Amazon pulls out of Texas

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Amazon pulls out of Texas

Postby The Reaper » Fri Feb 11, 2011 5:50 pm UTC

http://news.yahoo.com/s/ap/20110210/ap_ ... ax_dispute
AUSTIN, Texas – Online retail giant Amazon.com is closing a suburban Dallas distribution center and scrapping plans to expand Texas operations after a dispute with the state over millions of dollars in sales taxes, an executive informed employees Thursday in an e-mail obtained by The Associated Press.

Dave Clark, Amazon's vice president of operations, writes in the e-mail that the center will close April 12 due to Texas' "unfavorable regulatory climate." Amazon spokeswoman Mary Osako would not say Thursday how many employees work at the Irving distribution center.

Texas contends Amazon is responsible for sales taxes not collected on online sales in the state. The comptroller's office last year demanded $269 million in uncollected sales taxes from the company. The case is currently pending before the State Office of Administrative Hearings.

"We regret losing any business in Texas, but our position hasn't changed: If you have a presence in the state of Texas you are required to pay sales tax, just like any other business that has a presence in Texas," said Allen Spelce, a spokesman for Texas Comptroller Susan Combs.

Spelce said Texas loses an estimated $600 million in Internet sales taxes every year.

Amazon has been the target of numerous lawsuits filed by states seeking sales taxes on online purchases made from within their borders.

Clark said in his e-mail that the company also is scrapping plans "to build additional facilities and expand in Texas, bringing more than 1,000 new jobs and tens of millions of investment dollars to the state." Texas employees who are willing to relocate will be offered positions in other states, Clark said.

"We've had ongoing communications over the years encouraging Amazon to expand their business in Texas, and we recently encouraged them to stay in the state," said Katherine Cesinger, spokeswoman for Gov. Rick Perry. "We are always mindful of the tax burden on families and businesses in our state, and it is important that Texas clarify the laws regarding this issue to further strengthen the reliability of our tax system and to protect Texas jobs."

The Irving distribution center, known as a fulfillment center, opened in 2005. During Amazon's fourth-quarter earnings conference call last month, CFO Tom Szkutak said company had 52 fulfillment centers after adding 13 in 2010.

The Alliance for Main Street Fairness, a lobbying group for small businesses working to eliminate Internet sales tax loopholes, criticized Amazon's decision to close the Irving center.

"Texas retailers collect and remit sales taxes every day — whether the sale happens in a store or online," said Danny Diaz, a spokesman for the group. "Amazon.com was asked to play by the same rules, and has responded by eliminating hundreds of Texas jobs. Amazon could have chosen to collect the sales tax as Texas retailers do, but instead they opted to protect their special sales tax loophole to the detriment of hardworking families."
How did amazon not know that sales taxes apply to sales within the state if you have a business within the state?

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Re: Amazon pulls out of Texas

Postby AngelfishTitan » Fri Feb 11, 2011 5:54 pm UTC

Is this just sales tax on Amazon's shipments within Texas? I thought online retailers usually got away if the buyer was outside the state you were selling to. If they were sales in Texas, then Amazon doesn't have much to cry about.
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Re: Amazon pulls out of Texas

Postby nitePhyyre » Fri Feb 11, 2011 6:11 pm UTC

I love how Amazon owes Texas $269 Million, then says the company also is scrapping plans "to build additional facilities and expand in Texas, bringing [...] tens of millions of investment dollars to the state."

Like if I steal $1000 from you then toss you a penny, you should be thanking me. Jerks.
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Re: Amazon pulls out of Texas

Postby The Reaper » Fri Feb 11, 2011 6:20 pm UTC

http://news.cnet.com/8301-10784_3-9942692-7.html
In 1992, the U.S. Supreme Court ruled in its landmark Quill v. North Dakota case that retailers aren't required to collect sales taxes from customers who live in states where the businesses don't have a physical presence, or "nexus."


That seems to be the issue. They sold things to texas residents without applying the texas state sales tax for those citizens.

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Re: Amazon pulls out of Texas

Postby AngelfishTitan » Fri Feb 11, 2011 6:24 pm UTC

Ok, that's what I figure. I like how Amazon words it like it is Texas' fault that they are leaving.

What do you mean I have to pay my tab? Screw this bar, and I was just about to buy some more beers.
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Re: Amazon pulls out of Texas

Postby Роберт » Fri Feb 11, 2011 6:33 pm UTC

Well, I don't want to have to pay taxes on products that residents of other states wouldn't have to pay. It seems reasonable for Amazon to make the sacrifice and move operations to keep the good citizens of Texas from having to pay a tax that residents of other states don't have to pay.

Basically, Amazon is saying: "What does a nexus matter? We want to sell to people in Texas without them having to pay sales tax. We can legally do that by moving operations out of state, so we're doing so. You are being silly in making us do this, because we're both losing out on the deal... we want distribution centers in Texas, you want jobs in Texas... by requiring us to pay taxes if we have a nexus, we're just moving our nexus. Not only do you still not get taxes, you just moved jobs out of Texas. End quote intentionally left out in honor of today's comic.
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Re: Amazon pulls out of Texas

Postby Xeio » Fri Feb 11, 2011 6:43 pm UTC

Роберт wrote:Well, I don't want to have to pay taxes on products that residents of other states wouldn't have to pay. It seems reasonable for Amazon to make the sacrifice and move operations to keep the good citizens of Texas from having to pay a tax that residents of other states don't have to pay.

