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February 11, 2011 11:22 PM UTC

Don't Mess With Amazon.com

  • 49 Comments
  • by: Colorado Pols

Here’s a story from the Dallas Morning News that’s instructive for Colorado, as the court battle over our state’s recently-passed use tax reporting legislation for online purchases gets underway:

As a result of an ongoing tax dispute with Texas, Amazon.com has decided to take its ball and go home.

The online retailer said Thursday that it would shutter its Irving distribution facility April 12 and cancel plans to hire as many as 1,000 additional workers rather than pay Texas what the state says is owed in uncollected sales tax.

Texas wants $269 million from Seattle-based Amazon in past-due sales tax. It sent the bill to the company last October…

Amazon, with $25 billion in sales last year, has operated the Irving center since 2006. It argues that a subsidiary company owned the center. The state audited Amazon after reporting by The Dallas Morning News questioned whether the retailer was complying with state law.

It’s not the same situation as Colorado, of course, where a “point of presence” in the state wasn’t necessary in the legislation passed by the General Assembly and now stuck in court. If anything the circumstances in Texas are much clearer-cut, with only a thin pretense of a “subsidiary” between Amazon and perfectly justifiable liability for Texas sales tax.

It’s just worth pointing out, as House Majority Leader Amy Stephens demands the immediate repeal of Colorado’s so-called “Amazon tax,” and opponents of the new law hype the consequences of Amazon’s retaliation in Colorado out of all earthly proportion, that the corporation they’re defending just plain doesn’t want to pay taxes anywhere.

And like Gov. John Hickenlooper says, how fair is that?

Comments

49 thoughts on “Don’t Mess With Amazon.com

    1. Let ’em operate for free off the back of the other taxpayers, using services, expecting fire protection and the like.  The little people can pay to cover their operating costs.  

      (/sarcasm)  

        1. communities to foot the bill for things like fire protection while the corporations get a free ride are just peachy. More socialism for the corporations, the only kind of socialism the GOP is adamantly for. If it’s fine with you as long as it’s legal then, if you’re really against socialism, you and your party should be fighting to make it illegal.

    2. SOCIALIST! SOCIALISM! REDISTRIBUTION OF WEALTH!

      Wait a minute, Rick Perry is a tea party hero who wants to secede from the union. Whatever he did couldn’t be bad, could it?

    3. We need more corporations to be bullies and intimidate local communities to show what a great Democracy we have.  ArapaGOP will be so excited when the health insurance corporations are fee to deny coverage to little people with pre-existing conditions like diabetics.  That will show those damn governments that they can’t regulate corporations.  Corporations and the rich are Gods who don’t need to help pay for a civilized society.

      (/shitforbrainsputdown)

  1. “just plain doesn’t want to pay taxes anywhere.” Since they are based in Washington State which has one of the highest sales tax rates in the country.

    How would you like if Wyoming told you that you didn’t have to pay your income taxes, 4 years later they change their mind and say nevermind, your brother lives here, now you owe us all those taxes that we said you didn’t have to pay.

    And also have to remember that Amazon is a go through. They charge their customers the taxes and transfer it to the state government, so if they aren’t collecting how can the government turn around and say you owe it to us. Sounds silly.

    1. Do you have evidence that they were told they didn’t have to pay taxes in Texas?  That would be weird, since it’s clear and settled that businesses need to pay sales taxes on sales to anyone in a state where they physically operate.

      Everything I see says they just decided not to do it, so the state audited them.  Good for the state; that’s what all states should do when businesses practice sales tax evasion.

      1. But there must be some serious gray area here. Why did it take Texas 4 years to decide they wanted Amazon to pay taxes? Did they not notice that one of the largest companies on the planet had a facility in their state..? uh huh sure. Or maybe more that Amazon thought that since they did not own the facility, another company did, that they didn’t have to collect and thus pay the taxes. (Probably Amazon knew the technicality was not legimate but since no one was calling them on it, they went with it. What for profit company on this planet would not do the same thing?)

        They have no problem collecting and paying taxes in Washington State and many other states in the US and other countries in the world. Why is Texas so different? My suspicion is because a new comptroller came into office and a mandate to find way to lower the states debt, probably in memo form came to their office and said well maybe we can get amazon to pay on a technicality. I don’t know the truth, but probably a little more likely then thinking Amazon just hates paying taxes, since they do it all the time in different states.

          1. Where is your evidence they don’t? They are being asked to pay back taxes in one state. Other states are trying to change their laws so that amazon will soon have to start paying which any reasonable company would try to fight.

