Amazon taxesAmazon.com has offered a $300 million investment and the promise of 5,000 jobs in the state of Texas in exchange for the state postponing legislation that would force the online retailer to begin collecting sales tax on purchases made by Texans.

According to one source, top officials in the Texas legislature and governor's office are weighing Amazon's (AMZN) offer. The terms of the deal are strikingly similar to one accepted by South Carolina earlier this month -- 2,000 jobs and a $125 million investment in a distribution center, in exchange for which the state will allow it to postpone collecting sales taxes until 2016.

In Texas, where folks say everything is bigger, Amazon's offer to build distribution centers and hire workers is larger too -- if the Lone Star state is willing to delay its Internet tax collection requirement until 2016, said one government official.

This sort of wheeling and dealing in exchange for a tax exemption is not all that uncommon, says Diane Yetter, president of sales tax consulting business Yetter Consulting Services in Chicago. She noted that years ago, Federal Express struck a deal with Tennessee to hire a specific number of people and invest in a new distribution facility, in exchange for a sales tax exemption on purchases of new equipment that went into the building.

"Most states have enterprise zones where companies can locate there and receive tax exemptions," says Yetter. "The states are hoping to capture lucrative property tax or state income tax from those employees." However, she notes, "with Amazon's offer, it's flow-through money. Texas does not require individuals pay income tax, so all these people Amazon plans to hire won't contribute in that way. Texas, in part, may be looking to do this for the [public relations] benefit, or part of political jockeying."

Although Amazon did not return calls seeking comment, the e-commerce giant may be banking on the hope it can strike similar deals with others from the growing number of states that have introduced and passed "Amazon Tax" legislation this year.

An Unfair Advantage for Online Retailers


Convincing those states to delay implementing their legislation by nearly five years may also buy Amazon time to try to win its court battle with New York, where it hopes to avoid setting a legal precedent that would require it to collect sales tax on online purchases made through any of its affiliates.

New York took a novel approach in its approach to the tax issue in order to get around a 1992 U.S. Supreme Court decision, Quill v. North Dakota, which says states can only collect sales tax if the retailer has a physical presence in the state, like a store or distribution center. But New York argues Internet retailers that rely on other websites or affiliates also have a presence in the state where the affiliate operates. New York takes the view that affiliates are de facto storefronts, allowing a retailer to transact a sale once a user clicks on their advertisement on the affiliate Web site.

Brick-and-mortar competitors complain that their online rivals have an unfair advantage, noting they are able to sell their items at lower prices because their customers aren't paying sales tax -- which, they say, is costing them revenues and forcing them to lay off workers. Although consumers are required to pay sales tax on their Internet purchases, many do not. And the money that goes uncollected is huge -- with some estimates reaching $23 billion in uncollected sales tax by 2012.

Amazon, however, has threatened and has terminated its relationship with its affiliates in states where "Amazon Tax" legislation has passed. Earlier this year, state Rep. Nancy Skinner introduced AB153 in the California state legislature, calling for out-of-state retailers like Amazon to start collecting online sales tax. Affiliates, as well as brick-and-mortar retailers, turned up en masse to voice their concerns at a recent hearing over the bill.


California's House of Representatives has passed AB153, and it's scheduled to be heard on July 6 in the state senate's governance and finance committee. Amazon has yet to make a similar offer in California, said one government source. Currently, Amazon does not have a distribution center in the state, nor does it have one under construction.

In the meantime, California, like other states pushing their own versions of the "Amazon Tax" laws, hope to shift the burden of collecting Internet sales tax onto the online retailers themselves, similar to the way they are collected at a brick-and-mortar checkout counters.

As Yetter previously noted: "If everybody paid the sales tax that's due, the states' budgets wouldn't be as bad as they are."



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Max Smart

If the government would stop spending money they don't have then the "budgets wouldn't be as bad as they are." Here's a clue: when you're broke, stop spending.

When did it become generally accepted that government thinks the answer to over-spending is over-taxing?

I don't mind helping a neighbor or a friend but when you don't have anything to give then you stop and nowhere is it written that government is supposed to be a safety net for people when they try and fail.