Basically, Amazon is saying: "What does a nexus matter? We want to sell to people in Texas without them having to pay sales tax. We can legally do that by moving operations out of state, so we're doing so. You are being silly in making us do this, because we're both losing out on the deal... we want distribution centers in Texas, you want jobs in Texas... by requiring us to pay taxes if we have a nexus, we're just moving our nexus. Not only do you still not get taxes, you just moved jobs out of Texas. End quote intentionally left out in honor of today's comic.
Eh, realistically? Isn't it fairly silly that they would somehow be exempt though given any other retailer in the state isn't?

Though I think there has already been legislation trying to force online retailers to charge sales tax even if they don't have distribution in-state (I don't recall how that went though, other than that it didn't pass).

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Re: Amazon pulls out of Texas

Postby Роберт » Fri Feb 11, 2011 6:46 pm UTC

Xeio wrote:Eh, realistically? Isn't it fairly silly that they would somehow be exempt though given any other retailer in the state isn't?
The aren't like other retailers like Walmart and Barnes & Noble, because they don't have physical stores here.
Physical retailers can't just move if they don't like the sales tax (except for near state borders where this does happen.
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Re: Amazon pulls out of Texas

Postby AngelfishTitan » Fri Feb 11, 2011 6:49 pm UTC

Amzon.com's section on Sales Tax wrote:Companies selling over the Internet are subject to the same sales tax collection requirements as any other retailers.


Amzon.com's section on Sales Tax wrote:Items sold by Amazon.com LLC, or its subsidiaries, and shipped to destinations in the states of Kansas, Kentucky, New York, North Dakota, or Washington are subject to tax.


For other states they have distribution centers that have sales tax: Arizona, Indiana, Nevada, Pennsylvania, Texas, and Virginia.

I wonder if Amazon has deals with most of those states to get away with not paying the sales tax on their products, or if they are just using loopholes. This might cause the other states to speak up as well.
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Re: Amazon pulls out of Texas

Postby Cathy » Fri Feb 11, 2011 8:47 pm UTC

As someone living in Texas, it would bug me like crazy if I had to pay sales tax for Amazon when someone in, say, Louisiana, doesn't. Plus, sales tax is different in different counties - which tax would it be?

if I go to one Walmart, it's 8.125%, but at the HEB down the street it's 7.25%.

If I was going to buy something particularly expensive from amazon, it might even convince me to have it "bought" by someone outside the state to avoid the extra dollars.

While I do agree their "10s of millions of dollars" thing is silly complaints, I get the feeling that because of Texas's shortfall budget-wise, the comptroller is just now doing something about a tax issue that has been around for years. Plus, this just means more unemployed people in Dallas.
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Re: Amazon pulls out of Texas

Postby Endless Mike » Fri Feb 11, 2011 9:03 pm UTC

AngelfishTitan wrote:For other states they have distribution centers that have sales tax: Arizona, Indiana, Nevada, Pennsylvania, Texas, and Virginia.

As a Virginian, I can confirm that I've never paid sales tax on an Amazon order, and the distro center isn't far from my house.

I don't think I've ever had anything shipped from that distro center, though, now that I think about it.

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Re: Amazon pulls out of Texas

Postby netcrusher88 » Fri Feb 11, 2011 11:32 pm UTC

Endless Mike wrote:I don't think I've ever had anything shipped from that distro center, though, now that I think about it.

That doesn't matter. I get stuff shipped from Amazon from all over and I pay Washington sales tax on every penny.
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Re: Amazon pulls out of Texas

Postby Роберт » Fri Feb 11, 2011 11:35 pm UTC

netcrusher88 wrote:
Endless Mike wrote:I don't think I've ever had anything shipped from that distro center, though, now that I think about it.

That doesn't matter. I get stuff shipped from Amazon from all over and I pay Washington sales tax on every penny.

Yes, you live in one of the five states that has sales tax for Amazon. Texas is trying to become state number six, but they're doing it in a dumb manner that just inconveniences Amazon and moves jobs out of Texas.
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Re: Amazon pulls out of Texas

Postby dedwrekka » Fri Feb 11, 2011 11:50 pm UTC

nitePhyyre wrote:I love how Amazon owes Texas $269 Million, then says the company also is scrapping plans "to build additional facilities and expand in Texas, bringing [...] tens of millions of investment dollars to the state."

Like if I steal $1000 from you then toss you a penny, you should be thanking me. Jerks.

Those jobs generate more tax revenue for the country, and those people with jobs pay sales tax on things since they are living in Texas, generating tax revenue for the state. Texas probably lost more revenue than we would recoup with the 269 million as it's continuous. The law is also applied for physical locations of the stores, but they do not have a physical store in Texas as they do not sell directly from a warehouse. Some states add specific clauses to cover that instance.

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Re: Amazon pulls out of Texas

Postby DrSir » Sat Feb 12, 2011 5:23 am UTC

Роберт wrote:
netcrusher88 wrote:
Endless Mike wrote:I don't think I've ever had anything shipped from that distro center, though, now that I think about it.

