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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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RE: The Gov Needs To Back Down
By FITCamaro on 5/14/2008 10:09:51 AM , Rating: -1
Face it. Sales taxes on internet sales are inevitable. It sucks yeah. But its still inevitable. Online prices are still lower though. Of course on smaller items, the combination of sales tax and shipping might erase any savings.


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.


"Vista runs on Atom ... It's just no one uses it". -- Intel CEO Paul Otellini

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