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Don't Mess with Taxes.
February 11, 2011 2:25 PM   Subscribe

Amazon.com's state sales tax fight took a dramatic turn as plans were announced to close the online retailer's Irving, Texas distribution center by April 12. Amazon would not confirm the total number of employees who worked at the fulfillment center, but did announce plans to offer positions in other states to employees willing to relocate. Amazon blames the closure on Texas' "unfavorable regulatory climate."

Texas State Comptroller Susan Combs' office billed Amazon for some $269 million in unpaid sales taxes for a five year period, adding that the state estimates $600 million in lost sales taxes each year due to interstate online sales. Amazon filed suit against the state of Texas in January, demanding it produce an audit for the bill. However Texas comptroller's office withheld the report, citing the Attorney General's opinion that it was protected by attorney-client privilege.

Amazon is also scrapping plans "to build additional facilities and expand in Texas, bringing more than 1,000 new jobs and tens of millions of investment dollars to the state." Estimates place the loss of existing jobs at 119 employees across 98 positions in the Dallas suburb. Texas is facing a $27 billion shortfall, based on the comptroller's estimate of the 2012-2013 budget. (Previously)
posted by 2bucksplus (218 comments total) 3 users marked this as a favorite

 
Battle of the Titans. Which it appears Amazon has already won.
posted by bearwife at 2:27 PM on February 11, 2011


We won't raise taxes, but we'll attempt to enforce un-enforcable taxes we already have.

Nice work Texas. Amazon done messed with y'all.
posted by GuyZero at 2:31 PM on February 11, 2011 [10 favorites]


It's probably obvious to say but if somebody said make a list of states by "unfavorable regulatory climate", Texas would would typically be very far down on that list. Guess it depends on which type of company and which type of regulation.
posted by MCMikeNamara at 2:33 PM on February 11, 2011 [5 favorites]


But, but, all the Republicans up here in Cali-bama say Texas is SO business friendly that we need to eliminate all regulation in order to complete! You mean they've been lying to me?
posted by entropicamericana at 2:34 PM on February 11, 2011 [5 favorites]


Ugh, what a comptrol freak.
posted by Zozo at 2:36 PM on February 11, 2011 [9 favorites]


"Fulfillment center" is almost as obnoxious as "winning" an eBay auction.
posted by nathancaswell at 2:41 PM on February 11, 2011 [3 favorites]


i blame al gore.
posted by ennui.bz at 2:41 PM on February 11, 2011 [1 favorite]


So we wanted to bill them, but weren't going to let them know how we got the bill numbers? Why not just put a gun to their heads?

Anyway, Amazon sells books and if there's anything we don't need more of in Texas, it's books. Good riddance, yee haw, I love Jesus and go Cowboys.
posted by emjaybee at 2:41 PM on February 11, 2011 [12 favorites]


I didn't see anything in the articles that explained why Amazon doesn't feel like it needs to pay taxes in Texas.

My very simple understanding of how sales tax works is if a company has a physical presence in a state - briefly restated in the articles above as well - they would have to collect on sales to residents of this state.

My also simple understanding of the "Amazon loophole" was that it specifically related to states like New York where Amazon didn't have a physical office. If Amazon has a presence in Texas, wouldn't they be have a clear obligation to collect tax on sales to residents there? Just want to understand where they're coming from.
posted by mullicious at 2:41 PM on February 11, 2011 [13 favorites]


Wow, and I was worried my earlier comment was stereotyping Texas too much.
posted by MCMikeNamara at 2:42 PM on February 11, 2011 [1 favorite]


Seems like a pretty open-and-shut case. If you physically operate in Texas and you sell goods to Texans, you have to charge sales tax. Why wouldn't you?
posted by East Manitoba Regional Junior Kabaddi Champion '94 at 2:43 PM on February 11, 2011


We won't raise taxes, but we'll attempt to enforce un-enforcable taxes we already have.

Nice work Texas. Amazon done messed with y'all.


What? Why do rich corporations get to avoid state taxes?
posted by Ironmouth at 2:43 PM on February 11, 2011 [3 favorites]


Interesting the very different tenor this thread took out of the gate from the Illinois thread.
posted by kmz at 2:44 PM on February 11, 2011


My also simple understanding of the "Amazon loophole" was that it specifically related to states like New York where Amazon didn't have a physical office. If Amazon has a presence in Texas, wouldn't they be have a clear obligation to collect tax on sales to residents there? Just want to understand where they're coming from.

From the second article, quoted in the second paragraph of the FPP :

Amazon filed suit against the state of Texas in January, demanding it produce an audit for the bill. However Texas comptroller's office withheld the report, citing the Attorney General's opinion that it was protected by attorney-client privilege

The issue isn't that there is a tax. The issue is in how it is being assessed.
posted by Pogo_Fuzzybutt at 2:44 PM on February 11, 2011 [3 favorites]


The issue isn't that there is a tax. The issue is in how it is being assessed.

I live in Texas and I've never paid sales tax when I purchase from Amazon.
posted by kmz at 2:47 PM on February 11, 2011 [1 favorite]


I'll admit I didn't read the articles so my knowledge of issue is less than basic. I can say, as a resident of Texas who shops on Amazon often enough, not one of my Amazon purchases were shipped directly from Texas, they always come from out of state. I have a feeling this is not a coincidence.
posted by redyaky at 2:48 PM on February 11, 2011 [3 favorites]


Sales tax...Texas...Republicans...Corporate blackmail of government....

I don't know who to support in this fight.
posted by DU at 2:50 PM on February 11, 2011 [11 favorites]


Amazon blames the closure on Texas' "unfavorable regulatory climate."

BURN!

What? Why do rich corporations get to avoid state taxes?

Yeah... as much shadenfreude as I feel towards my state right now, I have to recognize that Amazon isn't the Good Guy here. Neither is the Texas comptroller's office.
posted by muddgirl at 2:50 PM on February 11, 2011 [1 favorite]


I wouldn't be surprised if the shipping center in Texas is an independent subsidiary that Amazon contracts out to, in order to avoid having a presence in the state.
posted by zippy at 2:51 PM on February 11, 2011 [1 favorite]


Texas need money, Amazon makes a lot of money:

1. Texas made up a number that it hoped Amazon would pay (knowing also about Amazon's expansion plans)
2. Amazon called Texas' bluff by asking for supporting documents (which I think we can assume do not exist)
3. Texas appealed to authority (in this case, the AG) and stonewalled
4. Amazon decide that Texas was no longer a friendly environment.

Note that this explanation does not touch on whether or not Amazon really owes sales tax money or if that is the duty of the state resident. If Texas had done some homework perhaps Amazon would be arguing over the bill's total instead of looking for greener pastures.
posted by 2bucksplus at 2:53 PM on February 11, 2011 [20 favorites]


this is a basic failure of the federal government to find a way to replace lost state sales tax due to internet sales. it's not like we just figured out that a huge chunk of the consumer economy is going to move/has moved online. yet 10-15 years after this was obvious there still hasn't been any response. it should be clear that trying to enforce state sales tax in the context of internet sales doesn't and will not make any sense.

it's part and parcel with a politics and culture based on the principle of something for nothing.
posted by ennui.bz at 2:54 PM on February 11, 2011 [6 favorites]


Is it Amazon's responsibility to collect sales tax or is it the responsibility of the citizens of Texas to pay it?

Just because an online retailer does not charge sales tax does not mean that one is immune from paying it. I understand that it's easier to go after a corporation but what is stopping Texas from prosecuting all the sales tax cheats who live within it's borders?
posted by photoslob at 2:54 PM on February 11, 2011


Is it Amazon's responsibility to collect sales tax or is it the responsibility of the citizens of Texas to pay it?

I don't know what Texas law on this is, but in Massachusetts it's the responsibility of the retailer to collect the sales tax where applicable, not the responsibility of the consumer to pay it. Who would the consumer even pay sales taxes improperly not assessed by retailers to?
posted by Sidhedevil at 2:57 PM on February 11, 2011 [1 favorite]


Avoid sales tax altogether! Open centers in Oregon, Delaware, Montana or New Hampshire.
posted by Mister Fabulous at 2:58 PM on February 11, 2011 [3 favorites]


It's a lot easier to go after a giant corporation for millions, than thousands or millions of individuals for tens of dollars each.
posted by MadamM at 2:58 PM on February 11, 2011


Is it Amazon's responsibility to collect sales tax or is it the responsibility of the citizens of Texas to pay it?

In the end it's always the citizens responsibility to pay the tax.
posted by MikeMc at 2:58 PM on February 11, 2011


Here in Utah, when you file your annual income taxes, they offer a line for you to pay the sales tax you technically should when buying online. I can't honestly think that anyone voluntarily fills that out, just like the line for reporting illegal income.
posted by msbutah at 2:59 PM on February 11, 2011 [3 favorites]


I wouldn't be surprised if the shipping center in Texas is an independent subsidiary that Amazon contracts out to, in order to avoid having a presence in the state.

