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Texas Comptroller charged Amazon $269 million in sales taxes that were not collected on online sales in the state, provoking Amazon to close its distribution center and cancel plans to expand its operations in Texas

Amazon has announced that it is closing one of its distribution centers and canceling operation expansions in Texas due to a dispute with the state's comptroller over millions of dollars in sales taxes. However, Governor Rick Perry (R-Texas) isn't letting the internet retail giant go that easily. 

Amazon made the decision to close a suburban Dallas distribution center after Texas State Comptroller Susan Combs told the company that they were responsible for $269 million in sales taxes that were not collected on online sales in the state. 

"We regret losing any business in Texas, but our position hasn't changed: If you have a presence in the state of Texas, you are required to pay sales tax just like any other business that has a presence in Texas," said Allen Spelce, a spokesman for Texas Comptroller Susan Combs.  

But Perry disagrees with Combs' decision to charge Amazon millions of dollars in sales taxes, and to let the company leave the state of Texas. Amazon's decision to close its Irving distribution center and cancel plans to expand operations in Texas will result in job losses as well as the loss of tens of millions of investment dollars to the state.

"That is a problem and I would suggest to you that we need to look at that decision that our comptroller made," said Perry. "The comptroller made that decision independently. I would tell you from my perspective that's not the decision I would have made."

Perry added that Combs shouldn't have pinned the sales taxes on Amazon's Dallas distribution center, since it doesn't have a storefront and is not responsible for such matters. 

"You couldn't go in and buy anything out of that store, and that, historically, has been the way we defined whether you pay taxes or not - if you had a storefront," said Perry. "This obviously didn't have a storefront. It was specifically there to manage products that need to be shipped out." 

Perry is looking to get the legislature involved to keep Amazon in Texas, but it may already be too late. Amazon's Dave Clark, vice president of operations, has announced that the company will close its Irving distribution center on April 12, and will cease all plans to expand operations in the state of Texas, which will eliminate 1,000 potential jobs and cut tens of millions of potential investment dollars to the state as well. 

"We don't want to be onerous on tax policy where businesses and I would say I'm having a hard time getting my hands around this one," said Perry. "Texas should be a bastion for businesses, not one where they're sitting there going 'we'd rather go over to Oklahoma where we could get a better deal.' Texas doesn't want to make itself less competitive with its tax decisions."  

According to Spelce, Texas loses about $600 million in online sales taxes annually. Currently, a case is pending before the State Office of Administrative Hearings regarding the $269 million in sales taxes from Amazon. 

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Big Parasite
By Shadowmaster625 on 2/14/2011 10:33:40 AM , Rating: 0 does not use any state services that could possibly justify a $269 million tax bill. They dont use police. They dont use fire. They dont use the highways. (UPS might, but UPS is not amazon.) They dont have any retail commercial property. There is absolutely no way to justify a sales tax on a company like amazon. Except if you are a money grubbing recipient of that money grab.

RE: Big Parasite
By T2k on 2/14/11, Rating: 0
RE: Big Parasite
By Sazabi19 on 2/14/2011 11:04:45 AM , Rating: 3
The Govt. takes enough of my money as it is, leave my non store-front online purchases the hell alone, I've paid my dues to get stuff driven to my door, that's what shipping is for and the company that pays its local taxes as well.

RE: Big Parasite
By paydirt on 2/14/11, Rating: 0
RE: Big Parasite
By Drag0nFire on 2/14/2011 10:48:49 AM , Rating: 2
It's not Amazon that uses the state services; rather, it is the people of Texas who purchased their merchandise at Amazon that consume state services. This is the purpose of "sales tax" - a percentage of the value of all purchases made by the People of Texas are collected by the government to fund state services for the People of Texas.

Also remember that as a citizen, you owe sales tax on all purchases made including those made at a merchant that has no business presence in your state. The difference is simply that Amazon is not responsible for collecting tax revenues if it has no business presence in a state.

This said, the current system is broken. Most online buyers do not pay the sales tax, and this loophole for online purchases is becoming more and more significant in terms of revenue lost to the state governments. I think it will be important to resolve it decisively in a just and uniform manner. The system as it is places unfair burden on brick&mortar businesses.

RE: Big Parasite
By theapparition on 2/14/2011 11:07:57 AM , Rating: 3
Thank you Drag0nFire, very well put.

