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Texas Comptroller charged Amazon $269 million in sales taxes that were not collected on online sales in the state, provoking Amazon to close its distribution center and cancel plans to expand its operations in Texas

Amazon has announced that it is closing one of its distribution centers and canceling operation expansions in Texas due to a dispute with the state's comptroller over millions of dollars in sales taxes. However, Governor Rick Perry (R-Texas) isn't letting the internet retail giant go that easily. 

Amazon made the decision to close a suburban Dallas distribution center after Texas State Comptroller Susan Combs told the company that they were responsible for $269 million in sales taxes that were not collected on online sales in the state. 

"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.  

But Perry disagrees with Combs' decision to charge Amazon millions of dollars in sales taxes, and to let the company leave the state of Texas. Amazon's decision to close its Irving distribution center and cancel plans to expand operations in Texas will result in job losses as well as the loss of tens of millions of investment dollars to the state.

"That is a problem and I would suggest to you that we need to look at that decision that our comptroller made," said Perry. "The comptroller made that decision independently. I would tell you from my perspective that's not the decision I would have made."

Perry added that Combs shouldn't have pinned the sales taxes on Amazon's Dallas distribution center, since it doesn't have a storefront and is not responsible for such matters. 

"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," said Perry. "This obviously didn't have a storefront. It was specifically there to manage products that need to be shipped out." 

Perry is looking to get the legislature involved to keep Amazon in Texas, but it may already be too late. Amazon's Dave Clark, vice president of operations, has announced that the company will close its Irving distribution center on April 12, and will cease all plans to expand operations in the state of Texas, which will eliminate 1,000 potential jobs and cut tens of millions of potential investment dollars to the state as well. 

"We don't want to be onerous on tax policy where businesses and I would say I'm having a hard time getting my hands around this one," said Perry. "Texas should be a bastion for businesses, not one where they're sitting there going 'we'd rather go over to Oklahoma where we could get a better deal.' Texas doesn't want to make itself less competitive with its tax decisions."  

According to Spelce, Texas loses about $600 million in online sales taxes annually. Currently, a case is pending before the State Office of Administrative Hearings regarding the $269 million in sales taxes from Amazon. 

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Good on Amazon
By Motoman on 2/14/2011 10:23:29 AM , Rating: 4
This reminds me of actions taken by some companies who just flat-out shut down certain installations because it was the only way to get rid of the union. This is the only way, under the current ruling, that Amazon could get out from under a legal malfeasance.

The states need to figure out, on their own, how to enforce their use taxes. Trying to make private-sector companies do their jobs for them is the wrong thing to do, and I applaud Amazon for standing up to the powers-that-be.

RE: Good on Amazon
By Christobevii3 on 2/14/11, Rating: 0
RE: Good on Amazon
By Motoman on 2/14/2011 10:29:41 AM , Rating: 2
"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," said Perry.

...IANAL, but then why is the Governor of Texas saying something like that?

RE: Good on Amazon
By theapparition on 2/14/2011 11:01:20 AM , Rating: 4
Probably because he's a politician!!! ;P

This isn't rocket science, the law is pretty clear. If Amazon hired a single person to work in the state of Texas, they now have a State Tax ID number. Once you have that number, you're required to file certain tax information and collect sales tax where applicable.

The law is also quite clear, when a company is required to collect that tax and didn't, the consumer is exempt from paying that tax, it is completely the responsibility of the company to pay that. So Amazon can't go back after their customers for that tax (as if that wouldn't be a PR nightmare).

Amazon will lose this case, but as sour grapes will pull out of Texas. Or, it's just political manuvering to get the local government to give them some special incentives. So they will have to pay the $250million, but may get $500 million in tax breaks and incentives.

That's how the game is played folks.

RE: Good on Amazon
By Motoman on 2/14/2011 11:03:41 AM , Rating: 5
Well, I would reckon that Amazon would have a pretty good case if they are indeed being treated differently from other companies with non-storefront installations in TX though. Which at the very least, seems to be what the governor is saying.

If TX courts declare that Amazon's TX installation is sufficient to require the collection of sales tax, they'd have to apply that ruling to every other company that is apparently NOT being required to collect sales tax...that could be even messier than just dealing with Amazon.

At any rate - the appropriate response when you don't agree with a law or ruling is to leave. Don't stay and try to still disobey a ruling or law. So even if Amazon is held to this ruling, if they don't like it, their correct course of action to avoid it in the future is to leave TX.

RE: Good on Amazon
By bah12 on 2/14/2011 11:12:14 AM , Rating: 2
I'd have to look at a case where they are though. I know he said that historically this was not the case, but I certainly cannot think of any company that is exempt because it has no store front. Ultimately he is a politician so I don't think I'd put too much stock in what he says.