From what I've been reading, it's exactly that. When you purchase from Amazon, you buy from Amazon, LLC. The distribution center is Amazon, Inc. Not sure that distinction would hold up in court, though.
posted by lunalaguna at 3:00 PM on February 11, 2011 [1 favorite]


In the end it's always the citizens responsibility to pay the tax.

It may be equally or even more the retailer's responsibility to collect the tax, depending on the specific wording of the state law. The penalties for not collecting sales taxes are generally much harsher than the penalties for not paying sales tax on individual transactions.
posted by Sidhedevil at 3:01 PM on February 11, 2011


"Here in Utah, when you file your annual income taxes, they offer a line for you to pay the sales tax you technically should when buying online. "

Pretty much every state has a Use Tax that almost nobody pays, I don't see where it's Amazon's fault that we're mostly all tax cheats.
posted by MikeMc at 3:01 PM on February 11, 2011 [1 favorite]


Who would the consumer even pay sales taxes improperly not assessed by retailers to?

In states that collect income tax, there is undoubtedly a line on your income tax returns. At least there was in California. However, I believe this line is for sales tax that could not be collected because the seller resided out-of-state. For in-state vendors,
As a seller, you are responsible for collecting and remitting the correct amount to the Comptroller's office. If you do not collect and remit the correct amount, you can owe any additional tax plus you may be assessed penalties and interest.
Texas does not collect income tax returns, but I have seen a form to collect sales tax on purchases made from out-of-state sellers. I've never used it.
posted by muddgirl at 3:02 PM on February 11, 2011 [1 favorite]


Interesting the very different tenor this thread took out of the gate from the Illinois thread.

That could very well be a "first responders" issue.
posted by Joey Michaels at 3:02 PM on February 11, 2011


I don't see where it's Amazon's fault that we're mostly all tax cheats.

Amazon isn't responsible for use tax, they are responsible for collecting and remitting the correct amount of sales tax. Is Amazon required to do this? Let's check:
A person or a retailer is engaged in business in Texas if any of the following criteria are met:

* (A) maintains, occupies, or uses an office, place of distribution, sales or sample room, warehouse or storage place, or other place of business;
* (B) has any representative, agent, salesperson, canvasser, or solicitor who operates in this state under the authority of the seller to sell, deliver, or take orders for any taxable items;
* (C) promotes a flea market, trade day, or other event that involves sales of taxable items;
* (D) uses independent salespersons in direct sales of taxable items;
* (E) derives receipts from a rental or lease of tangible personal property that is located in this state;
* (F) allows a franchisee or licensee to operate under its trade name if the franchisee or licensee is required to collect Texas sales or use tax; or
* (G) conducts business in this state through employees, agents, or independent contractors.
Emphasis my own.
posted by muddgirl at 3:04 PM on February 11, 2011 [6 favorites]


I thought that in places like WA, where maxwelton industries worldwide (emphasis on the wide after recent chocolate binge) is located, if you hold a garage sale in theory you're supposed to collect sales taxes, same with selling stuff on CL. I doubt any private party ever does, but I thought that's what the law said.

Can we just eliminate sales taxes soon, please? It's horribly regressive and costs a lot to administer both for the private sector and the gov't.
posted by maxwelton at 3:04 PM on February 11, 2011 [1 favorite]


How on earth can supporting documents for a tax bill be protected under attorney-client privilege? That's absolutely insane.

It's quite possible that Amazon would actually owe that much; they'd have to have sold $3.4 billion or so (at 8.25% tax) to Texans over a 5-year period. Their total revenues in 2010 were apparently $34 billion. They have a very healthy growth rate, so just pulling a number out of thin air, I'll assume a $20 billion annual average for the last five years. Texas has 25 million people, or about 8% of the total US population of around 305 million. Assuming that all sales are equally distributed, that means they should have sold around $8 billion in Texas.

Now, I imagine that Amazon's sales are, in actual fact, loaded much more heavily toward the 'rich' states, but it's at least not impossible that they could owe that much.

But imposing a sales tax and refusing to support it with documentation? That's seriously screwed up.
posted by Malor at 3:09 PM on February 11, 2011 [6 favorites]


Is it Amazon's responsibility to collect sales tax or is it the responsibility of the citizens of Texas to pay it?

Well, when I lived in Eastern Oregon and would drive to the nearest Costco (in Eastern Washington) to stock up the house, they were always fine with having me present my Oregon ID and not have to pay the sales tax. Because OR didn't have a sales tax at the time (maybe still doesn't), and WA does.

Living in WA, I don't get to drive to ID and opt out of sales tax there.

I'm not really sure how all these laws work, but they're more complicated than first meets the eye.
posted by hippybear at 3:13 PM on February 11, 2011 [1 favorite]


What? Why do rich corporations get to avoid state taxes?

Enforcing the law or dodging the law requires lawyers.
Lawyers require money.
Rich corporations can afford lots of lawyers.

(something something rule of law, something something meritocracy, etc.)
posted by yeloson at 3:16 PM on February 11, 2011


Malor: Is that the sales figures for Amazon in the US only or does it include their global subsidiaries?
posted by Grimgrin at 3:19 PM on February 11, 2011


I thought that in places like WA, where maxwelton industries worldwide (emphasis on the wide after recent chocolate binge) is located, if you hold a garage sale in theory you're supposed to collect sales taxes, same with selling stuff on CL. I doubt any private party ever does, but I thought that's what the law said.

Actually, there are two bits to answer that.

1) sales tax may only apply to first sale

2) sales tax only applies to sales where the seller is realizing a capital gain. yard sales don't realize capital gain on prior purchases.

I'm not a tax lawyer, but that's how I understand the law. If I'm wrong, I hope someone can provide correct information.
posted by hippybear at 3:20 PM on February 11, 2011 [1 favorite]


A few of my clients are small business retailers, and they are really suffering at the hands of companies like Amazon because:

1) Amazon buys in bulk an often sells things for less than the cost to a small business.
2) Amazon works on obscenely low margins, made possible through tax loopholes and underpaying workers, a.k.a. "efficiency".
3) Customers know about the sales tax thing. When that ranges from 7-10%, and you're talking about a two thousand dollar computer or camera, it can make a big difference.

The market solution to this is to create a network of over the border internet retailers who bleed state and local government dry with tax loopholes. I don't think it's a very good solution, and I'd rather not end up working for one of fifty Amazon clones operating out of vast, windowless warehouses in the middle of nowhere.
posted by notion at 3:23 PM on February 11, 2011 [1 favorite]


I'm sure that I'm showing my ignorance here, but how would Texas know how much sales tax to ask for? Isn't Amazon the only one who knows how much they have sold in Texas?
posted by rfs at 3:24 PM on February 11, 2011


49 states to go.
posted by clarknova at 3:28 PM on February 11, 2011


Congress needs to authorize a national collection system for online merchants. Pay the Feds, report the shipping address and settle the accounts annually. The beauty is the Feds could profit off the float. States would collect revenue.
posted by humanfont at 3:30 PM on February 11, 2011 [2 favorites]


This isn't about sales taxes. This is happening because Amazon didn't bribe the right people in Austin. Texas is extraordinarily business-friendly when those businesses are willing to donate large amounts to political candidates or throw lavish "fundraising" parties and so forth.

When businesses get in trouble in Texas, it's because they haven't greased the right palms. In that sense, "free-market" Texas more closely resembles countries like Mexico and Bulgaria rather than some theoretical libertarian paradise.
posted by Avenger at 3:31 PM on February 11, 2011 [15 favorites]


What? Why do rich corporations get to avoid state taxes?

This tax, to the extent that it's applicable, would not be paid by Amazon, only collected by them. It isn't a corporate tax, it's a tax on the purchase. The problem, of course, is that they didn't collect it. Here the state is saying they're liable for it anyway, which may or may not be true, but nobody's saying that Amazon is avoiding taxes here.

Of course, they are benefiting from their tax-free sales being more attractive to customers than taxable in-state sales.
posted by George_Spiggott at 3:31 PM on February 11, 2011


Nthing that I'm a Texan who has never paid sales tax to Amazon, and I'm pretty sure this is a tax cheat on Amazon's part. (I pay sales tax, for instance, to the iTunes store, because Apple has physical presence in Texas.) Amazon has a (moral, at least) right to know how they got the number, and our AG's opinion on this, as on so many other subject, is wrongheaded, but I can't see how the comptroller's office is wrong to figure Amazon owes some sales tax to the state.
posted by immlass at 3:34 PM on February 11, 2011


Nthing that I'm a Texan who has never paid sales tax to Amazon, and I'm pretty sure this is a tax cheat on Amazon's part.

To be more precise, it is a tax cheat on your part.
posted by Justinian at 3:36 PM on February 11, 2011


If Texas has an unfavorable regulatory climate, the land of anti-American Rick Perry, then what the hell? I'm pretty tired of this myself. Every single brick and mortar company has to pony up with sales tax. Why is Amazon special?
posted by IvoShandor at 3:36 PM on February 11, 2011


Everyone wants civilization but nobody wants to pay for it.
posted by IvoShandor at 3:37 PM on February 11, 2011 [2 favorites]


The Amazon LLC thing mentioned above is the primary loophole they utilize. You purchase an item that is sold by Amazon.com, LLC. (You'll see this on items you're buying if they've moved a dist. center into your state.) Because the distribution is handled by another company, (Amazon.com, Inc.) the seller (Amazon.com, LLC) can technically claim no rightful presence in the state.