To the OP, Amazon should not have to pay $249mil in taxes, but they should have collected $249mil in sales tax from Texas consumers. The law is clear, if you are required to collect tax, and don't, you are repsonsible to pay them and can't retroactively go back after employees/customers. Amazon only has themselves to blame for this.

This said, the current system is broken. Most online buyers do not pay the sales tax, and this loophole for online purchases is becoming more and more significant in terms of revenue lost to the state governments. I think it will be important to resolve it decisively in a just and uniform manner. The system as it is places unfair burden on brick&mortar businesses.

Couldn't agree more.

RE: Big Parasite
By paydirt on 2/14/2011 11:48:48 AM , Rating: 2
I posted above. The non-collection of sales tax:

*hurts property values (lower retail activity, fewer retail jobs, fewer jobs to maintain/support retail operations, lower employment leads to less demand for residential housing)
*hurts local tax collection (primarily due to lower property values, but also from local sales tax non-collection)
*directly hurts state tax collection
*hurts local employment (the loss of the TX facility might cost 1,000 direct jobs, but it may have already destroyed many more jobs--which will likely be restored)

local and non-local businesses should be on the same footing.

AND I'm a conservative/libertarian

RE: Big Parasite
By lowsidex2 on 2/14/2011 11:04:14 AM , Rating: 2
It's a sales tax. You buy something, you pay it. Up until know, states haven't been broke, and internet sales were not significant enough to justify the effort to collect. That is no longer true.

Plus it's unfair to every other store. How can they complete when everyone knows you can get it 8% (or whatever TX tax is) cheaper online? I guess every local retail outlet can close shop and go work for UPS as a driver.

RE: Big Parasite
By sviola on 2/14/2011 11:40:12 AM , Rating: 2
So, if I don't live in TX and buy something there, all I have to do is prove I don't live there and they'll not charge me for the sales tax?

RE: Big Parasite
By Solandri on 2/14/2011 12:45:58 PM , Rating: 2
That's really the crux of the issue. In the old days, the buyer and the seller were in the same state so it made sense for the state to be able to collect taxes on it. Mail order changed that. What happens if the buyer is in one state and the seller is in another? Which state is entitled to tax the transaction? The seller's? The buyer's? Both? Neither? In international commerce, differences in taxation are usually normalized by import/export taxes. But the Constitution and court precedent established that states are prohibited from imposing such taxes at their borders.

Sears was the first company to really capitalize on this, running the first highly successful mail order business. The problem really should have been taken care of at the Federal level back then in the early 1900s. Unfortunately it wasn't so we're still stuck with it today. California was the first state to use the concept of nexus to start collecting sales taxes (on IBM sales if I remember right, IBM being a New York company but with offices in California), and more and more states are using that. But it still doesn't address the basic problem - are the taxes based on the buyer? Seller? Both (double taxation)? Neither (the current situation)?

RE: Big Parasite
By tech4tac on 2/14/2011 1:26:09 PM , Rating: 2
Generally, if you deliver via a common carrier (USPS, UPS, Fedex, DHL, etc) the state & district the item is delivered to is entitled to the sales tax. If the seller have a nexus in that state, they are responsible for collecting the sales tax for the state, otherwise the buyer is responsible for paying the use tax on their state tax return. Some states have laws that complicate matters but this is generally the case. The main problem for business with interstate sales is navigating the tens of thousands of different ever-changing state & district taxes and laws. If they'd just create 1 Federal or 1 state wide internet sales tax rate & law, it'd make things much easier to implement. However, in the Federal case, a constitutional amendment may be needed for this to happen.

RE: Big Parasite
By stonemetal on 2/14/2011 11:03:59 AM , Rating: 1
They dont use police. They dont use fire. They dont use the highways.

So if that warehouse is robbed they don't expect police to do anything? If the place catches on fire they don't expect fire fighters to come and put it out? Their employees don't drive to work? The product stored in that warehouse is brought in by what means? Magic maybe?

RE: Big Parasite
By spamreader1 on 2/14/2011 11:29:07 AM , Rating: 3
Those functions are paid for by property (state, county, and city taxes {if your property is in a city limits}), not sales taxes in Texas if I'm not mistaken.

RE: Big Parasite
By swampthing1117 on 2/14/2011 11:05:33 AM , Rating: 2
Really? If their facility catches fire who's going to put it out? if there's a crime on their property who's going to respond? If it's a shipping center all those semi trucks are doing a major toll on the local highways. Whether it's an amazon truck or a ups truck is irrelevant, the center's presence is generating that traffic.