The appeals court will make the ultimate call, but unfortunately the damage is already done. Closing a facility is not cheap, or easy, and without extensive incentives to do otherwise, I doubt we will see Amazon back here soon.

RE: Good on Amazon
By paydirt on 2/14/11, Rating: -1
RE: Good on Amazon
By wookie1 on 2/14/2011 11:44:20 AM , Rating: 5
What do you propose to do if people buy something from an international seller? How would you collect taxes from them? And if you can't, why wouldn't Amazon simply move all of their operations out of the country?

Are you suggesting that the State/local governments be able to monitor all of their residents somehow to ensure the taxes are collected from them?

RE: Good on Amazon
By paydirt on 2/14/11, Rating: -1
RE: Good on Amazon
By theapparition on 2/14/2011 1:39:11 PM , Rating: 4
If international businesses (we are not discussing small mom & pop sellers) choose not to collect state tax, local tax, VAT, or flat tax from their consumer (as Amazon did), then states (or the taxing entity) can send the tax bill directly to the international business (as Texas did). If Amazon was in British Columbia instead of the U.S., the situation would be the same.

That is completely incorrect information.
Only if the international business maintained a local presence are they obligated to collect sales tax for the state. If not, then burden lies on the taxpayer to correctly report and pay that tax directly to the state.

In the Amazon case, they maintained a business presence in the state, and hence were obligated to collect tax and redistribute to the state. If they were international, that situation, as you correctly pointed out, would not change.

However, if they had no local presence, then that company is under no obligation to collect local taxes. Plain and simple.

RE: Good on Amazon
By kattanna on 2/14/2011 12:23:02 PM , Rating: 1
why wouldn't Amazon simply move all of their operations out of the country?

because international shipping costs and delays would make it unattractive

RE: Good on Amazon
By FITCamaro on 2/14/2011 2:35:08 PM , Rating: 2
You are required to pay the taxes on anything bought. You might choose not to. But you run the risk of being caught. And shouldn't complain if you are.

RE: Good on Amazon
By Solandri on 2/14/2011 12:18:52 PM , Rating: 3
***Local businesses should be on the same footing as non-local businesses. If you favor non-local businesses by not imposing the same tax on them as you do everyone else, then you are directly causing dollars to leave the state.

I think everyone realizes this. However, the problem has to do with a conflict with Federal and State law. The Feds and State governments need to get together and fix it. Asking businesses to voluntarily act as if it's fixed simply won't work. The ones who heed your call will lose market share to those who don't. Consequently, the problem will remain the same as ever, all you'll accomplish is driving out of business the people sympathetic to your cause.
Non-collection of State Sales Tax AFFECTS EVERYONE. It lowers real estate values, it lowers employment, it lowers local tax collection, it lowers state tax collection.

On the contrary, this is actually one of the good things about having no sales tax between states. It only causes the problems you describe locally. For every real estate value lowered, real estate values are raised elsewhere. For every job lost, a new job is created elsewhere. Sales tax revenue is lost, but income tax revenue is gained. Other states benefit (in the form of their businesses doing extra sales) at the expense of a state with onerously high sales taxes. It acts as an incentive for states not to simply raise sales taxes as high as they think they can get away with without inciting riots, and to keep their corporate income taxes low as an incentive to attract businesses.

RE: Good on Amazon
By Fracture on 2/15/2011 1:57:10 PM , Rating: 2
Dead on. Waving taxes on interstate commerce would be a huge boon to creating a "buy American" mentality without implementing protective tariffs (that incidentally piss off other countries).

RE: Good on Amazon
By YashBudini on 2/14/2011 10:10:23 PM , Rating: 1
Non-collection of State Sales Tax AFFECTS EVERYONE. It lowers real estate values, it lowers employment, it lowers local tax collection, it lowers state tax collection.

And yet the pro-corporatists have voted you down.

You do realize how many people buy on-line for the sole purpose of not paying taxes, even when shipping costs about the same. It's like being anti-local, and yeah that's a great way to keep your neighbors and yourself employed.

But you can't reason who the corporatist/elite on this board. So why try?

RE: Good on Amazon
By bah12 on 2/15/2011 9:12:48 AM , Rating: 4
I agree the tax should be paid. But please get your facts straight. The business does not PAY the sales tax, they merely collect it on behalf of the buyer. It is ALWAYS the buyers responsibility to pay the use tax IF not collected at time of sale.

So while I agree with you that sales tax should be paid, the laws already exist to do so. A simple audit of my credit card bill will show all purchases to NewEgg/Amazon. Pretty easy to enforce if they states wanted too. Simple fact is it is easier to target the company rather than then individual.

RE: Good on Amazon
By Solandri on 2/14/2011 12:28:37 PM , Rating: 5
I'd have to look at a case where they are though. I know he said that historically this was not the case, but I certainly cannot think of any company that is exempt because it has no store front. Ultimately he is a politician so I don't think I'd put too much stock in what he says.

