, and is there the same extra 177 miles and three hours.
--------------------
Wages are naturally lower in Texarkana than they are in Dallas. Amazon would have to get its shipments put together three hours earlier in the evening to make the same delivery deadlines in Dallas, Houston, , Austin, and San Antonio. Suppose they stick in some more robots to speed up the business of making up parcels and putting them in the right trucks, and getting the trucks away in time to make their delivery deadlines. Governor Perry of Texas backed down in the face of an entirely credible threat.
The same pattern repeats itself all over the country. It is usually possible to put the distribution center in a small poor state, where all employment is gratefully received. For example, you can put a distribution center in the Fort Ashby-Romney area of Eastern West Virginia, just across the Potomac River from Cumberland, MD, and I-68 leading east to Washington, Baltimore, and Philadelphia. To the west, there is a good railroad line from Cumberland, leading to Pittsburgh, and ultimately to the West Coast, so that the distribution center can get its supplies cheaply. Fort Ashby-Romney is a very poor area. It is beyond feasible commuting distance from Washington and Baltimore, and there aren't any sizable local employment centers people could commute to. At the same time, it's just close enough that kids can spend a couple of hours driving to a suburban mall, and come to understand just how poor they are by comparison. It's a case of poor people up on their hill, looking down at the rich folks below. Incidentally, it's the place which produced Lynndie England, the Baghdad torture girl, with the dog leashes and all. It is also known for producing suicidally crazy robbers, the kind who rapidly get killed attempting stick-ups against impossible odds, a variant form of "suicide by cop." They want an Amazon distribution center, and they want it real bad!
http://en.wikipedia.org/wiki/Lynndie_England
[ link to this | view in chronology ]
amazon doesn't pay the tax
It is not an income tax that Amazon pays.
The 2 most troubling issues is the threat that Amazon is making and how local brick and mortar stores are staying quite.
Here you have Amazon telling the state what to do. And the local stores keep quite. About time stores ask for exemption on paying sales tax.
[ link to this | view in chronology ]
I welcome tax discussions
[ link to this | view in chronology ]
Corporate Law Makers
[ link to this | view in chronology ]
Somebody has to pay
[ link to this | view in chronology ]
SO.. THAT is how you play Texas Hold 'em Poker.
I have been edumacated now.
[ link to this | view in chronology ]
Makes sense
[ link to this | view in chronology ]
Look, I don't like Corporations not paying their taxes when we have to, but its great of Amazon to tell the state(s) to shove it! Which they should; for all those wanting Amazon to pay taxes, guess what -- you just cost 119 jobs because of statism. If Amazon paid up and let the state steal their money, other states would have just followed Texas' move (domino effect), and pretty soon Amazon would have to start charging a sales tax to everyone online. That isn't a good thing, because I wouldn't buy from them again if they did.
[ link to this | view in chronology ]
Texas
[ link to this | view in chronology ]
Amazon sales tax/ Texas
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, it only gives the force of law 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.
An outfit called Alliance for Main Street Fairness (StandWithMainStreet.com) has been formed recently to lobby to end the present online sales tax loophole.
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.
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.”
[ link to this | view in chronology ]
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.
[ link to this | view in chronology ]
Re:
[ link to this | view in chronology ]
Tax fraud!
[ link to this | view in chronology ]