It's not just lawyers. It's CFOs and other financial-policy and tax avoidance workers in the company. Every. Single. Corporation. has a team of professionals dedicated to reducing the total tax burden their company is exposed to. Hence Google's Double Irish & Dutch Sandwich tactics, which are put forth by both Ireland and the Netherlands knowingly as a way of attracting corporate presence, at the expense of their far more expensive European compatriots.

I think that as a rule, the government will constantly seek out every possible penny of tax revenue, as a matter of course, within the law. Likewise, shouldn't I, or any company, be allowed to seek out every possible loophole that exists to avoid paying taxes, illegally?
posted by disillusioned at 3:38 PM on February 11, 2011 [1 favorite]


*last bit should be "legally". Dammit.
posted by disillusioned at 3:38 PM on February 11, 2011



To be more precise, it is a tax cheat on your part.


Again, this is not true according to the Texas State Comptroller.
As a seller, you are responsible for collecting and remitting the correct amount to the Comptroller's office. If you do not collect and remit the correct amount, you can owe any additional tax plus you may be assessed penalties and interest.
We are casually confusing sales tax with use tax.
posted by muddgirl at 3:39 PM on February 11, 2011 [1 favorite]


1. Texas made up a number that it hoped Amazon would pay (knowing also about Amazon's expansion plans)
2. Amazon called Texas' bluff by asking for supporting documents (which I think we can assume do not exist)
3. Texas appealed to authority (in this case, the AG) and stonewalled
4. Amazon decide that Texas was no longer a friendly environment.


We have no evidence to support any of this. In fact, if there were no documents, the Texas AG could not assert attorney-client privilege over them. Therefore the documents must exist. An attorney may not go before a tribunal and knowingly assert an untrue fact. You would be disbarred instantly.
posted by Ironmouth at 3:41 PM on February 11, 2011 [1 favorite]


I'm sure that I'm showing my ignorance here, but how would Texas know how much sales tax to ask for? Isn't Amazon the only one who knows how much they have sold in Texas?
posted by rfs at 3:24 PM on 2/11
[+] [!]


Again, Texas has no idea how much to charge Amazon because they don't really want the back taxes. They're looking for a bribe.

This is like when you're traveling in Mexico and get pulled over by a Mexican cop. He tells you in broken English that you've broken some law and that now you need to pay a $1000 fine or go to jail. You don't have $1000 so you give him $20 and he leaves you alone.

Likewise here Texas is refusing to disclose how they got their numbers because the numbers are self-evidently not the issue. It's just a shakedown and the big numbers are there just to scare amazon into spreading some "contributions" around Austin.
posted by Avenger at 3:41 PM on February 11, 2011 [2 favorites]


I'm one of the states that automatically collects sales tax on Amazon purchases (Kansas, low population + central distribution + cheap land = make the 3 customers pay taxes). My only concern is that the many, many small retailers I buy from would suddenly have to pay state taxes. I'm talking about the 1-2 employee businesses that are certainly operating out of their home and only exist in their niche market because they can ship to anywhere in the world with little overhead. Start requiring them to wade through state and local taxation and you have a real problem.

Of course I'm of the opinion that sales tax is a regressive tax and if we start pushing for "making people pay taxes" we should raise the damn income tax on the top 10% to Eisenhower levels.
posted by geoff. at 3:42 PM on February 11, 2011 [2 favorites]


We are casually confusing sales tax with use tax.

No. They're not. Texas has a use tax identical to the sales tax and if you do buy from out of state you're expected to remit the amount via this form.
posted by Talez at 3:43 PM on February 11, 2011 [1 favorite]


Every. Single. Corporation. has a team of professionals dedicated to reducing the total tax burden their company is exposed to.

Yep. Indeed, if you examine routine company statements required by the SEC, you'll see companies do things like estimate their possible tax burden going forward - this is information deemed very important to investors and requires full disclosure. So, shareholders will examine how well a company manages to shrink their tax obligations. Just business.
posted by VikingSword at 3:43 PM on February 11, 2011


Likewise, shouldn't I, or any company, be allowed to seek out every possible loophole that exists to avoid paying taxes, illegally?

no. you cannot illegally attempt to avoid taxes. nor may you twist the law deliberately. Nor would the subsidiary argument work. Amazon is making the sales. Someone is collecting profits. Creating a shell corporation just gives the state the ability to pierce the corporate veil. This would not work.
posted by Ironmouth at 3:43 PM on February 11, 2011


Again, Texas has no idea how much to charge Amazon because they don't really want the back taxes. They're looking for a bribe.

This is like when you're traveling in Mexico and get pulled over by a Mexican cop. He tells you in broken English that you've broken some law and that now you need to pay a $1000 fine or go to jail. You don't have $1000 so you give him $20 and he leaves you alone.

Likewise here Texas is refusing to disclose how they got their numbers because the numbers are self-evidently not the issue. It's just a shakedown and the big numbers are there just to scare amazon into spreading some "contributions" around Austin.


ahh, no. Read the article. Amazon is doing this around the country and other companies are also complaining why they get to avoid taxes and they don't. Amazon is just an unethical company.

But people who think they are going to challenge the state and win will lose. Amazon pulling out is just stupid--every judge will screw them over big-time.

Internet sales should be taxed.
posted by Ironmouth at 3:45 PM on February 11, 2011 [3 favorites]


Texas has a use tax identical to the sales tax and if you do buy from out of state you're expected to remit the amount via this form

But to say that Amazon is not responsible for collecting and remitting sales tax on items I purchase would be, on the face of it, completely incorrect. Yes, Texas has a use tax. It also has a sales tax that Amazon is not collecting aore remitting, despite the fact that Amazon and/or its independent contractors may be doing business in this state.
posted by muddgirl at 3:45 PM on February 11, 2011


The problem as I understand it is that they weren't charging the tax, Texas decided to collect an "estimated" amount from them refusing to say how they arrived to that figure and Amazon decided that the whole thing wasn't worth it, took their ball and left. Is this correct?

They still have to pay that estimated figure (or at least fight over it) even if they leave, right?
posted by Memo at 3:45 PM on February 11, 2011


An attorney may not go before a tribunal and knowingly assert an untrue fact. You would be disbarred instantly.

lol

That being said, I'm really interested in the attorney-client privilege claim. I don't the think the state will win out on a "just trust me, the documents say what we claim, now pony up" theory.


no. you cannot illegally attempt to avoid taxes. nor may you twist the law deliberately. Nor would the subsidiary argument work. Amazon is making the sales. Someone is collecting profits. Creating a shell corporation just gives the state the ability to pierce the corporate veil. This would not work.


Huh? This can and does work all the time. See e.g. the Google Dutch/Irish article linked above.
posted by r_nebblesworthII at 3:47 PM on February 11, 2011


Likewise here Texas is refusing to disclose how they got their numbers because the numbers are self-evidently not the issue. It's just a shakedown and the big numbers are there just to scare amazon into spreading some "contributions" around Austin.

If it wasn't self-evident you wouldn't need to call it self-evident. Texas is refusing to disclose the numbers because it is attorney-client privileged. There has to be a basis for the state to rule that way. You can't just assert privilege if the documents never went to the AG's office in the first place.

This is just a bullshit company trying not to pay taxes in the country that makes them rich.
posted by Ironmouth at 3:47 PM on February 11, 2011 [2 favorites]


I'm talking about the 1-2 employee businesses that are certainly operating out of their home and only exist in their niche market because they can ship to anywhere in the world with little overhead. Start requiring them to wade through state and local taxation and you have a real problem.

I believe that you have to be a business of a minimum size and employment numbers to be obligated to "wade through state and local taxation". Small mom and pop outfits are exempt. Perhaps this depends on the state?
posted by VikingSword at 3:48 PM on February 11, 2011


An attorney may not go before a tribunal and knowingly assert an untrue fact. You would be disbarred instantly.

lol

That being said, I'm really interested in the attorney-client privilege claim. I don't the think the state will win out on a "just trust me, the documents say what we claim, now pony up" theory.


If there is a legitimate claim the documents are not privileged, the judge can review them in camera. This is done all the time.
posted by Ironmouth at 3:48 PM on February 11, 2011 [1 favorite]


The problem as I understand it is that they weren't charging the tax, Texas decided to collect an "estimated" amount from them refusing to say how they arrived to that figure and Amazon decided that the whole thing wasn't worth it, took their ball and left. Is this correct?

Read the article. Amazon is a huge pain in the ass for every state they operate in because they pull this shit everywhere.

Its just tax evasion, people. Amazon will eventually pay up.
posted by Ironmouth at 3:49 PM on February 11, 2011


But to say that Amazon is not responsible for collecting and remitting sales tax on items I purchase would be, on the face of it, completely incorrect. Yes, Texas has a use tax. It also has a sales tax that Amazon is not collecting aore remitting, despite the fact that Amazon and/or its independent contractors may be doing business in this state.