The issue that the court decided in this case was whether a subsidiary company constitutes nexus for the parent. Amazon set up a wholly separate (but controlled by Amazon) company to own and run the distribution facility in Texas. It argued that since the parent (Amazon) wasn't present in the state, there was no nexus and so Amazon didn't have to pay sales tax. The subsidiary did no sales, it merely fulfilled orders Amazon sent it. The court decided the subsidiary was sufficient to establish nexus.

Which does leave me scratching my head a little. I can see the court's point of view. On the other hand, what if Amazon hadn't owned the subsidiary? What if they'd contracted with an independent company in Texas to warehouse a bunch of Amazon's products, and when an order was placed Amazon would instruct the independent company to box and ship the order? That would seem to be functionally equivalent to what Amazon was doing with its subsidiary, but avoid the court's logic.

Of course, New York took it to this step and ruled that even having affiliates in New York constituted Nexus. Consequently, Amazon closed their affiliate program for New York residents and businesses. If you are based in New York, you cannot participate in Amazon's affiliate program, even though the relationship is only contractual.

RE: Good on Amazon
By tmouse on 2/15/2011 8:46:47 AM , Rating: 4
The "affiliate" program is in reality just a way to attempt an end-run around a state's taxes. In New York's case Amazon's stance was “we do not have to collect sales tax since they are not part of us” and the Affiliate’s argument was “we do have to collect tax since Amazon is the sales agent”. It's beginning to look like states with use taxes will be requiring sales information for sales within their states. I highly doubt Amazon will cease doing business within those states since close to 50% of states have use taxes. I suspect nexus points will soon be moot as sooner than later all states will probably have use taxes or some sort of federal tax will be initiated.

RE: Good on Amazon
By Kiffberet on 2/15/2011 8:40:42 AM , Rating: 2
By not paying taxes, they put local businesses at a disadvantage, and they'll eventually shutdown.

You've got to take a hard stance on this or you end up with a similar situation as you do in the UK with Amazon.

Amazon base themselves out of Jersey which is a small island with tax haven status. CDs, DVDs, books etc are all cheaper than the local stores, who have to pay tax, so they've all shut.

Meanwhile the public are happy because they get their goods cheaper, but the taxman doesn't get his tax, so he puts tax up on something else, like fuel or income tax.

Texas should persue the tax and if Amazon leave good riddance. They'd only be taking local jobs anyway...

RE: Good on Amazon
By Lerianis on 2/15/2011 8:53:55 AM , Rating: 3
Kiffberet, the fact is that other than food stores, most 'local businesses' should have shut down a long time ago.

The internet has ABROGATED the usefulness of stores like Barnes & Noble, Sears, etc. for the most part.

RE: Good on Amazon
By mars2k on 2/14/2011 12:34:55 PM , Rating: 2
What tax incentive could texas possibly give them thats worth $500 million. Thats just silly

RE: Good on Amazon
By Christobevii3 on 2/14/2011 11:02:36 AM , Rating: 2
He doesn't know the law$ext.TacPage?sl=R&app=9&p_dir=&p_rloc=&p_tloc=&p_ploc=&pg=1&p_tac=&ti=34&pt=1&ch=3&rl=286

(A) maintains, occupies, or uses, permanently or temporarily, directly or indirectly, or through an agent, by whatever name called, a kiosk, office, place of distribution, sales or sample room, warehouse or storage place, or other place where business is conducted; (B) has any representative, agent, salesperson, canvasser, or solicitor who operates in this state under the authority of the seller to conduct business, including selling, delivering, or taking orders for taxable items;

Then they get hit with this still

An out-of-state seller who has been engaged in business in Texas continues to be responsible for collection of Texas use tax on sales made into Texas for 12 months after the seller ceases to be engaged in business in Texas.

RE: Good on Amazon
By frobizzle on 2/14/2011 1:45:47 PM , Rating: 2
The fact that Texas has laws on their books potentially affecting an out of state retailer means nothing. They could write whatever laws they want but the limits of their enforcement ends at the Texas border. This is why businesses conducting transactions across state lines fall under the jurisdiction of federal law.

In this case, Amazon has (or perhaps soon, had) a presence in Texas and thus, as handed down in multiple Federal court cases, Amazon having a nexus in Texas, is liable to collect taxes on sales to people in Texas.

Amazon really only has two options here. They either pay up or close their distribution center.

RE: Good on Amazon
By bah12 on 2/14/2011 11:03:31 AM , Rating: 3
Because he is an extremely pro-business republican.

I personally agree with him, but the fact is the comptroller was just following the law. Does it need to be changed? IMO yes, but he was merely enforcing the law as it stands now.