That doesn't matter. I get stuff shipped from Amazon from all over and I pay Washington sales tax on every penny.

Yes, you live in one of the five states that has sales tax for Amazon. Texas is trying to become state number six, but they're doing it in a dumb manner that just inconveniences Amazon and moves jobs out of Texas.


Would they ask for sales tax if a distribution center existed in general in a State then? Or just if your state's distribution center sent you your goods, verses you receiving them from another one (though that would be bad efficiency, etc.)?

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Re: Amazon pulls out of Texas

Postby EdgarJPublius » Sat Feb 12, 2011 5:39 am UTC

Cathy wrote:As someone living in Texas, it would bug me like crazy if I had to pay sales tax for Amazon when someone in, say, Louisiana, doesn't. Plus, sales tax is different in different counties - which tax would it be?


As someone who lives, works and pays taxes in Texas, it bugs me like crazy that Amazon is stealing money from government services that I use and support every day.

It's the state Tax at issue (I believe 6.5% or so) though I suppose in theory that whichever county the distribution center is in could pass a law requiring that additional sale taxes be collected within that county.

Also, I believe this has been a slowly escalating issue since before the current budget shortfall, though doubtless the state has pursued it more vigorously as a result of the budget issue.
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Re: Amazon pulls out of Texas

Postby Xeio » Sat Feb 12, 2011 6:53 am UTC

DrSir wrote:Would they ask for sales tax if a distribution center existed in general in a State then? Or just if your state's distribution center sent you your goods, verses you receiving them from another one (though that would be bad efficiency, etc.)?
As a general rule, if the business has a physical presence in your state, you pay sales tax regardless of where it is shipped from.

Granted, with the fact that they supposedly have such distribution centers in PA and other states (I'm in PA, never paid sales tax at amazon), I don't know if that is the states being lenient, or, striking some sort of deal with amazon, or what.

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Re: Amazon pulls out of Texas

Postby Telchar » Sat Feb 12, 2011 7:52 am UTC

As someone from Montana with no sales tax we have a lot of online business that relocate centers here specifically for this reason. That and a relatively cheap labor force due to low cost of living.

And states certainly do strike deals to get major companies to create centers in their state. Wells Fargo opened up a support center in Billings along with GE and part of the reason they chose MT, in addition to the cheap labor force above, is because they got a break on property taxes.
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Re: Amazon pulls out of Texas

Postby KnightExemplar » Sat Feb 12, 2011 9:17 am UTC

Its not really anyone's fault. Its just how businesses make money. And this is also why big companies have huge amounts of lobbyists. They'll save more money by changing the laws of the current state, as opposed to packing up and moving out of the state. After all, the state legislature has the power to change the law, change the way sales taxes are calculated. I don't really like how the Yahoo article is written... it seems awfully biased towards Texas and doesn't share Amazon's side of the story.

Sales Taxes are one of those things that States compete with each other for. The states with the lowest taxes (or easiest regulation) attract more business. In this case, Texas made it clear that they wanted Amazon to either put up for get out of Texas. Otherwise, the legislation would have changed the law to keep Texas there. Its not a manner of "Texas deserves taxes" or "Amazon deserves a tax break" or even "Shady Business deals". Its a simple matter of business. If Amazon can make more money by relocating to another state, they will relocate to another state. Ironically, these are the kinds of job-killing regulations that Republicans are supposed to fight against. Of all the states to make this kind of stance, Texas is the last one I was expecting. It takes a lot to convince a company that it doesn't want to do business in an established location. It takes even more to convince the company to fire tons of its employees and move out of the state. (Employees are the core of a company. You don't want to let go of skilled workers who understand your company's culture. There's a lot of value and money put into Employees)

Also, those aren't Texas's jobs. They're Amazon's jobs. Amazon can do whatever it wants with its workforce. If Texas doesn't want to play nice with Amazon, its Amazon right to move out of the state. Thats whats awesome about America. (it also goes to show how little power the local governments have in controlling taxes and jobs). Its a free country, Amazon can do whatever it wants.

Anyway, I'm sure Amazon will pay a huge amount of whatever they rightfully owe to Texas (whittling whatever down they can by dragging their feet through the Judicial process: but lets face it, $200+ million is a lot of money, and its probably a good use of the court system to settle this kind of dispute). Big companies always make their court dates. Unfortunately, its a bit too late for Texas to change their state taxes. Even if they changed it to what Amazon wanted... Amazon would have settled down in other states by now.

BTW: as long as people view this as a "Texas vs Amazon" issue, the optimal solution will never come about. No company wants to leave a state, and no state wants to lose a bunch of jobs. So here's my question: why wasn't Amazon lobbying the state government for more favorable taxes... and why wasn't the state government keeping in touch with Amazon (which apparently was supplying thousands of jobs, as well as millions of dollars in property taxes, and all of the other kinds of taxes aside from sales tax)? And if they were keeping tabs on each other, then where was the breakdown in communication that would let this sort of issue come up? Did Amazon not understand Texas laws when it created its datacenter?

