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State thinks online giant owes them millions of back taxes

Online retailer 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 “, 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 “” 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’s subsidiaries’ Texas operations.”

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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..

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