Perry just wants to step in and shine the light on himself as the altruistic savior of jobs. Notice he didn't say sh*t until it Amazon already closed up shop. Had he really cared he would have spoke up sooner. Not after the fine was imposed and the facilities shut down (that does not happen overnight).

RE: Good on Amazon
By invidious on 2/14/2011 11:06:01 AM , Rating: 2
because she isnt making a legal ruling she is making a business decision.

RE: Good on Amazon
By MonkeyPaw on 2/14/2011 10:59:05 AM , Rating: 4
States get greedy too. It's not like this center is tax-free. The company no doubt already pays millions in taxes to Texas. Also, a distribution center brings the shipping industries in, which are all taxed, too. Sure, the law may say to charge sales tax, but there must be other states that don't, and that is where Amazon will go. That's when legislators need to use their brains. It just goes to show what taxation does, and how you can't demand too much from the rich--they have the resources to move to whomever will give them the most freedom. It's up to Texas, have a big player and
more jobs (where you charge more taxes), or have nothing. It should be a lesson here on what is reasonable and what isn't.

RE: Good on Amazon
By Fracture on 2/15/2011 1:41:39 PM , Rating: 2
Exactly right. Texas is already getting the real estate taxes on the distribution center, income tax from all the employees, sales tax on input goods bought locally, and additional sales tax on overhead goods like office supplies, etc.

RE: Good on Amazon
By Sazabi19 on 2/14/2011 10:59:52 AM , Rating: 2
Link please. Distrobution warehouse does not usually count. We have one here in Indianapolis as well, I do not get sales tax.

RE: Good on Amazon
By Christobevii3 on 2/14/2011 11:03:55 AM , Rating: 2$ext.TacPage?sl=R&app=9&p_dir=&p_rloc=&p_tloc=&p_ploc=&pg=1&p_tac=&ti=34&pt=1&ch=3&rl=286

RE: Good on Amazon
By Sazabi19 on 2/14/2011 1:09:08 PM , Rating: 2
Yup, right here:"(A) maintains, occupies, or uses, permanently or temporarily, directly or indirectly, or through an agent, by whatever name called, a kiosk, office, place of distribution, sales or sample room, warehouse or storage place, or other place where business is conducted;" from your link. Ty for link :) you were wholeheartedly right.

RE: Good on Amazon
By theapparition on 2/14/11, Rating: 0
RE: Good on Amazon
By paydirt on 2/14/11, Rating: 0
RE: Good on Amazon
By theapparition on 2/14/11, Rating: 0
RE: Good on Amazon
By YashBudini on 2/14/2011 10:24:35 PM , Rating: 2
Texas law is written that if you have any operations be it store front, warehouse, shipping center and the item is delivered in the state that you have to collect sales tax on it.

Fine, but why did they wait so long? And what other state is going to let them slide next time?

(These are the kinds of companies that hire H1B's, screw workers at every opportunity.)

RE: Good on Amazon
By invidious on 2/14/2011 10:58:30 AM , Rating: 1
Amazon isnt standing up for anything righteous, they simply don't want to pay their taxes. There is nothing to be applauded. If you don't like state sales tax then don't sell to customers in that state.

Texas isnt asking anyone else to figure out how to enforce their taxes, they are doing it themselves, right now with this. Texas isn't elivating this to the federal level or involving any 3rd party private sector entities. I don't see anything in the article suggesting that Texas is pushing anything off onto the private sector.

Texas needs to enforce their sales tax at the time of sale if they want their money. And in since they haven't been doing that they need to make a choice of whether the back taxes are worth losing future jobs. They make their own bed, plain and simple.

RE: Good on Amazon
By Motoman on 2/14/2011 11:00:24 AM , Rating: 2
By the governor's own quote, Amazon's TX operations didn't match their established norm for sales taxation. That seems to make your argument invalid.

RE: Good on Amazon
By invidious on 2/14/2011 11:11:20 AM , Rating: 2
State senate creates law, comptroller enforces it. Governor usese political power to bend and break the law. Point being that the governor doesn't make or enforce the rules, it is their job to run the state WITHIN the rules.

RE: Good on Amazon
By Motoman on 2/14/2011 11:20:02 AM , Rating: 2
Ultimately, as stated above, Amazon's action of leaving TX is their only correct course of action - whether they wind up having to pay that bill or not.

They clearly don't like the law and/or this ruling against them - so they can leave. It's the only thing they can do to avoid having to deal with a law and/or ruling that they don't like again in the future.

