Print 62 comment(s) - last by dever.. on May 15 at 2:12 PM

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.”

Comments     Threshold

This article is over a month old, voting and posting comments is disabled

RE: The Gov Needs To Back Down
By bhieb on 5/14/2008 11:00:02 AM , Rating: 2
Problem is that the government (no matter what level) has monetary needs and will get that money from somewhere. The only method they have for getting funds is by taxes. Sales tax is voted on and passed by the public and we have to some extent approved it. The problem is that Etailers have been enjoying a 6.25% advantage over local b&m's why is that fair?

I have no problem with sites like this collecting the tax, as we are legally obligated to pay it anyway. I would much rather see this than a state income tax, excspecially if it resembles the "robin hood" steal from the rich to give to the poor model the Fedral government uses.

RE: The Gov Needs To Back Down
By xsilver on 5/14/2008 11:11:21 AM , Rating: 2
what is the consensus among amercians about a flat rate federal tax just like the brits/aussies have with VAT/GST?

wouldnt it eliminate a lot of confusion and loophole worming?
Or is there a huge discrepancy between state taxes so that a singular figure would be hard to agree to?

RE: The Gov Needs To Back Down
By HVAC on 5/14/2008 11:15:55 AM , Rating: 2
It creates a black market opportunity. An income tax tracks a much better controlled set of transactions: paychecks. A VAT/GST in the percentages needed by a federal government gives enough incentive to make bypassing it lucrative and it is more difficult to enforce on a transaction by transaction basis.

RE: The Gov Needs To Back Down
By xsilver on 5/14/2008 11:25:58 AM , Rating: 2
isnt this 6.25% tax in texas a sales tax?
VAT/GST is also a sales tax, its just universal so that it created less confusion. Everything is taxed at 10%, some items are not taxed at all (essential food products such as milk/bread in australia)
Other products have an excise (alcohol/petrol/cigarettes) so that more tax is collected

what has this got to do with income tax as you mention?
The introduced GST in australia has created less black market opportunities, not more.

RE: The Gov Needs To Back Down
By zombiexl on 5/14/2008 1:25:44 PM , Rating: 2
So you ignore all the under-the-table workers?
Why should we be taxed on money before its spent?
Why is it anyone's business how much money I make?

In most states you pay a state wage tax and a state sales tax. On top of that there are all sorts of "special" sales taxes (cigs, booze, etc). On top of that you pay sales tax on the "special tax", which is not quite legal. Although it’s the government so was just bend over and take it.

If the taxes keep escalating (and they will with Universal Health around the corner) I imagine people will begin to realize the reason the 2nd amendment was put in place.

If government needs more money cut some of the pet projects and social programs.

RE: The Gov Needs To Back Down
By Spivonious on 5/14/2008 11:18:53 AM , Rating: 2
Just a small example, Pennsylvania is 6%, Maryland was recently 5% but just moved to 6%, New York is 7%, and Delaware has no sales tax. I think it would be very hard to get the states to agree on a flat rate. Also, where would the VAT go? Right now, the federal government does not collect sales tax. I'm sure the states wouldn't be too enthusiastic about losing all of that income.

RE: The Gov Needs To Back Down
By xsilver on 5/14/2008 11:31:49 AM , Rating: 2
yes, I would think it would be very hard to agree on a flat number for the entire country. Would a flat rate of say 8% screw over a considerable number of people?

However all the income can just be redistributed amongst the states for exactly how much you collect if the states are smart/savvy enough to self govern.

A Utopian view would be that it would reduce a lot of people trying to "skip" the sales tax by buying things interstate and create a more level environment. Its not like the money collected will be lost, it can go to the usual suspects of schools,hospitals,infrastructure etc.

RE: The Gov Needs To Back Down
By zombiexl on 5/14/2008 1:27:46 PM , Rating: 2
Correction. PA is 6%, but in 2 counties (allegheny and philadelphia) there is an extra 1% sales tax. This tax was to pay for stadiums that the voters voted against.

RE: The Gov Needs To Back Down
By bhieb on 5/14/2008 11:31:24 AM , Rating: 4
I'm personally for it, but the problem is it would just be too much. I don't have the numbers but I'm sure that in order to match the funds that they are getting from the income tax the IRS woul have to have at least a 5% sales tax. Tack that on to the 8.25% I pay in city/state now and and your looking at double digit tax numbers.

However I do think it helps solve some of the illegal immigrant issues. With a income tax based system it is very easy for them to just not pay and still reap the benefits of the current tax system. However if you put a sales tax in place they at least have to contribute something to taxes, sure they can still get around em on a cash transaction basis, but it would be more difficult to avoid.