            Of course I can’t prove they always pay taxes. Just like you can’t prove that they “don’t want to pay taxes anywhere.” It is a reasonable expectation that a company is willing to pay the taxes that it collects, since it does so in other states. What is not reasonable is to assume that a company never wants to pay taxes because they are conflicting with some changes/new interpretations of laws in different states.

        1. take a few minutes on the Intertubz…

          To find that it appears a specific effort by Amazon, in numerous states, to avoid paying sales taxes on a large chunk of their business.

          They say they are just ‘distribution centers’ subsidiaries and all that, to argue they have no ‘physical presense’ in that jurisdiction, but its a purposeful shell game.  Sure it’s a ‘virtual’ bookstore, but they are still selling from their store of books.  And not paying taxes.  Taxes that the brick and mortar bookstore down the street, likely moving a mush lower volume of books that than a national ‘distribution center’ is paying–for the streets employees and delivery trucks drive on; for fire and police protection; for snow removal.  How is that fair?

          http://www.dispatchpolitics.co

          Amazon so far has avoided collecting sales tax in six states where it operates distribution centers. The company argues that, because the facilities are separate legal entities, they do not give the e-tailer a physical presence.

          “We are having discussions right now with the state on this,” Kiga, a former head of Washington state’s revenue department, told the Times Free Press in Chattanooga, Tenn., last month. “The distribution centers here are not retailers, but rather drop-shippers.”

          Amazon charges sales tax in a handful of states where it does business: Kansas, Kentucky, New York, North Dakota and Washington. The six states where it distributes products but does not charge sales tax are Arizona, Indiana, Nevada, Pennsylvania, Texas and Virginia.

          1. So for four years Texas had no problem with saying that distribution centers did not force amazon to pay taxes… now it changes its mind. Amazon probably set up in these state with an assumption that what they were doing was reasonable and now the rules are being changed, so they don’t want that to happen. As would happen if you move into your house and then later find out the state wants to tax you more because they changed the zoning.

            I don’t work for amazon or care if they have distribution centers in Texas or Colorado, what tees me off is when people think because they read a few articles that it is cut and dry when they have no idea what happened behind the scenes. Companies are in business to profit, though I think it is reasonable for government to tax them on that profit. If the government decides that they want to tax more or chance the tax structure, then amazon can fight it “lobby” or move out which they have every right too. Just like they have every right to put together a business model which takes advantage of taxing structures, just like every person and business in this country does. Who here claims a home office on their taxes? The law allows you too so you take advantage of it, why can’t businesses.

            1. Is the knee-jerk reaction that tax-loathers spew, so focused on someone getting taxed that they ignore what the net result is when a large-volume business isn’t: taxpayers and government subsidizing a private entity’s large profits.  

              Distribution centers aren’t free.  They impact the communities in which they operate, and like other businesses in those jurisdictions that sell goods, they should pay their fair share of taxes.

              Income taxes =/= sales taxes =/= property taxes, unless all you see (I surmise) is TAXES!!!!!

              1. As long as it’s at the expense of the  poor shmuck tax payer and for the benefit of fat cats who make zillions out of corporations.  I guess it’s from each citizen as much as you can squeeze to each corporation as much as it can extort by threatening to take their ball and go home.  Thing is, they can’t take their ball and go home from everywhere.  So it’s divide with scare tactics and conquer to keep the socialism for corporations golden safety net in place.

                What if every state refused to be screwed? Would they leave the entire United States? Go out of extremely profitable business to spite us?  I don’t think so. Seems like they could afford to pay fair tax and still have plenty of profit. But why should they if we don’t make them?

                1. We do need to come up with a way to get some tax from windward to both the communities they locate in and sell in.

                  I don’t think sales tax is the best way. But we do need an approach where companies pay their fair share.

                  1. In this case though Amazon is not skirting paying taxes. Since normally they are a pass through. They charge their customers taxes and then pass those taxes back to the state government. If Amazon knew that they had to pay Texas sales taxes, they probably would have charged those customers and passed that money to the state.

                    The real problem is the perceived advantage Amazon gets over the local stores in not having to charge tax, so their product is cheaper. Does anyone honestly believe that amazon’s prices would not be cheaper than the mom and pop store no matter what sales taxes they had to pay? I think we all know the answer to that.

                    1. Mom and Pop and Brick and Mortar stores. All the more reason why they don’t need the added advantage of a sales tax break. I’d like physical stores to survive. I like to get out of the pjs and go out, get some air and interact with actual human beings sometimes. I’d like that option to survive.