RE: Good on Amazon
By mars2k on 2/14/2011 12:30:29 PM , Rating: 2
Do you mean they sold more than $5 Billion in Texas? Where does $269 million come from?
Texas better reconsider cause there's another place from which to distribute.
Where does the sale originate? Put the computers in Nebraska ship from someplace else
Colorado, or Tennessee are major shipping hubs.
So long Texas jobs

Big Parasite
By Shadowmaster625 on 2/14/11, Rating: 0
RE: Big Parasite
By T2k on 2/14/11, Rating: 0
RE: Big Parasite
By Sazabi19 on 2/14/2011 11:04:45 AM , Rating: 3
The Govt. takes enough of my money as it is, leave my non store-front online purchases the hell alone, I've paid my dues to get stuff driven to my door, that's what shipping is for and the company that pays its local taxes as well.

RE: Big Parasite
By paydirt on 2/14/11, Rating: 0
RE: Big Parasite
By Drag0nFire on 2/14/2011 10:48:49 AM , Rating: 2
It's not Amazon that uses the state services; rather, it is the people of Texas who purchased their merchandise at Amazon that consume state services. This is the purpose of "sales tax" - a percentage of the value of all purchases made by the People of Texas are collected by the government to fund state services for the People of Texas.

Also remember that as a citizen, you owe sales tax on all purchases made including those made at a merchant that has no business presence in your state. The difference is simply that Amazon is not responsible for collecting tax revenues if it has no business presence in a state.

This said, the current system is broken. Most online buyers do not pay the sales tax, and this loophole for online purchases is becoming more and more significant in terms of revenue lost to the state governments. I think it will be important to resolve it decisively in a just and uniform manner. The system as it is places unfair burden on brick&mortar businesses.

RE: Big Parasite
By theapparition on 2/14/2011 11:07:57 AM , Rating: 3
Thank you Drag0nFire, very well put.

To the OP, Amazon should not have to pay $249mil in taxes, but they should have collected $249mil in sales tax from Texas consumers. The law is clear, if you are required to collect tax, and don't, you are repsonsible to pay them and can't retroactively go back after employees/customers. Amazon only has themselves to blame for this.

This said, the current system is broken. Most online buyers do not pay the sales tax, and this loophole for online purchases is becoming more and more significant in terms of revenue lost to the state governments. I think it will be important to resolve it decisively in a just and uniform manner. The system as it is places unfair burden on brick&mortar businesses.

Couldn't agree more.

RE: Big Parasite
By paydirt on 2/14/2011 11:48:48 AM , Rating: 2
I posted above. The non-collection of sales tax:

*hurts property values (lower retail activity, fewer retail jobs, fewer jobs to maintain/support retail operations, lower employment leads to less demand for residential housing)
*hurts local tax collection (primarily due to lower property values, but also from local sales tax non-collection)
*directly hurts state tax collection
*hurts local employment (the loss of the TX facility might cost 1,000 direct jobs, but it may have already destroyed many more jobs--which will likely be restored)

local and non-local businesses should be on the same footing.

AND I'm a conservative/libertarian

RE: Big Parasite
By lowsidex2 on 2/14/2011 11:04:14 AM , Rating: 2
It's a sales tax. You buy something, you pay it. Up until know, states haven't been broke, and internet sales were not significant enough to justify the effort to collect. That is no longer true.

Plus it's unfair to every other store. How can they complete when everyone knows you can get it 8% (or whatever TX tax is) cheaper online? I guess every local retail outlet can close shop and go work for UPS as a driver.

RE: Big Parasite
By sviola on 2/14/2011 11:40:12 AM , Rating: 2
So, if I don't live in TX and buy something there, all I have to do is prove I don't live there and they'll not charge me for the sales tax?

RE: Big Parasite
By Solandri on 2/14/2011 12:45:58 PM , Rating: 2
That's really the crux of the issue. In the old days, the buyer and the seller were in the same state so it made sense for the state to be able to collect taxes on it. Mail order changed that. What happens if the buyer is in one state and the seller is in another? Which state is entitled to tax the transaction? The seller's? The buyer's? Both? Neither? In international commerce, differences in taxation are usually normalized by import/export taxes. But the Constitution and court precedent established that states are prohibited from imposing such taxes at their borders.

Sears was the first company to really capitalize on this, running the first highly successful mail order business. The problem really should have been taken care of at the Federal level back then in the early 1900s. Unfortunately it wasn't so we're still stuck with it today. California was the first state to use the concept of nexus to start collecting sales taxes (on IBM sales if I remember right, IBM being a New York company but with offices in California), and more and more states are using that. But it still doesn't address the basic problem - are the taxes based on the buyer? Seller? Both (double taxation)? Neither (the current situation)?