But Amazon does collect sales tax in states where it operates.
posted by Talez at 3:51 PM on February 11, 2011


I don't see where it's Amazon's fault that we're mostly all tax cheats.

Amazon isn't responsible for use tax, they are responsible for collecting and remitting the correct amount of sales tax. Is Amazon required to do this? Let's check:
A person or a retailer is engaged in business in Texas if any of the following criteria are met:

* (A) maintains, occupies, or uses an office, place of distribution, sales or sample room, warehouse or storage place, or other place of business;
* (B) has any representative, agent, salesperson, canvasser, or solicitor who operates in this state under the authority of the seller to sell, deliver, or take orders for any taxable items;
* (C) promotes a flea market, trade day, or other event that involves sales of taxable items;
* (D) uses independent salespersons in direct sales of taxable items;
* (E) derives receipts from a rental or lease of tangible personal property that is located in this state;
* (F) allows a franchisee or licensee to operate under its trade name if the franchisee or licensee is required to collect Texas sales or use tax; or
* (G) conducts business in this state through employees, agents, or independent contractors.
Emphasis my own.


this is the comment you need to read in this thread.
posted by Ironmouth at 3:52 PM on February 11, 2011



If there is a legitimate claim the documents are not privileged, the judge can review them in camera. This is done all the time.


Well, sure. And since that hasn't happened yet, we don't know if the documents even exist, much less if they're covered by a/c privilege.
posted by r_nebblesworthII at 3:53 PM on February 11, 2011


But to say that Amazon is not responsible for collecting and remitting sales tax on items I purchase would be, on the face of it, completely incorrect. Yes, Texas has a use tax. It also has a sales tax that Amazon is not collecting aore remitting, despite the fact that Amazon and/or its independent contractors may be doing business in this state.

But Amazon does collect sales tax in states where it operates.


nope.

See the article:

"The online giant has been the target of numerous lawsuits filed by states seeking sales taxes on online purchases made from within their jurisdictions. Online competitors such as Dell Inc., J.C. Penney Co. and Sears Roebuck and Co. have complained about having to levy the sales taxes while Amazon does not."

They're just tax cheats, that's it.

Also, jurisdiction shopping is not twisting the law. It is pure and simple legal activity.
posted by Ironmouth at 3:55 PM on February 11, 2011


Though I do agree with the broader point that Amazon is a tax cheat. I would just be surprised to learn that it's perfectly cromulent for a state to send you a bill, demand payment, and when you ask what it's based on, they cry privilege. That sounds like a recipe ripe for abuse to me.
posted by r_nebblesworthII at 3:55 PM on February 11, 2011 [3 favorites]


Not willing to opine here on tax law in Texas as tax law is not an area in which I've ever practiced and I'm not a member of the Texas bar. But -- even assuming a lawsuit ensues, how is Texas going to collect anything from Amazon unless the state reveals the basis for their assessment? They will also still be out the business and jobs that Amazon's expansion plans in Texas would have brought them.
posted by bearwife at 3:55 PM on February 11, 2011


Ironmouth, I don't really believe the $269 million figure is entirely fiction. I just believe it's probably backed into from publicly available data and based on an Excel file some intern at the Comptroller office put together. There's no way that Texas knows exactly what Amazon's sales were to Texans over the past 5 years AND the correct basis for tax on each sale. Basically Amazon got a bill and asked the state to show their work. Texas didn't want to show their work because they know it is sloppy and indefensible.
posted by 2bucksplus at 3:56 PM on February 11, 2011 [1 favorite]


All tax on online sales should be assessed at the federal level, and directed exclusively to science and math education programs for adults and children.
posted by Afroblanco at 3:56 PM on February 11, 2011 [10 favorites]


If there is a legitimate claim the documents are not privileged, the judge can review them in camera. This is done all the time.

Well, sure. And since that hasn't happened yet, we don't know if the documents even exist, much less if they're covered by a/c privilege.


No, no, no. An attorney cannot provide an opinion to a client stating that certain documents are privileged if they don't exist. That's an ethical violation. Such an attorney would be trying to perpetrate a fraud on another party. Its patently illegal.

I don't know where the idea came that the documents may not exist, but they most certainly do.
posted by Ironmouth at 3:57 PM on February 11, 2011 [1 favorite]


Ironmouth, I don't really believe the $269 million figure is entirely fiction. I just believe it's probably backed into from publicly available data and based on an Excel file some intern at the Comptroller office put together. There's no way that Texas knows exactly what Amazon's sales were to Texans over the past 5 years AND the correct basis for tax on each sale. Basically Amazon got a bill and asked the state to show their work. Texas didn't want to show their work because they know it is sloppy and indefensible.

No facts in evidence here. Let's not try and typify what the documents say. That is a mistake we should not make.
posted by Ironmouth at 3:58 PM on February 11, 2011


No, no, no. An attorney cannot provide an opinion to a client stating that certain documents are privileged if they don't exist. That's an ethical violation. Such an attorney would be trying to perpetrate a fraud on another party. Its patently illegal.

I don't know where the idea came that the documents may not exist, but they most certainly do.



Right. And murder is illegal, which is why nobody ever gets murdered.
posted by r_nebblesworthII at 3:58 PM on February 11, 2011 [2 favorites]


No, no, no. An attorney cannot provide an opinion to a client stating that certain documents are privileged if they don't exist. That's an ethical violation. Such an attorney would be trying to perpetrate a fraud on another party. Its patently illegal.

I don't know where the idea came that the documents may not exist, but they most certainly do.


Right. And murder is illegal, which is why nobody ever gets murdered.


You don't practice law, do you.
posted by Ironmouth at 4:00 PM on February 11, 2011 [2 favorites]


r_nebblesworthII: Though I do agree with the broader point that Amazon is a tax cheat. I would just be surprised to learn that it's perfectly cromulent for a state to send you a bill, demand payment, and when you ask what it's based on, they cry privilege. That sounds like a recipe ripe for abuse to me

On the other hand: Amazon had a chance (or in fact a chance each year so five total) to present a sum of what they sold and what percent they collected in taxes based on that gross sales number and then remit that tally as well as those monies to the state tax collector. If you, as a private person, skip this step this year, don't be surprised if Uncle Sam comes up with a decent ball-park estimate and charges it to your account (with the vig running) until you decide to either pony up or prove what you actually owe.
posted by paisley henosis at 4:00 PM on February 11, 2011 [1 favorite]


They're just tax cheats, that's it.

No they're not. If you buy something from out of state the state can't tax it and you're expected to pay a use tax. Amazon collects and remits sales tax based on where they operate.

If a state wants to tangibly tie Amazon to a specific state through the most tenuous of connections they're more than welcome. I assume they'll need to convince a federal judge of that fact though?
posted by Talez at 4:00 PM on February 11, 2011


No facts in evidence here. Let's not try and typify what the documents say. That is a mistake we should not make.

I'd love to hear you posit why Texas won't show their hand, instead of just negating all our (fun!) speculation.
posted by 2bucksplus at 4:00 PM on February 11, 2011 [1 favorite]


Not willing to opine here on tax law in Texas as tax law is not an area in which I've ever practiced and I'm not a member of the Texas bar. But -- even assuming a lawsuit ensues, how is Texas going to collect anything from Amazon unless the state reveals the basis for their assessment? They will also still be out the business and jobs that Amazon's expansion plans in Texas would have brought them.'

I think it is because the suit is a state information act suit. Not sure what the procedure is, but I think that they will waive privilege during the collection suit.
posted by Ironmouth at 4:01 PM on February 11, 2011 [1 favorite]


You don't practice law, do you.

Are you saying that lawyers don't do unethical things? You seem to be saying that because advising a client wrongly about privilege is unethical, it couldn't have happened. That's a non-sequitur.
posted by r_nebblesworthII at 4:02 PM on February 11, 2011 [1 favorite]


No facts in evidence here. Let's not try and typify what the documents say. That is a mistake we should not make.

I'd love to hear you posit why Texas won't show their hand, instead of just negating all our (fun!) speculation.


If the documents are privileged, you don't reveal them. The state or any other party has a basic interest in keeping privileged documents privileged. If they will reveal them, they will do it during discovery in the collections suit, not 3 years before, giving Amazon all that time to hier a bunch of bullshit experts to say that the estimate is wrong. If they have to waive, they'll wait until the last minute. This Information Act suit is just bunk to support their strategy to make it seem like tax cheat isn't the one doing wrong.

Amazon has NEVER paid any of these taxes in Texas. That's what the article says. They are just delaying as long as possible so as to obtain the time value of the money.

I hope all these people aren't defending amazon because its from the *internet* therefore making it magical and good.

This is a company which has not collected the tax and which is a major tax scofflaw throughout the country. I don't understand why everyone's all supporting the huge evil corporation that doesn't want to pay for the roads its trucks use to drive the books to the customers in texas.
posted by Ironmouth at 4:06 PM on February 11, 2011 [4 favorites]


You don't practice law, do you.