    1. A lot of the opposition to Amazon has focused on the measure being so extreme that Amazon even ended business with people in the state.  Of course, to most of us, it was apparent from the beginning that their goal is really to influence elections… but much hay was made of the state being so anti-business that Amazon just had to leave.  Turns out they like the power that gives them, and are quite willing to take the same approach if they’re just asked to pay taxes in a location where they clearly physically operate.

      Sure, it doesn’t prove Colorado is right; but it sure weakens the argument that there was anything wrong here.

      1. And any tax system by definition adds overhead and is imperfectly administered. So those arguments can always be used.

        But keep in mind that online stores face a much greater expense collecting tax than brick & mortar stores. Because they have to figure out on each sale if it’s taxable, wht the percent is, and then remit to a boatload of taxing authorities.

        1. that checks the zip code and gets the appropriate tax rate from an effective dated tax table.  Oh my God.  That would probably take oh maybe two days of programming by a single programmer to accomplish.

          You really think that with today’s computers it is some kind of impossible task to collect taxes based on zip code?  Come on David.  That is a joke argument.  End of month tax receipts should be a push button job with ACH payments made automatically.

          1. David actually has a computer program written to type out his argument in any thread that has the words “tax,” “Amazon” or “boatload.” Experts aren’t sure, but it could have gone viral and is operating on its own.

          2. First, the big problem is not the tax rate for a location (although many of those programs are wrong where zip codes cross tax boundaries).

            The biggest problem is what is taxable. All districts have different rules, especially around food, books, etc. You have to find out if something is taxable in a district.

            Second biggest is reporting the taxes. What forms have to be filled out and when. What registration is required, etc. Every taxing authority has its own rules.

            God is in the details and the details are many & varied. This is why I’d prefer to see income tax rise (that comes out of my pocket) and sales tax eliminated (that comes out of my customer’s pocket).

            Wit that said, I’m not saying we can’t do sales tax on online purchases. I’m just saying it has a lot more overhead for online stores than it does for local business. So it’s not a question of leveling the playing field, it’s a question of flipping who gets an advantage.

            1. I think most local sales taxes reflect the state’s taxable items.  So, that’s not an issue.

              The number of zip codes with two tax rates must be pretty small. If some very local district is different, let that district kvetch and work out the difference.  Otherwise, I’d bet they would be happy to collect whatever it is that comes their way without any effort.

              1. Pass a Federal law requiring the states to set up publicly accessible address lookup databases which return the appropriate tax level and payment information.

                Companies could then do a background query to get the right information without any problems.

                1. 1. Tax rate by product category so companies could automatically get if something is taxed in a district and if so at what rate.

                  and…

                  2. The payment and info is reported to a single entity in each state.

                  and…

                  3. There is a way to get quick clear answers on remaining open issues (like purchased software installed on the cloud – what “location” is that).

                  Then you have something that is pretty workable.

                  Also a good solution to item (1) is to say absolutely everything is taxed and taxed at the same rate. Good, services, everything. (You’ll notice here I propose increasing the tax hit – because it simplifies things which lowers overhead.)

                  1. 1.  A “sales tax” rate on the amount of the sale — end forever the game of twenty questions as to what is a “product” and what is a “service”?  A sale is a sale is a sale.

                    2. agree.  

                    3.  see #1 above.  A sale is a sale is a sale.  Install it in your home, install it in the ether, or install it your mother-in-law’s basement — doesn’t matter.

                    If you’re going to have a “sales tax,” and the reality is it’s an evil that we are living with, then make it simple, make it comprehensive, and make it comprehensible.

                    1. It has to be services too because many sales or of something that is partially a product and partially a service. So we need to put the tax on any transaction from legal fees to basic foodstuffs.

                      As to where it is – what if you don’t know if a software program is installed in Colorado? When you purchase software to install and/or run on Amazon’s cloud – there is no way to determine the physical location.

                    2. this reminds me a lot of what it’s like being a parent:

                      If my two daughters wanted to climb Mount Everest, they could find a thousand ways that could be easily done.  And, if they don’t want to do something, even something as easy as cleaning their rooms, they can spend more time and effort trying to convince me why that task is unfathomably difficult than it would take to perform the actual task.

                      1.  I already said, “I agree” — a sale is a sale is a sale.

                      2.  Does the client have a physical address, or does he live in a mansion on the clouds also?

                    3. 1. I know you said it, but many others read that as goods only, not services. I reiterated it for the others.