June 25 2011 at 8:41 AM Report abuse rate up rate down Reply
darinw40@mail.com

How so many idiots here are complaining about the fact that the people who purchase on the internet don't pay sales taxes..yet these same idiots say that corporations should pay no corporate taxes whatsoever...all righties need to go get bent and have no brains whatsoever..and the rich can go get F$%^d as well ! ! ! ! ! ! !...no sales taxes are the only way the poor can survive...this is why we purchase on the internet

June 24 2011 at 10:40 PM Report abuse -2 rate up rate down Reply
1 reply to darinw40@mail.com's comment
orbit7777

You probably have been told before and will be again and again that it does not matter whether the corporations are taxed or not the results are passed on to consumers. A fact that may as well be written in stone.

June 28 2011 at 12:29 PM Report abuse rate up rate down Reply
stevechengmead

California will have no teeth to get taxes from Amazon, they left the state long ago and will now dump any affliates here in California. California dept is unbearable as are our taxes. Businesses are being chased out of here quickly. Here are some facts and you figure out why this is happening : White Americans are no longer the majority, among the highest taxes in the nation, MILLIONS of Illeagal reside here AND recieve benefits, The Democratc Party has been in charge of both houses here since Christ was a corporal. WAKE UP.

June 24 2011 at 8:24 PM Report abuse +6 rate up rate down Reply
1 reply to stevechengmead's comment
savemycountry911

The lunatic left can't comprehend that much truth.

June 24 2011 at 9:46 PM Report abuse +1 rate up rate down Reply
1 reply to savemycountry911's comment
orbit7777

You can hardly blame them with such "news" outlets as HuffPo spouting their biased, liberal agenda 24/7.

June 28 2011 at 12:31 PM Report abuse rate up rate down
arklight99

If State legislatures were both sane and responsible, they wouldn't have already spent our great grandchildren's money. There are States with both sane and responsible legislatures, and which have no debt, and a surplus on top of that. I would think that those States would welcom Amazon, and others, realizing that working people pay more than enough taxes to make up for the 'lost' sales tax revenue: 'lost' meaning revenue that they never had in the first place, but are itching to get their mitts on so that they can spend ten times that amount, and then find more taxes and fees to gouge their citizenry with.

June 24 2011 at 7:18 PM Report abuse +3 rate up rate down Reply
Blackthorn

Hopefully, everyone realizes that sales tax pays for all those fun things you take for granted. Police, roads, street lights, 911, fire rescue, schools, trash pick-up, etc. The fact that you can buy something in YOUR OWN state from a online retailer that has a physical location IN YOUR STATE, and the buyer doesn't pay sales tax, can get it shipped for free, and most likely recieve it in one day, makes people figure "why shop locally?"
The problem then becomes that local businesses close. Everyone that works at those stores or owns those stores become unemployed. More and more properties become available to rent and lease with no one to rent or lease them. Unfilled properties generate no income and have a lien placed on them or go into forclosure. Next to sales tax, commercial taxes are the next huge revenue generator for the services the public enjoys. With out the taxes many things will change for the worse and many cities/towns economies will simply die.
(But I'm sure people will tell me I'm wrong.)

June 24 2011 at 5:36 PM Report abuse -3 rate up rate down Reply
2 replies to Blackthorn's comment
jackd1207

I'm old enough to remember the first K-Marts that started popping up all over the nation. What you say will happen now happened then. All that the Mom and Pop stores that could not compete closed. Over time, however, they found jobs or opened other businesses that weren't in competition with K-Mart. People who shopped at K-Mart saved some little extra money and spent that money on other things, i.e., going to movies more often, eating out more often, buying and extra pay of shoes, etc., etc. which created jobs and opportunities thjat didn't exist before. Change is rarely welcomed, but, in a free market ,we adapt.

June 24 2011 at 6:44 PM Report abuse +1 rate up rate down Reply
1 reply to jackd1207's comment
orbit7777

After K-Mart, then came Walmart and then came Dollar Stores, etc.. Now, Walmart sees the handwriting on the wall and are getting into smaller stores like Dollar Stores. (Not everyone is able or want to walk half a mile to collect a few items.) So round and round it goes. If Walmart wanted to be a good cvitizen they would put these smaller stores into buildings that are lying around empty such as their very own old buildings!