RE: Big Parasite
By tech4tac on 2/14/2011 1:26:09 PM , Rating: 2
Generally, if you deliver via a common carrier (USPS, UPS, Fedex, DHL, etc) the state & district the item is delivered to is entitled to the sales tax. If the seller have a nexus in that state, they are responsible for collecting the sales tax for the state, otherwise the buyer is responsible for paying the use tax on their state tax return. Some states have laws that complicate matters but this is generally the case. The main problem for business with interstate sales is navigating the tens of thousands of different ever-changing state & district taxes and laws. If they'd just create 1 Federal or 1 state wide internet sales tax rate & law, it'd make things much easier to implement. However, in the Federal case, a constitutional amendment may be needed for this to happen.

RE: Big Parasite
By stonemetal on 2/14/2011 11:03:59 AM , Rating: 1
They dont use police. They dont use fire. They dont use the highways.

So if that warehouse is robbed they don't expect police to do anything? If the place catches on fire they don't expect fire fighters to come and put it out? Their employees don't drive to work? The product stored in that warehouse is brought in by what means? Magic maybe?

RE: Big Parasite
By spamreader1 on 2/14/2011 11:29:07 AM , Rating: 3
Those functions are paid for by property (state, county, and city taxes {if your property is in a city limits}), not sales taxes in Texas if I'm not mistaken.

RE: Big Parasite
By swampthing1117 on 2/14/2011 11:05:33 AM , Rating: 2
Really? If their facility catches fire who's going to put it out? if there's a crime on their property who's going to respond? If it's a shipping center all those semi trucks are doing a major toll on the local highways. Whether it's an amazon truck or a ups truck is irrelevant, the center's presence is generating that traffic.

There is every reason to justify taxes on that property and i'm tired of all these online outlets not charging sales tax when I as a storefront have to. It makes competing with them even harder and all that money lost from them not paying has to be made up someplace, as in higher property taxes, local sales taxes etc. These mail order giants NEED to be charging sales tax, they are doing business and as such need to pull their weight.

Amazons move is nothing but a hissy fit over texas removing one of their main ways of competing and contributing to their boosted profits.

RE: Big Parasite
By bryanbrun on 2/14/2011 11:09:14 AM , Rating: 1
So if Amazon's warehouse catches on fire, who will put it out?

The roads that are torn up by the thousands of deliveries to and from the warehouse are to be paid for by whom? It makes no sense that UPS/Fedex bare all of this cost.

The warehouse benefits from the general state of order and security imposed by the local police force. Who pays those salaries?

Amazon is a parasite living off of the life blood of the local and state tax payer.

RE: Big Parasite
By spamreader1 on 2/14/2011 11:31:45 AM , Rating: 2
Fire dept paid by property tax.

Road repairs are paid for by property tax and a combination of fuel taxes and vehicle registration/inspection.

also note I think amazon should be collecting taxes on purchases from texas residents. just saying don't confuse the facts.

RE: Big Parasite
By Astral Abyss on 2/14/2011 1:08:58 PM , Rating: 2
^ Yes, this is correct. Take a look at your list of what your property taxes goes to. A huge portion of it is police, fire, and schools.

And since Texas doesn't have a state income tax, they tax the hell out of you on everything else, property taxes being one of them. I lived in Texas for 7 years and I can tell you with certainty that they will charge and tax you for everything they possibly can, including utilities.

I'm sure Amazon was already paying out the ass for property taxes, utilities, vehicle license fees/fuel, not to mention the employees they obviously had working there.

Maybe Amazon should have been collecting those taxes, but the fact is, Texas was still making bank off Amazon and Amazon was employing local residents to run the operation. They got greedy and stupid and some insignificant beaurocrat thought they'd stick it to Amazon for cheating the system.

The smarter way to handle that would have been to send Amazon a warning and a fine and say, according to such-and-such law you are required to collect taxes, and we will be collecting them in the future whether you charge them or not.

Someone just figured out that collecting that back-tax from Amazon is chump change to what they would have made in the long run from Amazon. And guess what, Amazon is still going to do billions in buisness in Texas and now won't having to pay taxes or support their local economy.

Brilliant job Texas...

RE: Big Parasite
By The Raven on 2/14/2011 3:54:22 PM , Rating: 2
Great post.

I think the comments here prove that the gov't has grown too big because the citizens can't keep the various tax systems straight. It should be a lot simpler and clear cut.

Oh and by the way... rather than having them ship it, I am going to cross the river, buy something in IL and tell them that I live in MO and that they should tax me accordingly. I don't think that will fly, am I right my brother?

RE: Big Parasite
By T2k on 2/14/2011 5:39:08 PM , Rating: 2
No because it's the DELIVERY ADDRESS, dumbo.

RE: Big Parasite
By The Raven on 2/15/2011 11:57:08 AM , Rating: 2
That is right to my point, which you obviously didn't get.

The store in IL wouldn't be delivering to me in MO. UPS/FedEx would. (Because I am the one to pay for it to be delivered, right?) So I get taxed at the MO rate and the money goes to MO? (Or in the case of the article, TX?) While if I go pick it up myself I get taxed at the IL rate?