To your original point the general population is opossed to it becuase they like the current system where the majority of the tax is paid by those that they think can "afford" it. But what most people just don't get is that Evil Corporation A that can afford it will not take a loss, they have a budgetary goal and they (just like everyone) will get their money. So remember that the next time Average Joe's company lays some folks off, or raises the price of goods. Businesses are not out to loose money and just cause the general public thinks they can "afford" the tax differential does not make it true, in fact it is just passed back on to the general public by less jobs and/or higher prices.

Is there a perfect system, I have no idea. But IMHO the only way to fix the high tax problem is to realize it is not a tax problem at all rather a spending problem. If the government spends less, then less tax is needed. So the debate should soley reside there.

RE: The Gov Needs To Back Down
By xsilver on 5/14/2008 11:40:22 AM , Rating: 2
im not sure about VAT, but with GST in australia, you cant skip paying the tax by paying cash.

The only conceivable way to skip the tax is to cook the books which is a huge risk. Suppliers pass on the tax to retailers so there is a long traceable tax trail. (retailers of course can claim the sales tax back on their suppliers so there goes your incentive to cook the books)

You make a great point with the illegal immigrants and with your comments on spending I think a simplified/"naive" view would be to put the sales tax moderately high, lower income taxes instead and still probably be ahead on revenue so that spending on schools etc. is increased so that brownie points can be won that way. This way it only clearly penalizes the illegals as the poor should reap the benefits of increased spending while the rich should stay the same with the rise of sales taxes but lowering of income taxes. I think I make it sound too simple but still....

RE: The Gov Needs To Back Down
By bhieb on 5/14/2008 11:56:00 AM , Rating: 3
Again the main reason it does not fly here is that the majority of the people love the fact that the rich pay most of the taxes. If your an Average Joe making $40K then your only paying 25%, but if you happen to be a Corporation and/or rich guy making $357K it is prefectly acceptable to the general public that you pay 35%. And you'll get a whole line of morons arguing that the rich pay way less because they get around the tax some "magic" way. But the fact is that they use the law to do it, the same one Average Joe could use. The only person getting "around" taxes would be a criminal violating the tax law.

That is why I love the Fed Sales tax idea. Punish the rich when he buys his douchebag $400K Ferrari but let him spend it. Consumer spending is what drives the ecomony so why take money out of the people's hands up front, get it when they spend it. That way if your trying to scrape by on $5.15/hr you don't pay hardly any tax (grocery's/essentials would still be exempt), but if your rolling around in your benz pay up.

RE: The Gov Needs To Back Down
By dever on 5/14/2008 2:28:28 PM , Rating: 2
I agree on the preference for a FairTax, but I think you're off on who pays the taxes.

Taxes are paid by upper middle-class. Those who actually declare an income. The top 50% of income earners pay 97% of all income tax (and ironically receive very little of the social largess that the government distributes using their money)...

2005 numbers:,...

However, their are still a lot of people in the "rich" category (whatever that means), who don't work for someone else, so their can be ways around declaring income. The point being, that a complicated tax system will always benefit those most able to study or pay to wiggle through the loop holes. It's not in "everyone's" best interest to simplify the tax code, but the majority.

RE: The Gov Needs To Back Down
By zombiexl on 5/14/2008 1:32:51 PM , Rating: 2
If you paid NO income tax a sales tax would be much better for you. Lets use round numbers to make it easy.

Lets say you make 52k/yr (easy to divide by 52) you get 1k a week. You probably take home around 800/wk. Now lets say instead you took home $1000/wk. Paying sales tax on things you bought might seem crappy, but the government knows nothing about your income, cant bracket you in anywhere and illegal money (drug money, etc) is taxed as well.

You catch that money for say those 5k/set of rims bought by that guy whos working at BK.

Also if you decide to bank your money you arent taxed for it.

RE: The Gov Needs To Back Down
By FITCamaro on 5/14/2008 12:05:47 PM , Rating: 2
Anyone who actually pays taxes in this country is for a flat federal income tax rate. The problem is that nearly 50% of American's don't pay taxes. If a flat tax went into place, they might have to. Plus all the lower income people say that it would benefit the rich. It would benefit nearly all of us.