These are the questions we should be asking. This is NOT a "Amazon's fault vs Texas's fault" issue.
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Re: Amazon pulls out of Texas

Postby aleflamedyud » Sat Feb 12, 2011 7:04 pm UTC

It is very definitely a fault issue, and Amazon's fault at that. They owe taxes for shipping to Texas residents. There is no legal or ethical reason that they should not have to pay the taxes; the only reasons are selfish excuses along the lines of "BUT I DON'T WANNA PAY TAX!". They ought to follow the law and pay their taxes.
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Re: Amazon pulls out of Texas

Postby KnightExemplar » Sat Feb 12, 2011 8:17 pm UTC

Sure, they owe taxes, and that will be settled by the courts. You guys can be sure of that, Amazon will have their money taken away from them by the courts.

But Amazon pulling out of Texas? This is strictly a regulation / tax environment issue. As stated before, no sane company wants to close operations in a major location and lose employees. The amount of money Amazon will lose because of this will be huge.
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Re: Amazon pulls out of Texas

Postby Yakk » Sat Feb 12, 2011 8:28 pm UTC

On the other hand, being willing to pull out of a state due to this kind of thing encourages other states not to do this kind of thing.
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Re: Amazon pulls out of Texas

Postby nowfocus » Sat Feb 12, 2011 10:42 pm UTC

I think this is a perfect example on we need more federal regulations on this sort of thing. There is no good reason why Amazon should have a competitive advantage by operating out of state. I'm a bit shocked some bricks-and-mortar retailer, like Wal-Mart, hasn't pushed for some measure allowing the federal government to collect these taxes and distribute them to the states. They certainly have the lobbying power, and they have a lot to gain.

This could also improve the efficiency of the whole system: Right now Amazon has an incentive to keep its distribution chain far away from major population centers, which presumably account for most of their business.
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Re: Amazon pulls out of Texas

Postby KnightExemplar » Sat Feb 12, 2011 11:21 pm UTC

nowfocus wrote:I think this is a perfect example on we need more federal regulations on this sort of thing. There is no good reason why Amazon should have a competitive advantage by operating out of state. I'm a bit shocked some bricks-and-mortar retailer, like Wal-Mart, hasn't pushed for some measure allowing the federal government to collect these taxes and distribute them to the states. They certainly have the lobbying power, and they have a lot to gain.

This could also improve the efficiency of the whole system: Right now Amazon has an incentive to keep its distribution chain far away from major population centers, which presumably account for most of their business.


Sure there is. Property Taxes, Payroll Taxes, Fuel Taxes, etc. etc. The entire tax structure of a state / city determines whether or not a business wants to be there. If one state has more favorable taxes, then businesses will move there. Granted, its not just about taxes. Transportation / mass transit infrastructure, crime, schooling, they all play a role in whether or not a business wants to move to a certain location.

Smart cities / states explicitly set up "Enterprise Zones" with favorable tax structures in certain parts of the state / city, with restrictions such as "you must hire and keep at least one new employee per year" (or else you get fully taxed). Some cities don't want big businesses to come in (and the associated traffic problems, population growth and all that). Some cities want businesses to come in (more tax revenue and so forth). It is the responsibility of the local government to figure out its regulations to encourage / discourage businesses.

I guarantee you. If Texas set up an Enterprise zone in Amazon's neck of the woods, Amazon would have been compelled to stay. And this is why its important for businesses and government to have an open and honest communication channel. Now, if Texas didn't want Amazon's business (and preferred to have a stronger tax code), then sure, the results of this are a win / win. Amazon moves out, and Texas collects the taxes they want.

Which is why I find it very hard to think of this as a "who's fault is it" problem. There are many ways to encourage Amazon to stay if Texas actually cared about those jobs.


Yakk wrote:On the other hand, being willing to pull out of a state due to this kind of thing encourages other states not to do this kind of thing.


Why do you think New Jersey has 0% sales taxes ??
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Re: Amazon pulls out of Texas

Postby nowfocus » Sat Feb 12, 2011 11:34 pm UTC

I don't see the relationship between my post and your response. Regardless, the issue here is that Amazon is able to take away the ability of state governments to charge taxes. That is not a good thing. Sure, Texas could set up some sort of tax-free zone, but the government would be out of some much needed revenue. Meanwhile, the bricks and mortar retailers, who are actually providing jobs and tax revenue, are put a disadvantage. This is just bad policy up and down, achieving the exact opposite of what a government would want (unless of course you don't think government should be able to tax things).

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Yakk wrote:On the other hand, being willing to pull out of a state due to this kind of thing encourages other states not to do this kind of thing.

Why do you think New Jersey has 0% sales taxes ??

I'm glad you brought up the example of New Jersey. See, what Amazon is doing is effectively forcing a 0% sales tax on all the major state governments. And look how that's working out for New Jersey
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Re: Amazon pulls out of Texas

Postby EdgarJPublius » Sun Feb 13, 2011 1:17 am UTC

Texas has such a favorable regulatory and tax environment for businesses already that I find the idea that Texas should do anything extra to keep the Amazon here humorously ironic.

Remember, the Texas constitution forbids personal income taxes, and prohibits the state (but not local governments) from collecting property taxes, so Amazon's Tax burden in Texas consists solely of the sales tax.