Are you saying that lawyers don't do unethical things? You seem to be saying that because advising a client wrongly about privilege is unethical, it couldn't have happened. That's a non-sequitur.


it isn't the unethicality of it, its the stupidity of it. People would lose their license and there would be sanctions. You would be wiped out at trial. Only an idiot would pursue a strategy like this.
posted by Ironmouth at 4:07 PM on February 11, 2011


I think that they will waive privilege during the collection suit.

IANAL but of course it seems like they'd have to. On the other hand, AG Abbott has a history of claiming privilege and keeping documents under wraps to the broadest extent possible, so we'll have to wait and see.

To be more precise, it is a tax cheat on your part.

I am not legally required to collect sales tax. As pointed out upthread, I may owe use tax, but I don't owe sales tax as a purchaser. (See, again, the iTunes store, which I bring up because the thing I purchase most frequently from Amazon is MP3s. If Apple can manage to collect and pay taxes, so can Amazon.)
posted by immlass at 4:07 PM on February 11, 2011


Wow, Ironmouth is really pissed at Amazon.
posted by snofoam at 4:10 PM on February 11, 2011 [6 favorites]


We're not "supporting the huge evil corporation", Ironmouth. It's not either-or, you know. But it strikes me that claiming state privilege over documentation on a tax bill is outright unethical on its face.

I do think Amazon should be paying the tax, but I also think they have the right to clear and correct documentation of the demand before doing so.
posted by Malor at 4:11 PM on February 11, 2011 [1 favorite]


Whether Amazon is in the right or in the wrong about whether it owes taxes to Texas, or whether purchasers are responsible for the ethics of their purchasing choices, the government of Texas made up a bunch of numbers and Amazon rightfully called their bluff.

Anyway, no one should have sympathy for a state run by someone who is cutting public services left and right, to artificially preserve low taxation for the state's wealthiest.
posted by Blazecock Pileon at 4:11 PM on February 11, 2011 [1 favorite]


But it isn't that black and white. Whatever the standard is, Texas just needs to fall barely on the side that doesn't get them sanctioned. I'm merely pointing out that it doesn't follow that the documents are really, actually privileged just because a party claims they are. There's plenty of litigation around the question of privilege so I'm not sure why you think it's such an open and shut issue.
posted by r_nebblesworthII at 4:12 PM on February 11, 2011


I don't understand why everyone's all supporting the huge evil corporation that doesn't want to pay for the roads its trucks use to drive the books to the customers in texas.

I agree with your broader point, but strictly speaking isn't it the Post Office that delivers the books?
posted by Ritchie at 4:16 PM on February 11, 2011


Anyway, no one should have sympathy for a state run by someone who is cutting public services left and right, to artificially preserve low taxation for the state's wealthiest.

As a Texan, this is the part that's funniest to me: Rick Perry is running businesses out of the state by requiring them to pay taxes! I just wish Molly Ivins were still with us, because this story could only benefit from her special touch.
posted by immlass at 4:16 PM on February 11, 2011 [4 favorites]


Right. And murder is illegal, which is why nobody ever gets murdered.

Seriously. What are you trying to get at with this comment? That nothing should be illegal because it happens anyway. DId you eat a stupid bar for breakfast?
posted by IvoShandor at 4:19 PM on February 11, 2011


Right. And murder is illegal, which is why nobody ever gets murdered.

Seriously. What are you trying to get at with this comment? That nothing should be illegal because it happens anyway. DId you eat a stupid bar for breakfast?


No: I was responding to the claim that because something is illegal or unethical, it couldn't have happened here. It doesn't follow, you see. Ironmouth later clarified that he meant it couldn't have happened because it would be extraordinarily dumb and bad legal tactics. "Stupid bar," nice one though.
posted by r_nebblesworthII at 4:22 PM on February 11, 2011


I'm sorry. It was a knee jerk.
posted by IvoShandor at 4:23 PM on February 11, 2011 [2 favorites]


It's okay, I forgive you.
posted by r_nebblesworthII at 4:24 PM on February 11, 2011 [1 favorite]


I would frankly be surprised if the state of Texas isn't doing something wrong on this, but Amazon unequivocally is doing something very shitty so even though I don't care for TX or the tax system there or whatever, I sure as shit hope Amazon winds up having to pay what they owe with full interest, in TX and everywhere else.
posted by paisley henosis at 4:29 PM on February 11, 2011


"This is just a bullshit company trying not to pay taxes in the country that makes them rich."

"Though I do agree with the broader point that Amazon is a tax cheat."


Amazon doesn't pay sales tax, it's customers do (if it's collected).
posted by MikeMc at 4:30 PM on February 11, 2011


Rick Perry is running businesses out of the state by requiring them to pay taxes!

Making up fake numbers and sending a bill is a shakedown, not a collection of tax revenues. But screw Perry anyway, he is running Texas into the ground with these shenanigans. It is an absolute delight to see his government squirm over this.
posted by Blazecock Pileon at 4:30 PM on February 11, 2011 [2 favorites]


Beyond, beyond idiotic. Plenty of hurting communities would be thrilled to declare a thousand years of tax abatement in exchange for what Amazon planned to do in Texas. Right or wrong isn't the issue, it's smart or stupid, and this was fucking stupid.
posted by kittens for breakfast at 4:31 PM on February 11, 2011 [2 favorites]


I have 2 questions:

1) What is Amazon's official reason for not collecting the sales tax from Texans despite having a physical presence in Texas?

2) Why won't Texas release the audit report? You don't just hand someone a bill for hundreds of millions of dollars and tell them it's none of their business how you arrived at that figure.
posted by MikeMc at 4:39 PM on February 11, 2011


Holy shit, Ironmouth. Calm down, and stop being such a pissy know-it-all lawyer already. We get it, Amazon has to pay taxes on items sold in Texas to Texans.

But, disbarment? Really? Losing licenses? Sanctions, maybe, but kind of unlikely in the fact scenario we're laying out here. Some of us litigate in the real world.

Here's the thing: you can't ask somebody to pay $269 million, and not have any evidence to back it up. I cannot think of once cognizable reason how this figure would be attorney-client privileged. Any time any person comes at any of my clients for a figure, whether it's $269 dollars or $269 million dollars, then they better be able to prove it by providing evidence of why they supposedly owe the money. Hiding behind "attorney-client privilege" is bullshit, and Amazon's request for an accounting is 100% reasonable. It makes the comptroller look like they're hiding something.

And you can't withhold evidence because you're afraid some big-corp lawyers are going to poke holes in it. If that's the reason you're withholding evidence, then it must be pretty weak to start with.

Also, the title to this post is pretty clever.
posted by jabberjaw at 4:42 PM on February 11, 2011 [13 favorites]


Amazon will need to pay their real sales tax eventually, given that usually you're responsible for ponying the data yourself.

I'd hope however that Amazon hurts Texas for the shakedown tactics by implementing their plans for pulling out of Texas, pursuing discovery for this shakedown tax bill, and fighting the legit tax bill just until Perry get voted out. Bonus points if Bezos hands the next governor the check in person right after swearing in. lol
posted by jeffburdges at 4:42 PM on February 11, 2011


Does anyone know who has the burden of proof in a Texas stare tax case?
posted by rtimmel at 4:43 PM on February 11, 2011


Also, the title to this post is pretty clever.

Thanks, I was pretty proud of it and hoped people would notice :-)
posted by 2bucksplus at 4:44 PM on February 11, 2011 [5 favorites]


1) What is Amazon's official reason for not collecting the sales tax from Texans despite having a physical presence in Texas?

They apparently operate on razor thin margins as noted upthread, and a price increase of 7-10% destroys their business model.

2) Why won't Texas release the audit report? You don't just hand someone a bill for hundreds of millions of dollars and tell them it's none of their business how you arrived at that figure.

The same reason you don't show your hand in a poker game. It's a bluff, at this point. Amazon is thinking: is the audit accurate and we're screwed if we go to court, or is it a pile of crap put together by some intern? Also it means Amazon can't as much time as they'd like to have their own accountants start figuring out how to poke holes in it.
posted by r_nebblesworthII at 4:45 PM on February 11, 2011


Beyond, beyond idiotic. Plenty of hurting communities would be thrilled to declare a thousand years of tax abatement in exchange for what Amazon planned to do in Texas. Right or wrong isn't the issue, it's smart or stupid, and this was fucking stupid.

Actually, I think it very much is an issue of right or wrong -- 'truthiness' is not the standard to which we should aspire. I'm quite sure that individual communities might be willing to grant Amazon tax abatement as an incentive to open up a warehouse in their jurisdiction, but sales taxes go to the state coffers, not municipal ones. It would madness to propose a system where state revenues could be depleted as a result of individual towns and cities deciding which taxes they were going to collect and which they weren't.