RE: The Gov Needs To Back Down
By bhieb on 5/14/2008 12:19:00 PM , Rating: 2
True to some extent, but I have had several conversations with people (mostly Democrats) that don't like the idea. They feel like the rich can "afford" it and should have to spread the wealth. I tell them that is like a forced 10% charitable contribution except the federal government picks where it goes. That I'd be more inclined to accept, if I could pick the charity cause the government sucks at it :)

RE: The Gov Needs To Back Down
By Nik00117 on 5/14/2008 1:26:21 PM , Rating: 2
The rich can afford it. Lets assume person A doesn't have the best of what life can offer. Therefore he has a decent job making 45k a year. Its enough to feed his faimly, and put some gifts under the tree for christmas. Then you got Person B, now person B was a bit lucky, and had a great idea. he is now making 170k a year. Now the base tax is 25% of your income. Ok so that makes persons B income 33750. Still liveable, but wait a minute Person B still has 127,500. Way can't we take another 10% or so? and now he has 110,500. Hes still a happy man with little worries, he just paid 10% extra though because he can afford it. As simple as that. I intend on beign rich and when I am rich I expect to pay more taxes.

RE: The Gov Needs To Back Down
By bhieb on 5/14/2008 1:33:11 PM , Rating: 2
The reason you don't take the extra 10% is because this is not a socialist country. That is what socialism is. Yes from a pure numbers point of view he can afford it, but again we are not socialists so what business does government have in determinig how much one person can afford over another. Taxes should be fair and place on everyone equally, they aren't but they should.

RE: The Gov Needs To Back Down
By zombiexl on 5/14/2008 1:44:51 PM , Rating: 2
I intend on beign rich and when I am rich I expect to pay more taxes.

How do you define rich?

I just had this conversation with my 7 y/o who asked if we are poor, rich or just ok. I told him it depends on who you ask.

If you make more you WILL pay more under a flat tax (although i'd prefer a totally use tax based system). There is no reason to punish someone who has worked to get where they are. Even if it is just a lucky idea, its their lucy idea and they deserve what they get.

If you think rich people should pay more, make taxes flat and add a voluntary section to the return. Trust me, no one thinks they have too much money except for someone with less money.

RE: The Gov Needs To Back Down
By dever on 5/14/2008 2:50:46 PM , Rating: 3
We are all rich. If you live in a present day, industrialized nation, you are rich. Period.

The poorest in our society has things that kings a few hundred years ago would have given most of their kingdom for.

The most common anti-biotics are now nearly free (and often free through some private pharmacies). About a hundred years ago, the US president (Coolidge) lost his son to an infection that spread from a blister in his heel from playing tennis, all while under the best medical care in the country.

We have hot and cold running water, indoor plumbing and toilets... unimagineable. No need to trek out to the outhouse in the mud, snow and sleet if you wake up in the middle of the night and realize you have the flu.

I personally have at least one instance where I would have died if it had not been for modern medicine (e-coli, mexican restaurant). In the recent past, most people had one or more close family members die from things we hardly blink an eye at today.

Thousands of food choices that cost a small fraction of the average income. Just a couple hundred years ago, most would have to spend 10 hours a day just working to feed themselves. The main dietary problem of our poor is obesity, not starvation.

The list goes on and on. If we continue increasing in wealth at our current rate, the average person in the US will be as rich as Bill Gates (adjusted for inflation) in about 400 years. Throughout history, the average family income has been about $600/year in today's dollars. We are truly wealthy.

RE: The Gov Needs To Back Down
By frobizzle on 5/15/2008 8:31:21 AM , Rating: 2
The only method they have for getting funds is by taxes.

That's not true! Up until very early in the 20th century, there was no federal income tax. It even required an amendment to the constitution to institute an income tax.

So, how did the Feds get funded? Import tariffs. The repeal of most tariffs is the fundemental reason the US economy is deteriorating at a rapid rate. Reinstituting the tariffs (and scuttling travesties like NAFTA) would and should be the first action taken by Washington. Not only would it significantly reduce the out of control trade defecit, it would revitalize the manufacturing sector and bring jobs back to Americans.

It's the logical path to follow so we can expect the government to never go that route!

"If you can find a PS3 anywhere in North America that's been on shelves for more than five minutes, I'll give you 1,200 bucks for it." -- SCEA President Jack Tretton
Related Articles
IRS Wants to Tax Online Sales
May 8, 2007, 9:30 AM

Most Popular ArticlesAre you ready for this ? HyperDrive Aircraft
September 24, 2016, 9:29 AM
Leaked – Samsung S8 is a Dream and a Dream 2
September 25, 2016, 8:00 AM
Yahoo Hacked - Change Your Passwords and Security Info ASAP!
September 23, 2016, 5:45 AM
A is for Apples
September 23, 2016, 5:32 AM
Walmart may get "Robot Shopping Carts?"
September 17, 2016, 6:01 AM

Copyright 2016 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki