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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 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.

"Well, we didn't have anyone in line that got shot waiting for our system." -- Nintendo of America Vice President Perrin Kaplan
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