June 28 2011 at 12:38 PM Report abuse rate up rate down
Loren

You start out showing how wonderful taxes are, then end your paragraph showing how destructive the parasite of taxation is on business. Businesses do not pay taxes, they pass the cost on to the consumer in the form of higher prices. Once the taxes exceed the profit the next step is to cut their losses and close down the shop.

June 25 2011 at 12:35 AM Report abuse +1 rate up rate down Reply
dasunx

This makes perfect sense to me...... After all, it is all about revenue. Now all Texas has to do is figure out which way they make the most money and take the deal and run................

June 24 2011 at 5:15 PM Report abuse +2 rate up rate down Reply
fentex5

Of course," Guv'ner" Perrycite and his hose bag cronies are not being offered any "incentives"for making a deal. No.......that would be illegal. But, that is the way politics and business converge down here.

June 24 2011 at 4:46 PM Report abuse -2 rate up rate down Reply
1 reply to fentex5's comment
dasunx

Are you just full of hate or is it that you just have a complete lack of common sense...........???

June 24 2011 at 5:16 PM Report abuse +1 rate up rate down Reply
tallbussys

Most states sales tax laws require the consumer to remit and pay sales taxes on purchases shipped from out of state, but very few consumers pay the required sales tax. Just like the local merchant who collects sales tax and does not forward it to the state, consumers who do not pay the required sales tax can also be forced to pay back sales taxes and penalties.

June 24 2011 at 4:19 PM Report abuse rate up rate down Reply
1 reply to tallbussys's comment
Kent

Illinois now offers two choices. A taxpayer can pay a replacement sales tax for out-of-state purchase, based on income, or a taxpayer can state the amount of out-of-state purchases and pay the appropriate amount of tax.

Based on the amount of items I bought via the internet, on-line, and while out of the state, I went with the former.

Also, Illinois does collect information from the U.S. Customs offices at O'Hare, Midway, and Lambert airports and cross-checks declarations against what people put down for sales taxes on their Illinois 1040s.

June 24 2011 at 4:48 PM Report abuse rate up rate down Reply
ntech

Amazon is overlooking the simplest way to kill the internet tax. Locate their shipment points outside of the USA and ship it in. Distribution points in Canada and Mexico would be sales tax free. And with the volume of shipping they do they could swing favorable shipping rates comparable to US shipping. Then the states then run into Article 1 sec. 10 of the US Constitution.

No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul of the Congress.

It becomes an international shipping issue and even if they get the Congress to ok the taxes the problem becomes they cannot force Amazon to give up their records. Issue resolved.

June 24 2011 at 4:19 PM Report abuse +2 rate up rate down Reply
1 reply to ntech's comment
dgframer

That is my argument against the "Fair Tax". People will shop online to keep from paying 5-7% imagine if it were a 25% saving.

June 24 2011 at 5:51 PM Report abuse +1 rate up rate down Reply
2 replies to dgframer's comment
amrbl

u don't know much about the fair tax, u need to study it more before making any commits.

June 25 2011 at 6:41 AM Report abuse rate up rate down
Henry ptnm

amrbl: Neither do you. Look up fair tax fine print.blogspot. Also look up The Flat Tax is not flat and the Fair Tax is not fair: www.lewrockwell.com/vance/vance243html. The Fair Tax is nothing but a gimmick. It was thought up by 3 rich businessmen and used by the GOP to entice people so they can look favorable to the GOP. Don't tell me about Neal Boortz's books. I don't read any books written by a racist.

June 27 2011 at 5:41 AM Report abuse rate up rate down
ruggit

The deal may be the best choice. Four years of no sales tax may be a cheap price to pay for the jobs and benefits, After that, start collecting. The sales tax issue is a tough one for brick and mortor stores to overcome.

June 24 2011 at 4:18 PM Report abuse +1 rate up rate down Reply