Conversely, Amazon claims that because the distribution center is owned by a separate corporate entity (an LLC which shares an address with Amazon headquarters in Washington) it doesn't actually represent a physical presence in the state which would require Amazon to collect sales Taxes.
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Re: Amazon pulls out of Texas

Postby KnightExemplar » Sun Feb 13, 2011 1:35 am UTC

nowfocus wrote:I don't see the relationship between my post and your response. Regardless, the issue here is that Amazon is able to take away the ability of state governments to charge taxes. That is not a good thing. Sure, Texas could set up some sort of tax-free zone, but the government would be out of some much needed revenue. Meanwhile, the bricks and mortar retailers, who are actually providing jobs and tax revenue, are put a disadvantage. This is just bad policy up and down, achieving the exact opposite of what a government would want (unless of course you don't think government should be able to tax things).


This wouldn't be a story unless Amazon was also providing jobs and tax revenue. Amazon is a business like any other and deserves its influence on the local government. And its not "bad policy", its the reality of the situation. States compete with each other for more / less favorable environments. Fortunately, states tend to work together (not even at the federal level, but governors talk to each other and coordinate these sorts of things).

States never had much control over their taxes, because of this reason. In many situations, lowering taxes may (in the long term) increase the amount of revenue to a state, while raising taxes (in the long term) decreases the revenue.

EdgarJPublius wrote:Texas has such a favorable regulatory and tax environment for businesses already that I find the idea that Texas should do anything extra to keep the Amazon here humorously ironic.

Remember, the Texas constitution forbids personal income taxes, and prohibits the state (but not local governments) from collecting property taxes, so Amazon's Tax burden in Texas consists solely of the sales tax.


I admit that I'm unfamiliar with Texas's tax / regulatory environment. Based of off what Politicians say, what you say makes sense. I figured Texas would be the best place for businesses to go. But if this is the case, then Amazon's actions don't make any sense to me. It doesn't make sense for businesses to just move out of a State, especially a big one like Amazon. Its generally a win / win to just stay where you are...
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Re: Amazon pulls out of Texas

Postby EdgarJPublius » Sun Feb 13, 2011 2:40 am UTC

It doesn't make as much sense for Amazon to move out of Texas as it does for Amazon to threaten to move out of Texas. As others have said, it's likely that there will be some agreement reached where Amazon continues to operate in Texas in exchange for some or all of Amazon's tax debt to Texas being forgiven.

Amazon has apparently made some similar arrangement over a tax issue with plans for a distribution center in Tennessee, though the details have not been revealed.
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Re: Amazon pulls out of Texas

Postby dedwrekka » Sun Feb 13, 2011 4:36 am UTC

AngelfishTitan wrote:
Amzon.com's section on Sales Tax wrote:Companies selling over the Internet are subject to the same sales tax collection requirements as any other retailers.


Amzon.com's section on Sales Tax wrote:Items sold by Amazon.com LLC, or its subsidiaries, and shipped to destinations in the states of Kansas, Kentucky, New York, North Dakota, or Washington are subject to tax.


For other states they have distribution centers that have sales tax: Arizona, Indiana, Nevada, Pennsylvania, Texas, and Virginia.

I wonder if Amazon has deals with most of those states to get away with not paying the sales tax on their products, or if they are just using loopholes. This might cause the other states to speak up as well.

I was just looking up some of the other states, and found that the some of the ones mentioned by Amazon do indeed have additional clauses to ensure that a form of tax is paid on goods and services even if they're otherwise exempt from Sales Tax
From: http://en.wikipedia.org/wiki/Sales_taxe ... ted_States
Washington
Residents of Washington, who purchase goods for use in Washington, must pay a use tax in lieu of a sales tax, if any one of four conditions are true: If a Washington resident purchases goods and certain services in other states that do not charge a sales tax or charge a sales tax rate less than the sales-tax rate in Washington, or if an out-of-state seller does not collect Washington sales tax, the resident must pay a use tax on all goods that will be used in Washington. Use tax must also be paid if a Washington resident purchases goods from a seller who is not authorized to collect sales tax or if personal property is acquired with the purchase of real property.[104] Washington state does not typically pursue use tax collection for most purchases. However, in 2005, the Washington State Department of Revenue began to make a concerted effort to collect use tax on artworks acquired in other states

New York
As of June 1, 2008, when products are purchased online and shipped into New York State, some retailers must charge the tax amount appropriate to the locality where the goods are shipped, and in addition, must also charge the appropriate tax on the cost of shipping and handling. The measure states that any online retailer that generates more than $10,000 in sales via in-state sales affiliates must collect New York sales tax. The cumulative gross receipts from sales to New York customers as a result of referrals by all of the seller’s resident representatives total more than $10,000 during the preceding four quarterly sales tax periods.




EdgarJPublius wrote:It's the state Tax at issue (I believe 6.5% or so) though I suppose in theory that whichever county the distribution center is in could pass a law requiring that additional sale taxes be collected within that county.

It's 6.25 in some areas and up to 8.25 in others depending on local tax laws within Texas jurisdictions. Though other states are the same way, with localities imposing different tax rates.
aleflamedyud wrote:It is very definitely a fault issue, and Amazon's fault at that. They owe taxes for shipping to Texas residents. There is no legal or ethical reason that they should not have to pay the taxes; the only reasons are selfish excuses along the lines of "BUT I DON'T WANNA PAY TAX!". They ought to follow the law and pay their taxes.