Please explain how this makes sense. In the case of the story, TX is begging for taxes that should be going to Bethesda, MD or wherever Amazon is based.

Here's an idea for B&Ms... get an online presence and "steal" taxes from Amazon's state. That would level the playing field rather than complain how big Amazon is.

The reason Amazon is so big is that they are online. They wouldn't be so special if they weren't. Everyone else needs to do the same or offer meaningful value to their B&M (like personalized service, etc.) or they should just be prepared to step out of the market. Because that is what it is: a market. Not a charity auction.

By thornburg on 2/14/2011 10:26:38 AM , Rating: 4
Does anyone know what time period these uncollected taxes are supposed to cover?

A quick google search shows that the Texas "sales and use tax" is 6.25%, which means that $269million would require $4.3 billion in sales.

If that's supposed to be for one year, it would imply that Texas accounts for much greater than their fair share of sales, as they are 8.14% of the US population, but $4.3 billion would be almost 13% of Amazon's total sales, and that's assuming that they sell absolutely nothing overseas (which is not correct).

RE: Timeframe?
By stonemetal on 2/14/2011 11:06:51 AM , Rating: 2
If I remember correctly it is for 5 or 6 years of back taxes.

RE: Timeframe?
By dagamer34 on 2/14/2011 11:14:04 AM , Rating: 2
Sales tax in Texas is 8.25%. The period Texas is claiming Amazon owes them is for the period of Dec. 2006 - Dec. 2009.

RE: Timeframe?
By opuscroakus on 2/15/2011 8:52:08 AM , Rating: 2
State Sales and Use Tax is 6.25%. The maximum amount including City and County taxes can be up to 8.25%. Amazon is only being charged for the State portion but the city and county could go after their share as well.

By adiposity on 2/14/2011 3:55:24 PM , Rating: 2
What's ridiculous is that all those buyers owe sales tax, not Amazon. It's not like they collected it and then didn't turn it over. They never collected it!

Texas is within their rights to insist the taxes be collected, though. Amazon has a presence in the state and state buyers are buying from them without paying tax. I'd say that's a pretty clear violation.

So, Amazon is changing the situation. Now Texas can't argue they are selling in Texas. Therefore, they can't demand the sales tax.

RE: Ridiculous
By rs2 on 2/14/2011 7:37:41 PM , Rating: 5
No, it's ridiculous that some people seem to think that taxing Internet commerce is acceptable. How about you stop being a bully and leave it alone? My income is already taxed when I earn it, so why should it be taxed again when I spend it?

RE: Ridiculous
By Lazarus Dark on 2/15/2011 7:26:42 PM , Rating: 2
Agreed. I pay federal income and state income tax. I pay real estate tax, property tax and sales tax. I'm pretty sure there's another one I'm forgetting. Why am I taxed 6 times? why can't I just get taxed once and call it a day? (or not at all preferably. I'm of the opinion that all tax should come from buisinesses only and let them filter the cost down. That way I can choose how much tax to pay based on my purchasing habits.)

Good for Amazon
By etekberg on 2/14/2011 10:41:41 AM , Rating: 3

This is a good way to bring to attention of State voters how taxes have direct consequences on businesses, jobs, and prosperity. Everything is a competition, and states compete for jobs as well as the country as a whole.

RE: Good for Amazon
By jimbojimbo on 2/14/2011 6:01:06 PM , Rating: 2
Exactly. If a state isn't going to make it tempting for a business to stay but another state lays out a better offer why the hell would they not leave?? One of the central states should just have no sales tax on mail order items then just lure all the internet businesses there. This will come to more corporate taxes and more jobs thus more income taxes. Win win.

Supply and Demand
By brshoemak on 2/14/2011 10:43:26 AM , Rating: 5
This is a pretty cut-and-dry situation. Amazon prefers to operate in a certain way in terms of tax laws, the Texas tax laws do not offer terms that Amazon would prefer.

However, other states operate in a manner that Amazon prefers. Like anyone else, they want the best deal possible.

Regardless of the debate of taxing online good, at the moment the best deal for Amazon is to leave Texas and find greener pastures with more lax tax laws. Sucks for Texas in terms of the many jobs and revenue that will be lost - but Texas they made that decision themselves, and had to know that there would be a substantial impact.

Here's a silly idea
By ewhite06 on 2/14/2011 1:32:16 PM , Rating: 2
I'm not an economist or anything, but why not get a flat "internet sales" tax or whatever you want to call it? Set it at 5% nationwide - everyone pays the same rate regardless of who you are or where you are. If the states whine "but our sales tax is 8% normally" we would reply "well, currently you are collecting 0% for online sales. Which would you rather have?" It's still cheaper for the consumer than going B&M and the states still get their piece.

