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State thinks online giant owes them millions of back taxes

Online retailer Amazon.com may owe the state of Texas four years of back sales taxes for purchases from Lone Star residents, due to a fulfillment center the company owns in Irving, Texas.

Following recent developments in New York, which recently passed a controversial sales tax that Amazon feels unfairly targeted by – some state officials nicknamed it the “Amazon Tax” – the Texas Comptroller’s office decided to open an investigation into Amazon’s Irving fulfillment facility, after being contacted by a reporter from the Dallas Morning News with questions regarding the company’s tax payments.

Amazon says that state officials are fully aware of the facility and its operations, and that it does not have to pay sales taxes because it operates the fulfillment center under Amazon subsidiary “Amazon.com.kydc, Inc.”

“We remain in compliance with all Texas laws governing sales tax collection,” said Amazon spokeswoman Patty Smith. Texas law doesn’t require subsidiaries to collect sales tax.

Complicating matters are the fulfillment center’s records filed with the state, which in 2006 and 2007 listed “Amazon.com” as the owner instead of its “kydc” subsidiary. Such a mistake, if it was one, would force the company to be liable for millions in back sales taxes over the past four years, which the Comptroller’s office fully intends to collect. The current sales tax rate in Texas is 6.25%.

Currently, internet retailers are only entitled to collect sales tax from customers residing in a state that the company has a significant presence in. While out-of-state customers are still obligated to pay “use tax” for out of state purchases, actual consumption is untracked and, consequently, most consumers choose not to pay it. Both United States federal and state governments have made it clear that they intend to change this system: several states, like New York, are gunning for ways to enforce use taxes, and the IRS last week made it clear that it wants to tax transactions through user-to-user sites like eBay and Craigslist.

Nonetheless, the Texas Comptroller’s Office says it will continue its investigation, and does not know when it will complete.

“We continue to interact with and cooperate with local and state Texas tax officials at many levels,” said Smith. “The state of Texas is fully aware of Amazon.com’s subsidiaries’ Texas operations.”

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The Gov Needs To Back Down
By Nik00117 on 5/14/2008 10:04:24 AM , Rating: 5
We are seeing a new marketing media, one where companies can sell to millions yet keep operating costs lower. The system in place is fine. Leave it be.




RE: The Gov Needs To Back Down
By FITCamaro on 5/14/08, Rating: -1
RE: The Gov Needs To Back Down
By Staples on 5/14/2008 12:08:53 PM , Rating: 1
I support the idea of sale tax for online items however I would like it implemented at a national level. I find it unfair if only Texas has to pay sales tax.


RE: The Gov Needs To Back Down
By zombiexl on 5/14/2008 1:14:18 PM , Rating: 2
Check out the fairtax, its close to what you want just on everything.

I feel it should be all sales or all income tax (preferebly sales tax to catch illegal money). This double dipping that most states do is BS.

Although the root of the problem is that the government seems to think they own the money. They think that by letting us keep a little of what we earn is doing us some service.


RE: The Gov Needs To Back Down
By dever on 5/14/2008 2:00:26 PM , Rating: 2
I, too, am a FairTax fan ( http://www.fairtax.org ). I encourage anyone interested to check it out.


RE: The Gov Needs To Back Down
By dragonbif on 5/14/2008 1:44:49 PM , Rating: 2
People from Oregon can come up into Washington and buy stuff at Costco and not pay sales tax. I know this because each time I go to Costco they always ask what state I am from. I finally asked them why ask that question and they told me that Oregon does not have a sales tax so they do not have to pay Washington’s sales tax.
Soon we are all going to have to pay the sales tax for whatever state we are from not matter what and all the online resellers are going to move to Mexico and send stuff in. Not to mention I currently pay 8.7% sales tax and they are talking about bumping it up to 9%. Try and buy a car with that kind of tax.
Hehe charge Ebay users sales tax, I don’t know how well that is going to go over the next thing you know you are going to be paying sales tax at a yard sale.


RE: The Gov Needs To Back Down
By chrispyski on 5/14/2008 3:44:50 PM , Rating: 2
If you think thats bad, try going to the Costco right on the Oregon border with Washington. I live right next to it and traffic is a constant nightmare of people coming down from Washington to Oregon to avoid sales tax, making any commute an infuriating mess.


RE: The Gov Needs To Back Down
By zombiexl on 5/14/2008 1:17:12 PM , Rating: 2
by using the word inevitable, you indicate that the govenment is not supposed to work in your best interest. I understand they may not now, but you should believe that they should.