Maybe people don't want to pay taxes when they purchase things online -- fair enough, I can see the self interest at play if not the logic that it is necessarily 'different' than purchasing things in person. But letting corporate interests dictate which sales taxes they will collect and which they won't will simply result in a horrifying Wal-Mart-esque 'race to the bottom'.
posted by modernnomad at 4:52 PM on February 11, 2011


Whoops, reading comprehension fail. That's obviously not their official reason.
posted by r_nebblesworthII at 4:52 PM on February 11, 2011


Amazon recently acquired woot.com, that wacky little one-item-a-day e-tailer which is based in Texas. Does this mean they'll have to relocate all their Bags of Crap?
posted by oneswellfoop at 4:53 PM on February 11, 2011


I'm sorry. It was a knee jerk.
posted by IvoShandor at 5:23 PM on February 11 [1 favorite +] [!]


It's okay, I forgive you.
posted by r_nebblesworthII at 5:24 PM on February 11 [+] [!]


Awww, fastest callout/flameout-resolution ever.
posted by disillusioned at 4:54 PM on February 11, 2011


1) What is Amazon's official reason for not collecting the sales tax from Texans despite having a physical presence in Texas?

They apparently operate on razor thin margins as noted upthread, and a price increase of 7-10% destroys their business model.


I understand the why it's the how. There must be some sort of legal fiction they're using to justify not collecting.
posted by MikeMc at 5:00 PM on February 11, 2011


1) What is Amazon's official reason for not collecting the sales tax from Texans despite having a physical presence in Texas?

Their argument is that having a fulfilment centre run by a different company (Amazon.com KYDC LLC, albeit from the same Seattle address as Amazon.com Inc.) doesn't count as a physical presence of Amazon.com Inc. in the state of Texas therefore it doesn't have to collect and remit sales taxes.

Texas disagrees.

Amazon looked at the situation and said "Well, let's assume you're right. Fuck you we'll just move Amazon.com KYDC LLC out of Texas and while you're at it suck my balls and say goodbye to a few thousand jobs".

Amazon specifically tries to keep a physical presence in the least number of states possible specifically so they can compete on price in more locations by not having to collect and remit sales tax. If a state tries to claim physical presence based on the most tenuous of circumstances (i.e. affiliates) Amazon just takes their ball and go home (by not allowing affiliates in certain states). This is a valid strategy under the law.

The correct response to this is to have the federal government regulate interstate commerce and/or Texas pursue the use tax with its citizens for buying out of state merchandise.

But it's far easier to try and hassle the guy with deep pockets.

Let's assume that Texas are right though. Why is this bad? Would this mean a small company that uses a warehouse/fulfilment service by say Fedex is expected to collect and remit sales tax to all states and counties? They've obviously gone to the length that paying another company to fulfil an order on your behalf is a "physical presence". Or is it just because Amazon.com Inc. and Amazon.com KYDC LLC are at the same address? How do you tell the difference? Where do you draw the line?
posted by Talez at 5:01 PM on February 11, 2011 [7 favorites]


no idea what the real impact would be, or if just negligible, but i would think that if amazon started charging sales tax for texas only, first amazon would bear costs of collection and reporting/enforcement on top of that sales tax; it's not like they would get to keep a share of the state tax collected, right?

but also, i would think there would be a kind of resale culture in the texas border states, people who could take advantage of amazon's prices and their own lack of sales tax in order to provide stuff to texans at lower cost than they would get otherwise--still tax-free for the purchasers in texas (though still with some added margin). plus, how would it account for buyers who live in a sales-tax-free state and ship to texas?

just sayin...if this went through, and i lived in texas, i might be looking at workarounds via out-of-state buddies, especially for pricier items or holiday shopping.
posted by fallacy of the beard at 5:03 PM on February 11, 2011


The correct response to this is to have the federal government regulate interstate commerce...

I was going to say that this violates the Constitution, but the way in which the commerce clause has been recrafted over the years, this might not even be true any more.
posted by It's Never Lurgi at 5:15 PM on February 11, 2011 [1 favorite]


first amazon would bear costs of collection and reporting/enforcement on top of that sales tax; it's not like they would get to keep a share of the state tax collected, right?

Every other company that does collect sales tax has to do this, so why should Amazon be a special case?

As an anecdote, I ordered an HP computer through HP's website. To the best of my knowledge, HP doesn't have a business presence in my state, and they still collected sales tax.
posted by drezdn at 5:22 PM on February 11, 2011


Ironically, if Obama or Pelosi were to propose a federal solution to this problem of cooperative action between the states, Texas and Rick Perry would be the first to scream blood murder hold their breath until they turned blue and passed out.

Couldn't happen to a better state.
posted by T.D. Strange at 5:25 PM on February 11, 2011 [1 favorite]


To the best of my knowledge, HP doesn't have a business presence in my state, and they still collected sales tax.

Hewlet Packard, like IBM, has offices all over the place:

http://www.manta.com/c/mml7wp0/hewlett-packard

Hewlett-Packard, Hewlett-Packard Company, Hp
N936 Craftsmen Drive
Greenville, WI 54942-8693
posted by zippy at 5:26 PM on February 11, 2011


Blazecock Pileon writes "Whether Amazon is in the right or in the wrong about whether it owes taxes to Texas, or whether purchasers are responsible for the ethics of their purchasing choices, the government of Texas made up a bunch of numbers and Amazon rightfully called their bluff. "

This is how it usually works in sales tax evasion cases. The government claims some ridiculous amount is owed based on something fuzzy like number of employees and sector averages. And then it is up to the retailer to prove the actual amounts. And woe betide them if they haven't kept appropriate records like sequentially dated till receipts for the period in question. It's the same process that allows governments to collect taxes on cash tips earned by wait staff.

drezdn writes "As an anecdote, I ordered an HP computer through HP's website. To the best of my knowledge, HP doesn't have a business presence in my state, and they still collected sales tax."

They probably have salespeople employed in the business sector and technicians providing short time service level agreement warranty service. Either of which alone would constitute a presence despite a lack of retail locations or fulfillment centres.
posted by Mitheral at 5:26 PM on February 11, 2011


Here, I'll try to piece it together. Keep in mind the rule: If a Texan buys something from you in TX, then you have to pay sales tax (6.25%, I think) on it. If a Texan buys something from you out-of-state, it's interstate commerce, and no sales tax is paid on it.

1) Amazon Inc. is based out of Seattle, WA.
2) Amazon LLC is a distribution center in TX.
3) Texan buys product from Amazon Inc. in WA.
4) Product is fulfilled and shipped to Texan via some other separate Amazon distribution center in another state, let's say Salt Lake City, UT.
5) Amazon argues that there was never a transaction between Texan and Amazon LLC in TX, only between Texan and Amazon Inc. in WA; and the entire transaction was processed out-of-state.

I'm not a corporate lawyer, so I'm not exactly sure how the legal fiction of separating Amazon Inc. and Amazon LLC works in this context. It's hard to know without seeing their corporate filings and charters, articles of incorporation, all that stuff. But I'm pretty sure a primary reason of setting up this legally-separate, likely financially independent, but related LLC, was to avoid having to deal with sales tax issues in Texas.
posted by jabberjaw at 5:27 PM on February 11, 2011 [2 favorites]


Making up fake numbers and sending a bill is a shakedown, not a collection of tax revenues.

We don't know if the numbers are fake; that's the point of asking to see the bill. We really won't know the answer to how realistic the numbers are until it's all aired out in court, if there's not a settlement that binds both parties not to talk about them. The plea that the corporate setup doesn't amount to a physical presence is iffy and should also be thrashed out in court. It's hilarious that it's hitting Rick Perry, hopefully somewhere that hurts, but this is a larger issue about taxation of internet-based transactions that needs to be addressed for other states and communities as well.
posted by immlass at 5:30 PM on February 11, 2011


I used to work for a subsidiary of Amazon, and my experience was that that subsidiary really was at arm's length - that Amazon sat on the board and issued high-level (monthly) guidance. Day to day stuff operations and decisions were done by the local management, our 401(k) was separate, and we operated as a corporation had Amazon as an investor.

Not defending the sales tax thing, just shedding some light on what it's like to be at a subsidiary of Amazon.
posted by zippy at 5:31 PM on February 11, 2011 [1 favorite]


jeffburdges: " Bonus points if Bezos hands the next governor the check in person right after swearing in. "

Maybe it's because Reagan has been in the media so much lately, but something about this scenario made us think we were taking the "Amazon holding Texas hostage" metaphor a bit far.
posted by MCMikeNamara at 5:32 PM on February 11, 2011


Maybe 34 states should band together and demand a constitutional convention on out-of-state sales tax...
posted by Talez at 5:33 PM on February 11, 2011


No they're not. If you buy something from out of state the state can't tax it and you're expected to pay a use tax. Amazon collects and remits sales tax based on where they operate.

Its Amazon's sales in Texas at issue here. Order on internet in Texas, shipped from Texas to Texas address. This is why its so fucking brazen.
posted by Ironmouth at 5:34 PM on February 11, 2011


I'm not a corporate lawyer, so I'm not exactly sure how the legal fiction of separating Amazon Inc. and Amazon LLC works in this context. It's hard to know without seeing their corporate filings and charters, articles of incorporation, all that stuff. But I'm pretty sure a primary reason of setting up this legally-separate, likely financially independent, but related LLC, was to avoid having to deal with sales tax issues in Texas.

Check bearwife's code cite. Includes subsidiaries, etc. Pretty sure its standard language in state sales tax codes. Somebody upthread started this speculation and it is wrong.
posted by Ironmouth at 5:37 PM on February 11, 2011



Blazecock Pileon writes "Whether Amazon is in the right or in the wrong about whether it owes taxes to Texas, or whether purchasers are responsible for the ethics of their purchasing choices, the government of Texas made up a bunch of numbers and Amazon rightfully called their bluff. "


You don't know that. Indeed, the foia suit was mainly designed to make you side with the corporate overlords
posted by Ironmouth at 5:41 PM on February 11, 2011


Its Amazon's sales in Texas at issue here. Order on internet in Texas, shipped from Texas to Texas address. This is why its so fucking brazen.

But to this point, it's similar to claiming that because the UPS has a hub in Texas, I should be expected to pay the sales tax because a facility involved in fulfilling the transaction, at some point, had a presence. Yes, it's a bit closer than that, but frankly I don't think that the state gets to grab money from every single transaction that is merely spoken about in its borders. The state had nothing to do with the transaction between me and Amazon.com LLC. It did host the Amazon, Inc. distribution center, which pays their payroll taxes, and whatever other obligations they have.

Likewise, if I buy, ON AMAZON from Joe's Baubles in Arizona and they've subcontracted to Amazon to perform their fulfillment, which is sent from a facility in Texas, am I to pay sales tax?
That's the issue at hand. It feels brazen, but if I'm not buying from the same entity, no matter how closely they're named, and the fulfillment is outsourced, it's not written that sales tax should be levied.

The question is how separate are the entities and how much of a legal subsidiary is Amazon.com KYDC LLC of Amazon.com, Inc., in a reading of the code that allows for them to be hit if they have subsidiaries involved.
posted by disillusioned at 5:46 PM on February 11, 2011 [1 favorite]


OK, I'll say this about Texas and taxes. The offshore oil and support industry is one of their biggest, and I am responsible for the counterparty risk assessment of this segment for my job.

Every single offshore oil (support) company is a DE LLC operating as a foreign corporation in TX. If you happen to find a TX LLC involved in the offshore industry, they are acting as an "agent only" for a foreign principal domiciled in either DE or actually outside the US.

So, yeah, voodoo economics at work. Texas...it trickles down.
posted by digitalprimate at 5:47 PM on February 11, 2011 [2 favorites]



Blazecock Pileon writes "Whether Amazon is in the right or in the wrong about whether it owes taxes to Texas, or whether purchasers are responsible for the ethics of their purchasing choices, the government of Texas made up a bunch of numbers and Amazon rightfully called their bluff. "


Hasn't anyone understood how this story got in Businessweek? You all do realize this whole "evil texas won't tell us what we owe" bit was planted to a friendly reporter by Amazon's PR firm, right? Seriously, they've never collected the taxes they owe, ever. Amazon is responsible for the information deficit here. They are supposed to collect the taxes and remit them

There is no legal leg to stand on here. They were in state sales. The code expressly requires them to collect. They didn't do it at all. They can't evade with a subsidary or agent. The code expressly prohibits it. Amazon is a pure tax cheat plain and simple. this whole estimate thing is bunk. Amazon sold the goods. they know exactly how much they owe, the info is on their servers. so they file this suit to make it look like they aren't the ones in the wrong. it is utterly transparent.
posted by Ironmouth at 5:51 PM on February 11, 2011 [2 favorites]


Order on internet in Texas, shipped from Texas to Texas address.

Given the money at stake, Amazon's sophistication when it comes to fulfillment and the fact that they probably have a number of fulfillment centers within one day ground shipping to Texas, I would be totally unsurprised if they deliberately did not ship anything from their Texas center to customers in Texas.
posted by snofoam at 5:52 PM on February 11, 2011


And also:

I'm not a corporate lawyer, so I'm not exactly sure how the legal fiction of separating Amazon Inc. and Amazon LLC works in this context. It's hard to know without seeing their corporate filings and charters, articles of incorporation, all that stuff. But I'm pretty sure a primary reason of setting up this legally-separate, likely financially independent, but related LLC, was to avoid having to deal with sales tax issues in Texas.

This is how 100% of the shipping and commodities industries work in the developed world. The "legal fiction" you refer to is, judicially, a very serious reality. Ask anyone who got burned in the FFA markets in '08
posted by digitalprimate at 5:54 PM on February 11, 2011


The statement from Rick Perry's spokesperson is hilarious in its complete evasion of any kind of actual position-taking on this issue:

"We are always mindful of the tax burden on families and businesses in our state, and it is important that Texas clarify the laws regarding this issue to further strengthen the reliability of our tax system and to protect Texas jobs."

That's so evasive it erases even the possibility of taking a position. Bravo.
posted by mediareport at 5:55 PM on February 11, 2011


I've said this in threads here before and I'll say it again: if I'm looking to hire a lawyer on Metafilter, I want jabberjaw in my corner, and not Ironmouth. That Ironmouth would plead me out and have me locked up in Sing Sing faster than he can say Habeas Corpus.
posted by PeterMcDermott at 5:55 PM on February 11, 2011 [3 favorites]


When New York went after Amazon for creating tax nexus with the Amazon marketplace sellers, I sided with Amazon. But having the disit center in Texas creates nexus. That's it. Amazon should have collected sales taxes all along. But they want that 8%-ish discount so fuck Texas.

I'm surprised that Amazon decided to close its Texas center rather than settle with a mea culpa and a promise to start collecting taxes for Texas customers. But instead they pull the jobs card in what I think is to piss of Rick Perry and get him involved since he's Mr. Texas is Business Friendly.

Their taking the center out and giving pink slips to 100 people (they said they were going to add 1000 employees, but Amazon is hellbent on automating and taking people out of the disti centers, I don't think that was being honest) won't have a material impact on Amazon, Amazon customers in Texas. But it will have an impact on the sales tax revenue of the State of Texas.

When I lived in Texas most of the stuff I bought from Amazon came from Kansas. I figured that was by design. Just as how my old company (and I thin Amazon as well) has a huge disti center in Nevada to serve California. Putting the distribution center in Texas was a fuck you to the state taxing authorities. Whether it is a subsidiary or the company itself, it is still Amazon.

Amazon's rationale for sales taxes being complex and hard to manage is bullshit. The manage a bazillion skus and all of the other logistices. Having a lookup table like practically every other online company is trivial. But this is about Amazon's desire to be cheaper than its competitors. Borders and Barnes and Nobel have to charge tax. Dell, HP, Apple and countless other companies doing business in Texas figure this out.
posted by birdherder at 5:57 PM on February 11, 2011 [2 favorites]


This is how 100% of the shipping and commodities industries work in the developed world. The "legal fiction" you refer to is, judicially, a very serious reality.

Except the code for retail sales expressly covers this situation. Bearwife quoted it. Agent, subsidiary, employee, doesn't matter. Its cuz the retail is the biggest plum. Its goods at full markup.
posted by Ironmouth at 5:57 PM on February 11, 2011


The thing is, I'm pretty sure Amazon Inc. hired a team of lawyers, and consulted with a lot of people (including TX state government officials) before deciding to put the distribution center in TX. They probably got a lot of advice on what to do and where to go in order to avoid these kinds of taxes.

I really don't think that Amazon was trying to cheat TX out of taxes. I think Amazon believed that, using the setup they had, they were not subject to taxes. They didn't pick TX for the purpose of cheating them out of taxes. I can almost guarantee you that there are other corporations with similar setups in TX that have never been subject to sales taxes.

My point is, I think that if Amazon really thought they had a legal obligation to pay taxes in TX, they would have set up the distribution center in a different state altogether.
posted by jabberjaw at 5:59 PM on February 11, 2011 [1 favorite]


1) Amazon Inc. is based out of Seattle, WA.
2) Amazon LLC is a distribution center in TX.
3) Texan buys product from Amazon Inc. in WA.
4) Product is fulfilled and shipped to Texan via some other separate Amazon distribution center in another state, let's say Salt Lake City, UT.
5) Amazon argues that there was never a transaction between Texan and Amazon LLC in TX, only between Texan and Amazon Inc. in WA; and the entire transaction was processed out-of-state.


Is this part true? Or is it Amazon actually arguing, per Ironmouth, that sales from its TX distributor to Texans don't incur sales tax?

It would be nice if we could get the actual letters or pleadings Amazon filed. Does anybody here have access to PACER?
posted by r_nebblesworthII at 6:00 PM on February 11, 2011


I've said this in threads here before and I'll say it again: if I'm looking to hire a lawyer on Metafilter, I want jabberjaw in my corner, and not Ironmouth. That Ironmouth would plead me out and have me locked up in Sing Sing faster than he can say Habeas Corpus.

