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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 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.

"Paying an extra $500 for a computer in this environment -- same piece of hardware -- paying $500 more to get a logo on it? I think that's a more challenging proposition for the average person than it used to be." -- Steve Ballmer
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