Texas government aught to have been collecting those taxes instead of charging a lump sum as they are now. There's no reason why it should have been left that long when they know that it was there. The original problem was a fault issue, but how it's handled is putting both parties at fault for the consequences.

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Re: Amazon pulls out of Texas

Postby EdgarJPublius » Sun Feb 13, 2011 6:32 am UTC

dedwrekka wrote:
EdgarJPublius wrote:It's the state Tax at issue (I believe 6.5% or so) though I suppose in theory that whichever county the distribution center is in could pass a law requiring that additional sale taxes be collected within that county.

It's 6.25 in some areas and up to 8.25 in others depending on local tax laws within Texas jurisdictions. Though other states are the same way, with localities imposing different tax rates.

I think the .25% transit tax is applicable for online sales as well, not entirely sure.


aleflamedyud wrote:It is very definitely a fault issue, and Amazon's fault at that. They owe taxes for shipping to Texas residents. There is no legal or ethical reason that they should not have to pay the taxes; the only reasons are selfish excuses along the lines of "BUT I DON'T WANNA PAY TAX!". They ought to follow the law and pay their taxes.

Texas government aught to have been collecting those taxes instead of charging a lump sum as they are now. There's no reason why it should have been left that long when they know that it was there. The original problem was a fault issue, but how it's handled is putting both parties at fault for the consequences.


It probably wouldn't have gone this long if Amazon hadn't have been concealing its sales within Texas with an un-affilliated-on-paper corporation.
I bet that 'Amazon.com KYDC LLC' (The company which owns the Dallas Distribution center, has the same address as Amazon.com, and which Amazon representatives claims is unaffiliated with Amazon for any and all legal and tax purposes) meticulously filed whatever tax forms it was required to and it only took two years or so for anyone to think maybe someone should check to make sure those returns were truthful and accurate.

If you want to play the 'ought to have' game, Amazon 'ought to have' paid their taxes in the first place.
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Re: Amazon pulls out of Texas

Postby KnightExemplar » Sun Feb 13, 2011 9:02 am UTC

EdgarJPublius wrote:It doesn't make as much sense for Amazon to move out of Texas as it does for Amazon to threaten to move out of Texas. As others have said, it's likely that there will be some agreement reached where Amazon continues to operate in Texas in exchange for some or all of Amazon's tax debt to Texas being forgiven.

Amazon has apparently made some similar arrangement over a tax issue with plans for a distribution center in Tennessee, though the details have not been revealed.


According to the first line of the article...
Online retail giant Amazon.com is closing a suburban Dallas distribution center and scrapping plans to expand Texas operations after a dispute with the state over millions of dollars in sales taxes, an executive informed employees Thursday in an e-mail obtained by The Associated Press.

<snip>

Texas employees who are willing to relocate will be offered positions in other states, Clark said.


They're pulling out of Dallas at least, and perhaps completely out of Texas. Which is my point of confusion. Amazon is a large company, thus Amazon thinks they're gonna make money out of this deal somehow. Companies of this size don't make stupid moves: they have analysts and lawyers who argue, calculate and debate to figure out the locations / plans that would make themselves the most money.

So here's my question: what kind of tax structure does Texas have that compels Amazon to move out of the state? How is it cheaper to set up operations elsewhere... even when you're paying the penalty of losing employees, equipment, infrastructure and office space. (As well as liquidating your assets in the location, and then the moving costs if you're moving the equipment elsewhere).

It just doesn't add up in my mind. Even if Amazon acted like a spoiled child, they wouldn't do this unless they made money in the long term.

EdgarJPublius wrote: It probably wouldn't have gone this long if Amazon hadn't have been concealing its sales within Texas with an un-affilliated-on-paper corporation.
I bet that 'Amazon.com KYDC LLC' (The company which owns the Dallas Distribution center, has the same address as Amazon.com, and which Amazon representatives claims is unaffiliated with Amazon for any and all legal and tax purposes) meticulously filed whatever tax forms it was required to and it only took two years or so for anyone to think maybe someone should check to make sure those returns were truthful and accurate.


These seem like important details to the story... do you have a link with more information?

Texas government aught to have been collecting those taxes instead of charging a lump sum as they are now. There's no reason why it should have been left that long when they know that it was there. The original problem was a fault issue, but how it's handled is putting both parties at fault for the consequences.


I agree. If Amazon was not paying their taxes, then its their fault for not paying it. But it is also the government's fault for not collecting it.

But that still does not give Amazon a compelling reason to move out of the state. Not only do they have to pay the taxes (even if they can delay it for a few years through the court system...), they still have to pay for the closing of their centers in Texas. Thats what we're missing here: why is Amazon moving out?

http://news.bookweb.org/news/amazon-pul ... -sales-tax
Rather than comply with an assessment from the state of Texas to pay $269 million in uncollected sales tax, Amazon.com has announced that it will close its distribution facility in the Dallas suburb of Irving on April 12, as reported by the Associated Press.


How does this work? Does Texas have no jurisdiction if a company moves out of the state?
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Re: Amazon pulls out of Texas

Postby Technical Ben » Sun Feb 13, 2011 9:20 am UTC

EdgarJPublius wrote:
Spoiler:
Texas has such a favorable regulatory and tax environment for businesses already that I find the idea that Texas should do anything extra to keep the Amazon here humorously ironic.

Remember, the Texas constitution forbids personal income taxes, and prohibits the state (but not local governments) from collecting property taxes, so Amazon's Tax burden in Texas consists solely of the sales tax.

Conversely, Amazon claims that because the distribution center is owned by a separate corporate entity (an LLC which shares an address with Amazon headquarters in Washington) it doesn't actually represent a physical presence in the state which would require Amazon to collect sales Taxes.


I have heard of countless companies in the UK, and the likes of Google, avoiding tax due to "loop holes". People argue that it is "legal". But transferring funds back and forth, through companies separate by name only, registered in P.O. boxes on tax haven nations, with no actual functional work. Seems off to me. One way I was told the banks in the UK did it was to loan out to/bankrupt their own companies. They buy out "Insurance R us" and then lend them 100 million. Just by chance, the interest on the loan, equals any profit "Insurance R us" makes. So they never make any profit, may even make a loss after interest pay outs. So they never pay tax, and can earn any amount needed. Oh, but the banks who own them make loads of money from the interest. :D
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Re: Amazon pulls out of Texas

Postby Eseell » Sun Feb 13, 2011 9:01 pm UTC

AngelfishTitan wrote:
Amzon.com's section on Sales Tax wrote:Companies selling over the Internet are subject to the same sales tax collection requirements as any other retailers.


Amzon.com's section on Sales Tax wrote:Items sold by Amazon.com LLC, or its subsidiaries, and shipped to destinations in the states of Kansas, Kentucky, New York, North Dakota, or Washington are subject to tax.


For other states they have distribution centers that have sales tax: Arizona, Indiana, Nevada, Pennsylvania, Texas, and Virginia.

I wonder if Amazon has deals with most of those states to get away with not paying the sales tax on their products, or if they are just using loopholes. This might cause the other states to speak up as well.

IANAL, but Arizona technically does not have a traditional sales tax; it has a Transaction Privilege Tax. The tax is imposed on the seller, not on the purchaser. I've never paid sales tax on Amazon orders, even the ones shipped from their distribution centers in the Phoenix area, but I'm not sure if that means they're ignoring the sales taxTPT or if they are eating the cost in order to be more competitive. The way I read the law indicates that they don't have to pass the cost onto customers in the the way that most retailers choose.
Arizona Administrative Code wrote:R15-5-2002. Liability for Transaction Privilege Tax
The transaction privilege tax is imposed directly on the person engaging in a taxable business within Arizona. The vendor shall be liable for the tax, regardless of whether or not the vendor passes on the economic burden of the tax to the customer.
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Re: Amazon pulls out of Texas

Postby TheSkyMovesSideways » Mon Feb 14, 2011 6:16 am UTC

http://news.cnet.com/8301-10784_3-9942692-7.html wrote:In 1992, the U.S. Supreme Court ruled in its landmark Quill v. North Dakota case that retailers aren't required to collect sales taxes from customers who live in states where the businesses don't have a physical presence, or "nexus."

On a related note, am I the only one thinking that sales taxes are a terrible idea in the age of the internet? Given the ease of purchasing from a state or country which does not apply a sales that you would pay locally, the sales tax becomes a disincentive to purchasing locally, and what government would want that?
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Re: Amazon pulls out of Texas

Postby EdgarJPublius » Mon Feb 14, 2011 8:17 am UTC

KnightExemplar wrote:
EdgarJPublius wrote:It doesn't make as much sense for Amazon to move out of Texas as it does for Amazon to threaten to move out of Texas. As others have said, it's likely that there will be some agreement reached where Amazon continues to operate in Texas in exchange for some or all of Amazon's tax debt to Texas being forgiven.

Amazon has apparently made some similar arrangement over a tax issue with plans for a distribution center in Tennessee, though the details have not been revealed.


According to the first line of the article...
Online retail giant Amazon.com is closing a suburban Dallas distribution center and scrapping plans to expand Texas operations after a dispute with the state over millions of dollars in sales taxes, an executive informed employees Thursday in an e-mail obtained by The Associated Press.

<snip>

Texas employees who are willing to relocate will be offered positions in other states, Clark said.


They're pulling out of Dallas at least, and perhaps completely out of Texas. Which is my point of confusion. Amazon is a large company, thus Amazon thinks they're gonna make money out of this deal somehow. Companies of this size don't make stupid moves: they have analysts and lawyers who argue, calculate and debate to figure out the locations / plans that would make themselves the most money.


Right now, Amazon is only saying they'll close the facility and pull out of Texas, a deal could still be struck anytime between now and April. Even if the facility is closed on April 12th as promised, they can still re-open it anytime if a deal is struck later, unless they actually sell it (which may be difficult if the State sues Amazon and locks the facility up in a legal tangle).

