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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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Dear Lord.
By 16nm on 5/14/2008 11:21:51 AM , Rating: 2
..., and the IRS last week made it clear that it wants to tax transactions through user-to-user sites like eBay and Craigslist.

So if I buy something, use it, and later sell it on eBay for less than I bought it for, taking a loss, I'm taxed? So I'm taxed when I buy it and then again when I sell it? That's poopy.

RE: Dear Lord.
By bhieb on 5/14/2008 11:34:54 AM , Rating: 2
No you depriciate it just like businesses do. Yes your tax return becomes a nightmare, but it is the same thing a B&M transaction has to do.

RE: Dear Lord.
By 16nm on 5/14/2008 11:49:59 AM , Rating: 2
But I should not have to treat my personal life like a business. If I sell a $5,000 camera lens on eBay, I should not have to treat it like a loss if I do not want to. Besides, wouldn't the IRS be losing money if people started adding personal losses (other than investments) to their income? Is that even legal? I don't think I can personally buy a camera lens and sell it for a $3,000 loss and write it off my personal income, can I? Unless I am missing something, this idea seems totally whacked for all parties involved.

RE: Dear Lord.
By bhieb on 5/14/2008 11:59:37 AM , Rating: 2
Probably not, but the ebay tax thing is more of an income tax issue rather than a sales tax the author just through that comment in they are 2 seperate issues. The IRS is really looking for people making a profit off of the lense. I think you would be just fine as long as the transaction is a net loss there is no income involved. The IRS is concerned with people using Ebay as a store front and avoiding income tax.

RE: Dear Lord.
By FITCamaro on 5/14/2008 12:45:05 PM , Rating: 2
They already passed some law that makes it that if you make over a certain percentage of your income off ebay sales, you have to pay income tax on that income. But also if you sell a single item worth over a certain amount, you have to pay income taxes on the profits. Of course if you're taking a loss, you don't make any profit.

RE: Dear Lord.
By 16nm on 5/14/2008 1:38:22 PM , Rating: 2
But if I have to go through the trouble of treating myself as a business then should I not also get to enjoy adding a loss to my personal income and therefore paying less taxes? I would hope so if the IRS is going to be knocking on my door about stupid eBay transactions! This idea seems really foolish to me. The IRS has not thought this through. It's a pain in the butt for people like me who basically treat eBay as a sort of electronic garage sale.

RE: Dear Lord.
By 16nm on 5/14/2008 3:13:54 PM , Rating: 2
Actually, I point the finger at the IRS when they are just dumb bovines that do what the laws tell them to.

“Then they pop up and say ‘Hello, surprise! Give us your money or we will shut you down!' Screw them. Seriously, screw them. You can quote me on that.” -- Newegg Chief Legal Officer Lee Cheng referencing patent trolls
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