It simplifies it for the online retailers to track and distribute how much tax they need to pay to the states because that is the KEY point behind this issue. The Amazons and every other mom-and-pop online shop don't want to pay or can't afford to pay for the accounting overhead to track taxes and send them to the states.

Admittedly, you would see a rush on companies setting up shop outside the US to get around all this but that has issues all its own.

RE: Here's a silly idea
By EricMartello on 2/14/2011 11:59:38 PM , Rating: 1
Here's an even sillier idea:

How about we hold the states accountable for the money they're spending. There is so much fraud and corruption going on behind closed doors, not to mention wasted spending on failed social programs that piss away tax dollars every day. This whole notion of spend more and pass the bill onto the people (or businesses) is a joke...the USA is struggling for jobs and making it more expensive to do business in the USA is not helping anything.

States already siphon money from its residents with income tax, property tax, tolls, fuel tax, taxes on alcohol and tobacco...yet they continue to say they need more. Really? I'd love to see how the money they do get is being spent and I think the people should play as larger role in deciding what the money is spent on.

To all of the people who simply say "it's the law, we should accept it"'re full of shit. The law should always have the interests of the people in mind. Laws which seek only to make politicians richer while the states continue to waste the money they do have are NOT in the interests of the people.

The USA is quickly becoming more like a communist country than ever's so far gone from what it was originally established to be by the founders...big, bloated, inefficient and corrupt governments are merely the tip of the iceberg.

TX State taxes
By wallijonn on 2/14/2011 11:40:58 AM , Rating: 2
they were responsible for $269 million in sales taxes that were not collected on online sales in the state.

TX must buy a lot of Amazon goods... Amazon shouldn't have to pay any taxes for goods shipped out of, or through, Texas. They do probably pay TX. employee taxes, though. Amazon will probably be looking for a tax free state.

Texas loses about $600 million in online sales taxes annually

I'd bet that other states are saying the same thing. Which means that all states will want a piece of the action if Amazon loses the case. What is at stake here is an Internet tax. Will the convenience of on-line shopping be stifled? Eventually the Feds will probably step in and demand a flat rate 10% tax which they will distribute to the states.

By CZroe on 2/14/2011 3:02:37 PM , Rating: 2
If you don't charge sales tax directly on traditional mail-orders from other states, be they from catalogs, ads, or even TV, you have no right to treat Internet sales any differently. Yes, the buyer still owes the state but that was always the case.

By kmmatney on 2/14/2011 7:11:15 PM , Rating: 2
I have to admit, I specifically buy from places online where I don't pay sales tax, and I'm sure the state or Colorado is losing hundreds of dollars from me alone, let alone everyone else who is doing the same. I think a flat internet and mail order state tax, of say 5%, would be fair.

By rs2 on 2/14/2011 7:33:25 PM , Rating: 2
I love how one of the most solidly Republican states in the U.S. is driving away businesses with its high taxes.

By Spacecomber on 2/14/2011 8:19:09 PM , Rating: 2
This seems to be similar to NewEgg's situation in TN. They have a distribution center (I believe in the Nashville area); so, they collect sales tax on items shipped to TN addresses. Obviously, they don't have a store front. I wonder how Amazon came to the conclusion that TX's apparently similar sales tax law didn't apply to them? Was the law just never enforced, until now?

In any case, I've never understood the sense of trying to run a state on the basis of sales taxes. Although they are popular with the voters, they are inequitable and a burden on businesses (it makes every business in the state a tax collector). In the internet era, they penalize every in-state business, since people often will buy out of state, if it means saving up to 10%. (I'm likely to save money by buying from Directron, instead of NewEgg, and I assume Texans are more likely to buy from NewEgg than Directron.)

Perry is a moron.
By bissimo on 2/14/2011 11:10:19 AM , Rating: 1
I live right down the street from a mail order only business in Texas. They have been doing business for years without a storefront and have ALWAYS been required to charge Texas sales tax.

Good For Amazon
By mgilbert on 2/14/2011 12:27:05 PM , Rating: 1
Good for Amazon. Tell Texas to go to h***. I wish Texas would secede from the union. The first state that manages to succeed in one of these lawsuits is going to screw us all. Every state will then be after more and more taxes. They get enough alone. Leave us alone.

How to spot a Faux-driven moron
By YashBudini on 2/14/2011 10:17:47 PM , Rating: 1
1. Lives in a state that has sales tax.
2. Evades the tax by buying online.
3. Never pays the tax owed, even when the law clearly states you must and forms are readily available.


4. Along comes new legislation (eventually) that collects tax on Internet sales and then....

The moron complains there's a new tax by the government. Yeah, new for you, arse-orifice.

(All this leads to a Murdoch driven news frenzy about our socialist government.)

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