There is every reason to justify taxes on that property and i'm tired of all these online outlets not charging sales tax when I as a storefront have to. It makes competing with them even harder and all that money lost from them not paying has to be made up someplace, as in higher property taxes, local sales taxes etc. These mail order giants NEED to be charging sales tax, they are doing business and as such need to pull their weight.

Amazons move is nothing but a hissy fit over texas removing one of their main ways of competing and contributing to their boosted profits.

RE: Big Parasite
By bryanbrun on 2/14/2011 11:09:14 AM , Rating: 1
So if Amazon's warehouse catches on fire, who will put it out?

The roads that are torn up by the thousands of deliveries to and from the warehouse are to be paid for by whom? It makes no sense that UPS/Fedex bare all of this cost.

The warehouse benefits from the general state of order and security imposed by the local police force. Who pays those salaries?

Amazon is a parasite living off of the life blood of the local and state tax payer.

RE: Big Parasite
By spamreader1 on 2/14/2011 11:31:45 AM , Rating: 2
Fire dept paid by property tax.

Road repairs are paid for by property tax and a combination of fuel taxes and vehicle registration/inspection.

also note I think amazon should be collecting taxes on purchases from texas residents. just saying don't confuse the facts.

RE: Big Parasite
By Astral Abyss on 2/14/2011 1:08:58 PM , Rating: 2
^ Yes, this is correct. Take a look at your list of what your property taxes goes to. A huge portion of it is police, fire, and schools.

And since Texas doesn't have a state income tax, they tax the hell out of you on everything else, property taxes being one of them. I lived in Texas for 7 years and I can tell you with certainty that they will charge and tax you for everything they possibly can, including utilities.

I'm sure Amazon was already paying out the ass for property taxes, utilities, vehicle license fees/fuel, not to mention the employees they obviously had working there.

Maybe Amazon should have been collecting those taxes, but the fact is, Texas was still making bank off Amazon and Amazon was employing local residents to run the operation. They got greedy and stupid and some insignificant beaurocrat thought they'd stick it to Amazon for cheating the system.

The smarter way to handle that would have been to send Amazon a warning and a fine and say, according to such-and-such law you are required to collect taxes, and we will be collecting them in the future whether you charge them or not.

Someone just figured out that collecting that back-tax from Amazon is chump change to what they would have made in the long run from Amazon. And guess what, Amazon is still going to do billions in buisness in Texas and now won't having to pay taxes or support their local economy.

Brilliant job Texas...

RE: Big Parasite
By The Raven on 2/14/2011 3:54:22 PM , Rating: 2
Great post.

I think the comments here prove that the gov't has grown too big because the citizens can't keep the various tax systems straight. It should be a lot simpler and clear cut.

Oh and by the way... rather than having them ship it, I am going to cross the river, buy something in IL and tell them that I live in MO and that they should tax me accordingly. I don't think that will fly, am I right my brother?

RE: Big Parasite
By T2k on 2/14/2011 5:39:08 PM , Rating: 2
No because it's the DELIVERY ADDRESS, dumbo.

RE: Big Parasite
By The Raven on 2/15/2011 11:57:08 AM , Rating: 2
That is right to my point, which you obviously didn't get.

The store in IL wouldn't be delivering to me in MO. UPS/FedEx would. (Because I am the one to pay for it to be delivered, right?) So I get taxed at the MO rate and the money goes to MO? (Or in the case of the article, TX?) While if I go pick it up myself I get taxed at the IL rate?

Please explain how this makes sense. In the case of the story, TX is begging for taxes that should be going to Bethesda, MD or wherever Amazon is based.

Here's an idea for B&Ms... get an online presence and "steal" taxes from Amazon's state. That would level the playing field rather than complain how big Amazon is.

The reason Amazon is so big is that they are online. They wouldn't be so special if they weren't. Everyone else needs to do the same or offer meaningful value to their B&M (like personalized service, etc.) or they should just be prepared to step out of the market. Because that is what it is: a market. Not a charity auction.

"We are going to continue to work with them to make sure they understand the reality of the Internet.  A lot of these people don't have Ph.Ds, and they don't have a degree in computer science." -- RIM co-CEO Michael Lazaridis

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