RE: The Gov Needs To Back Down
By dever on 5/14/2008 2:11:34 PM , Rating: 3
I think I see where you're coming from here, but I respectfully take issue. I may be over-sensitive, but that statement has a bit of a paternalistic ring to it.

While it may be a worthy intention, there has nevery really been a government that works for it's citizen's best interest. The US government was sent up to simply be a referee, not a parent.

Our founders had enough foresight to construct a framework (the constitution and bill of rights) whose sole purpose is to protect individuals from government. In essence, our founders believed that government is inherently bad... that concentration of power always leads to corruption, and that we must be diligent to guard against this.

I believe it folly to ever think that anyone else has your best interests in mind (except maybe my mom - she's a jewel).


RE: The Gov Needs To Back Down
By zombiexl on 5/14/2008 2:14:52 PM , Rating: 4
quote:
Our founders had enough foresight to construct a framework (the constitution and bill of rights) whose sole purpose is to protect individuals from government. In essence, our founders believed that government is inherently bad... that concentration of power always leads to corruption, and that we must be diligent to guard against this.


Hence the 2nd ammendment, or as some of my friends call it "the reset switch".


By Johnniewalker on 5/14/2008 5:27:54 PM , Rating: 2
@dever

I couldn't have said it better.

-johnniewalker


RE: The Gov Needs To Back Down
By seamonkey79 on 5/14/2008 8:11:22 PM , Rating: 2
Nice to know I'm not alone out here...


RE: The Gov Needs To Back Down
By dever on 5/15/2008 2:12:12 PM , Rating: 2
Thanks... I too am glad to know that I'm not alone. I often get down-rated for my anti-government-intrusion rants, but I think it's usually due to poor wording on my part.

I'm optimistic and believe that individuals love freedom. However, it's easy to lose appreciation when we have so much.

For some reason, the approach of a mid-life crisis is leading me to an interest in politics and ever-expanding appreciation of liberty, instead of convertible sport cars.


By therealnickdanger on 5/14/2008 10:15:26 AM , Rating: 3
Yeah, WTF?

As if we need one of the bastions of great service and low-cost goods to suddenly be as expensive as everyone else! If all these states just stopped subsidizing ethanol production, they would save millions upon millions (billions?) of dollars and their constituents would pay less for food without also have to worry about their favorite e-tailer suddenly getting more expensive. Everyone wins.


RE: The Gov Needs To Back Down
By SilthDraeth on 5/14/2008 10:17:12 AM , Rating: 2
The "use tax" I hadn't actually heard of or known about this. But it stands to reason. Anytime an item exchanges hands the US wants to tax it again. And even when it doesn't change hands, in the case of land, you have to pay taxes on it every year never mind that the land isn't generating any income.


RE: The Gov Needs To Back Down
By ebakke on 5/14/2008 10:36:12 AM , Rating: 2
Kind of ridiculous, huh?


RE: The Gov Needs To Back Down
By Polynikes on 5/14/2008 11:42:14 AM , Rating: 2
Ridiculously. ;)


RE: The Gov Needs To Back Down
By deeznuts on 5/14/2008 1:30:40 PM , Rating: 2
Yeah, ridiculous that you don't want to help pay for services on that property. You do like water and sewage and electricity and streets and police and ... well you get the point.

It's not the US that wants to tax this stuff, it's the States. A use tax has been around for a while. It was kind of an honor system, and states normally didn't go after you. However, more recently some of the more aggressive states, such as California and New York, started putting use statements into their returns so when you don't declare a use tax, and sign, but you did make out of state purchases, well now you are guilty of falsifying your return. Little useless tidbit I remember from being an enrolled agent a couple of years ago.


RE: The Gov Needs To Back Down
By zombiexl on 5/14/2008 1:37:43 PM , Rating: 2
I think you're a bit offbase.
Water/sewage/electricity/gas/etc most people pay a private company for. If they do not they are paying the local government. The state doesnt provice any of those services to me.

Streets and police are the only things that make sense in your argument.

To say that i owe tax to my state when making an out of state purchase is BS. If i walk into Best Buy in Ohio (i live in PA) and buy somethig there i pay sales tax there. There is no way i would pay sales tax twice.

As I said in a previous post. In order to buy into this crap, you have to believe the government owns all the money. I dont..


RE: The Gov Needs To Back Down
By ninjit on 5/14/2008 1:57:32 PM , Rating: 2
The worst example of this is the Death Tax. i.e. the tax beneficiaries have to pay when they inherit anything of value from someone else.

It doesn't make any sense, because I can just give everything I own to my kids BEFORE I die, and they wouldn't have to pay anything.

Yet for some reason the government thinks that the loss of a loved one is grounds for taxation??