                      2. Yes they do – programmers are on Poland, purchasing & some management is in New Jersey, and they have facilities worldwide using it, including some in Colorado. And the servers used could be anywhere. Who gets the taxes?

                    4. and then just send the money to me.  As a favor to you, I’ll sort the mess out and forward it to the appropriate parties — swear to dog.

                  2. The rest are answered.

                    If you sell something to a client based in East Podunk, KS, then they’re taxed based on that location’s rates.  Where they decide to install it is up to them – you’re selling to their physical presence.

                    (Which means that we need to reform the laws defining the locations of companies; no more post office boxes in Delaware or Bermuda…)

            2. “I’m just saying it has a lot more overhead for online stores than it does for local business.”

              Local businesses have to comply with multiple tax authorities.  If you write your application correctly and accommodate for multiple tax authorities, it doesn’t matter which state they are in.  I started writing business applications professionally in 1978 and I can tell you with a great deal of certainty that this is child’s play.  Make it month of programming time with a veteran team if you want to be ultra-conservative about the development time frame but handling tax receipts without co-mingling them is one of the most basic accounting applications this side of payroll.  It’s been done before.  Shock I know.

              Do not try to win this argument on the basis that payments to multiple tax authorities is beyond the technical capability of multi-national corporations.  That would be an embarassing cluster fuck of reasoning.

              1. When you set up a physical coffee shop you have to report to 2 taxing authorities (city & state). And you set up what they need against all sales.

                Imagine if you collected based on where each customer lived though. So someone from Fruita walks in for a coffee. And so that single sale requires that you now:

                1. Find out of Fruita charges tax on coffee. It’s a food so it might be exempt. And how it’s delivered can impact if it’s taxed. So you have that long discussion.

                2. Ok, you sold a bag of coffee and it becomes a question of where will it be consumed. If it’s half locally and half in Arvada on the way back, then you now have 3 entities with a claim on the taxes.

                3. You’ve worked all that out, now you have to file and pay to each district. Each has its own requirements and forms.

                All for a single sale.

                Big picture it’s easy to say no problem, just automate it. But actually doing it – it’s a tremendous amount of effort. Now if you sell a ton of stuff into each district (like Amazon) then it’s no where near as bad because that overhead is spread over a ton of sales. But for small companies that will have 1 or 2 sales into each district – it more than eats up their profit.

                1. in comparing a corner coffee shop to the predominant online retailer.  An online retailer forces you to register and tracks every single one of your purchases.  I did Direct Marketing solutions for ten years and I can tell you that cell segmentation and niche marketing were all the rage.  That keep track of every SKU you order down to the part number level.

                  You big butthurt from what I can tell is that you think the executive managers of Amazon won’t get a bonus this year if they have to pay sales tax on their sales.  Really?  That’s what you are rending your garments over?  Automation is impossible and we don’t want to inconvenience the CEO’s so don’t regulate corporations because it’s “BAD” for business.

                  Ugh.  You’ve gone off the rails dude.  All signs point to you slipping over to the dark side David.  Next thing I’ll know is that you are using one of those Tea Party decoder rings to understand dog whistle language.  “The Second Amendment is in the Bible and says that you can’t regulate corporations or make them collect a sales tax”. Ugh.  

          3. Is that paying sales tax to Colorado requires working with DoR and they’re a total clusterfuck. If they were competently run that would substantially reduce the overhead of collective sales tax.

            But you don’t get to say “assume DoR has competent management” because we deal with the world as is, not the world we would like to see. And Hick by keeping Roxy Huber has made it clear that we will continue to have a DoR that imposes excess cost on business.

            1. that absolves all corporations from paying any taxes to the State of Colorado?

              Are you serious David or are your posts just becoming cluster fucks of meaningless statements?

              1. I did not say it was a reason to not pay. But it does have an impact on online company’s decision on if they should collect taxes for Colorado.

                It also has an impact on Colorado business. We do have to pay. But the additional overhead it imposes on businesses means fewer jobs are created. Probably not a large number of jobs – but for those people that would have had a job and don’t – it’s a giant difference.

                1. automatic shutoff valve because we didn’t want to burden BP with “more” government regulations created a lot of jobs but not in a way that benefited our society and our planet in the long run.

                  To claim that government regulations and taxes are too burdensome for corporations to bear because we want corporations to create jobs even though the record is they are right now off shoring them to foreign countries is a really bizarre clusterfuck argument for allowing remote multi-billion dollar entities access to our local markets without any compensation for the construction and maintenance of a viable public infrastructure.

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