Really, Amazon is in a lose-lose scenario, if they actually move out, they lose any chance of striking a deal over the back taxes, if they stay, there's a chance they can make a deal over the back taxes, but they'll have to pay sales taxes from then on. Now, it's possible that Amazon thinks having to pay sales taxes on future orders will cost more int he long run than the back taxes + the cost of closing the distribution center, but the clincher is that States are increasingly taking part in 'simplified tax' programs that enable them to charge sales taxes to online retailers even without a physical presence in the state (this is similar to the New York law that forces Amazon to pay sales taxes in the state despite not having a presence there) and there's a bill going through the House in Washington that that would basically create a national version of these programs and force online retailers to pay sales tax wherever they are located.
Even if Amazon does pull out, they'll just be strengthening the case for simplified sales tax programs and making it more likely that they'll have to pay sales tax in every state, or at least that Texas will join the existing simplified tax program and charge Amazon sales taxes anyway.

Amazon has nothing to gain by pulling out, but nothing to lose by threatening to pull out and a chance that it can improve their (very weak) bargaining position with the State over the back taxes they owe.

EdgarJPublius wrote: It probably wouldn't have gone this long if Amazon hadn't have been concealing its sales within Texas with an un-affilliated-on-paper corporation.
I bet that 'Amazon.com KYDC LLC' (The company which owns the Dallas Distribution center, has the same address as Amazon.com, and which Amazon representatives claims is unaffiliated with Amazon for any and all legal and tax purposes) meticulously filed whatever tax forms it was required to and it only took two years or so for anyone to think maybe someone should check to make sure those returns were truthful and accurate.


These seem like important details to the story... do you have a link with more information?


This article in the Dallas Morning News says
Amazon contended the distribution center was owned by one of its subsidiaries called Amazon.com KYDC LLC, which is located at the same address as its corporate headquarters in Seattle.
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Re: Amazon pulls out of Texas

Postby Zamfir » Mon Feb 14, 2011 8:30 am UTC

TheSkyMovesSideways wrote:On a related note, am I the only one thinking that sales taxes are a terrible idea in the age of the internet? Given the ease of purchasing from a state or country which does not apply a sales that you would pay locally, the sales tax becomes a disincentive to purchasing locally, and what government would want that?

Well, it's more a reason to have uniform sales taxes. For that reason, the EU has a minimum VAT of 15%, with an exception category of at least 5% for specific 'basic' goods. On top of that, countries try to coordinate on a standard VAT: at the moment, most countries have a VAT of 19 to 20%.

Of course, it's always tempting as a country to lower your VAT to attract mail-order business and tourists. The UK did that a few years ago, and other countries were rightly pissed about it. But for the most part countries realize that a well-functioning VAT is very useful, so they are in general willing to coordinate with each other.

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Re: Amazon pulls out of Texas

Postby Josephine » Mon Feb 14, 2011 11:35 am UTC

TheSkyMovesSideways wrote:
http://news.cnet.com/8301-10784_3-9942692-7.html wrote:In 1992, the U.S. Supreme Court ruled in its landmark Quill v. North Dakota case that retailers aren't required to collect sales taxes from customers who live in states where the businesses don't have a physical presence, or "nexus."

On a related note, am I the only one thinking that sales taxes are a terrible idea in the age of the internet? Given the ease of purchasing from a state or country which does not apply a sales that you would pay locally, the sales tax becomes a disincentive to purchasing locally, and what government would want that?

In a relatively isolated country like the US, shipping costs (usually from europe or asia) are more prohibitive than sales tax. I'd think you'd know about that, being from Australia. What Zamfir is saying about the EU is necessary because that's a bunch of countries near each other, with lower shipping costs between them.
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Re: Amazon pulls out of Texas

Postby Zamfir » Mon Feb 14, 2011 12:35 pm UTC

nbonaparte wrote:What Zamfir is saying about the EU is necessary because that's a bunch of countries near each other, with lower shipping costs between them.

But it applies to interstate trade in the US even more. There is probably no reason to homogenize VAT (or sales tax) with Europe, but some level of homogenization within the US or perhaps even North America makes sense. Then again, sales taxes in the US are at most something like 6 or 7%, right? That's comparable with the difference between high and low VAT countries in Europe.

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Re: Amazon pulls out of Texas

Postby Thesh » Mon Feb 14, 2011 1:41 pm UTC

I'd rather see the US get rid of sales tax than make a nation-wide sales tax. We can make up for it with income tax; it's more stable (i.e. you can generally predict with high confidence what next years income tax revenue will be) and more progressive (sales tax tends to get fairly regressive).
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Re: Amazon pulls out of Texas

Postby Zamfir » Mon Feb 14, 2011 2:12 pm UTC

Thesh wrote:We can make up for it with income tax; it's more stable (i.e. you can generally predict with high confidence what next years income tax revenue will be) and more progressive (sales tax tends to get fairly regressive).

I don't think European countries have problems with the predictability of VAT, and they rely on it for something like half of their tax income. If US states have such problems, that problem lies presumably not in the tax itself.

The progressivity is an interesting one. The main reason Europe gets away with it is that the total system of all taxes and spending is rather progressive. The US probably have a more progressive system of taxation than most European countries. But European countries simply tax and spend more, and that compensates. If you introduce a regressive tax and use the result to pay for equal access to healthcare for everyone, the system as a whole is more equal, even if your tax system is now more regressive.

Of course, if you do not want to expand total expenditure, you can still introduce a regressive tax and compensate by making other taxes more progressive, or to change spending in ways that benefit lower incomes.


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