Please do not mistake my support for a government's rights to get rich ass tax cheats to pay their fair share for me not fighting my ass off for you. I only would recommend a plea if it was in your interest. Jabberjaw is the same.
posted by Ironmouth at 6:01 PM on February 11, 2011 [1 favorite]


@Ironmouth. I don't know nuthin' 'bout no retail, but I can tell you this is how all of the domestic commodities companies, whether publicly traded or any LLC/LP set it up. And I'm 100% sure it's because of (potential) state tax as well as tort liabilities.
posted by digitalprimate at 6:02 PM on February 11, 2011


I've said this in threads here before and I'll say it again: if I'm looking to hire a lawyer on Metafilter, I want jabberjaw in my corner, and not Ironmouth.

I would want a lawyer who doesn't spend all day on Metafilter.
posted by snofoam at 6:04 PM on February 11, 2011 [10 favorites]


update: Rick Perry says comptroller's decision was wrong
posted by r_nebblesworthII at 6:05 PM on February 11, 2011 [1 favorite]


Bearwife didn't cite the law; that was the dumbed-down guideline. The text of Rule 3.286 is a little different.
posted by jabberjaw at 6:07 PM on February 11, 2011


Wow. Well, at least Perry's consistent. Taxes: serious bizness.
posted by 2bucksplus at 6:09 PM on February 11, 2011


Of course. The only reason to insult our business friendly regulatory atmosphere is because you want a favor. We're open for business, Texas-style.
posted by polyhedron at 6:11 PM on February 11, 2011


update: Rick Perry says comptroller's decision was wrong
posted by r_nebblesworthII at 6:05 PM on 2/11
[1 favorite +] [!]


Ah. The check must have just cleared.
posted by Avenger at 6:11 PM on February 11, 2011


It would be nice if we could get the actual letters or pleadings Amazon filed. Does anybody here have access to PACER?

Ok, let's break down the procedure here. First, this is a state case. Its not on PACER. Anyone can get on PACER, you just need a credit card.

Second, this is not a suit by texas to collect the taxes. Texas sent a bill and Amazon filed a FOIA for the info. Why? Because if they waited until texas sued to get the info, they'd also be subject to discovery, which would reveal in 5 seconds exactly how much tax was owed. Exactly. Because amazon KNOWS how much it is. They made the sales. They recorded the info on the sales. Its TOTAL BULLSHIT that they are arguing that the information deficit is Texas fault. They know what they owe to the penny!

The Comptroller asks the AG if this is privileged. They say yes. Thus, the FOIA request is denied. The law contains a provision for judicial review. So this is only about texas info, not about Amazon's, because Amazon is suing to get the info. The info about the corporate structure of amazon's operations is totally irrelvant to this case.

The guy who came up with this media strategy deserves a raise. He or she has got you mad at texas and it took 2 mins to phone the story to the Businessweek reporter to do it.
posted by Ironmouth at 6:12 PM on February 11, 2011 [7 favorites]


jabberjaw, I'm no lawyer but 2(A) seems to be written to exclude the possibility of that subsidary tax dodge. Am I reading this wrong?

(2) Engaged in business--A person is engaged in business in Texas if the person has nexus with the state as evidenced by, but not limited to, any of the following:
(A) maintains, occupies, or uses, permanently or temporarily, directly or indirectly, or through an agent, by whatever name called, a kiosk, office, place of distribution, sales or sample room, warehouse or storage place, or other place where business is conducted;

posted by polyhedron at 6:13 PM on February 11, 2011


Bearwife didn't cite the law; that was the dumbed-down guideline. The text of Rule 3.286 is a little differente

Upon review, her gloss is accurate. Do you disagree?
posted by Ironmouth at 6:16 PM on February 11, 2011


Polyhedron, you are right on.

Gee Perry caves to a business interest that doesn't want to pay taxes. Who here is suprised?
posted by Ironmouth at 6:19 PM on February 11, 2011


Order on internet in Texas, shipped from Texas to Texas address.

Actually, the way most state laws on sales taxes are written, it doesn't matter where it is shipped from. It only matters that it is delivered to a Texas address and that the seller has a business presence in Texas. It doesn't really matter what state it was shipped from.

An example is Apple. They have a store in every state and so have a business presence but ship on-line from only a couple of places. But if you order on line from them, they will collect sales tax no matter what state they shipped that that iPod from.
posted by JackFlash at 6:19 PM on February 11, 2011


Ah. The check must have just cleared.

Nah, the Amazon press release and the use of the phrase "unfavorable regulatory climate" got Perry to do this for free. He's so proud of stealing businesses from other states because of his "favorable regulatory climate," when a major company comes out and says Texas isn't the Cayman Islands of the US, he got his feeling hurt.
posted by birdherder at 6:20 PM on February 11, 2011


Well, this played out like I expected. Texas looked incompetent and schizophrenic and Amazon won but looked just a little more like assholes than yesterday. Also, as expected, the legality of Amazon's set-up didn't ultimately matter and wasn't seriously challenged.
posted by 2bucksplus at 6:25 PM on February 11, 2011


Also, this is what's at stake. Amazon is liable for the taxes. They didn't collect them from the consumers. Now they have to pay. Not the consumer.
posted by Ironmouth at 6:28 PM on February 11, 2011


I would want a lawyer who doesn't spend all day on Metafilter.

You know, lawyers are a little better at multitasking, and can really handle Metafilter and other business at the same time. If you saw how much time we spent on Reddit, Digg, Facebook, Twitter, and, now, Quora, you really wouldn't think I spent all day on Metafilter.

(2) Engaged in business--A person is engaged in business in Texas if the person has nexus with the state as evidenced by, but not limited to, any of the following:
(A) maintains, occupies, or uses, permanently or temporarily, directly or indirectly, or through an agent, by whatever name called, a kiosk, office, place of distribution, sales or sample room, warehouse or storage place, or other place where business is conducted;


I might disagree, with the website's gloss, Ironmouth. The requirement to pay taxes requires a "nexus" with Texas. What is a "nexus"? Well, it's evidenced by having a place of distribution in Texas.

Two things:

(1) They have a place of distribution in Texas, but let's say it doesn't actually distribute anything to Texas. Is that really what the law is asking for? We'd have to read the law as a whole, and go back to the legislative intent, to determine whether the law really only covered distribution centers that actually distribute items in Texas to Texas.

(2) The term used is "evidenced by." So, having a distribution center is evidence of a nexus. I might even go as far as to say that it creates a presumption of a nexus. But it doesn't provide definitive proof of a nexus.

That's my gloss, assuming Amazon is my client, and I don't want them to pay taxes.
posted by jabberjaw at 6:30 PM on February 11, 2011 [2 favorites]


But imposing a sales tax and refusing to support it with documentation? That's seriously screwed up.

The burden is on the seller to provide documentation of their taxes. Virtually every tax fraud case involves a lack of documentation because that is how you commit tax fraud. So what the government does it is it gets a couple of forensic accountants to estimate the tax deficit using whatever information is publicly available.

Now thus far, Texas has not taken Amazon to court and sued them. They have simply presented them with a bill. Therefore they are not obligated to provide the details of their estimate to Amazon.

Amazon has two choices. First, they can agree to pay the taxes and provide supporting documentation of what they actually owe, in which case the Texas estimate is moot. Or second, they can refuse to pay and Texas will sue. Only in the second case is Amazon entitled to the government's documentation and the testimony of their forensic accountants. They are not entitled to that information at this point because there is not yet a lawsuit.
posted by JackFlash at 6:32 PM on February 11, 2011


Funny how Rick admits the comptroller was right while saying it was right. Its all bullshit. Why would a legislative fix be needed if the comptroller was wrong?
posted by Ironmouth at 6:32 PM on February 11, 2011 [2 favorites]


I would want a lawyer who doesn't spend all day on Metafilter.

I slaved 6 hours on a motion, amongst other things. I'm at a bar, drinking now.


Jabberjaw, Amazon knows damn well what they owe. They never even collected. Given the cost of gas, I highly doubt they shipped from Utah. But a genius strategy would be a distribution center in every state, that ships only to nearby states.
posted by Ironmouth at 6:39 PM on February 11, 2011


They have a place of distribution in Texas, but let's say it doesn't actually distribute anything to Texas.

It doesn't matter where an item is shipped from. The only thing that matters is the destination. A business presence could be just a customer service center. They never ship anything to anybody. But if the parent company ships items from New York to Texas, they are responsible for collecting Texas sales taxes. This is what every other on-line retailer does. But Amazon is claiming a exemption because they say their distribution center isn't actually operated by Amazon.

But a genius strategy would be a distribution center in every state, that ships only to nearby states.

No, because it doesn't matter where you ship from. It only matters where you ship to. You must collect taxes for the state you ship to, regardless of where you ship from (assuming you have some business presence in the destination state). A business presence could be just a call center that doesn't ship anything within the state.
posted by JackFlash at 6:47 PM on February 11, 2011


I also laugh in the faces of debt collectors who refuse to document their figures.
posted by Ardiril at 7:02 PM on February 11, 2011


Amazon aren't tax cheats. They are trying to save their customers from paying tax.
posted by w0mbat at 7:04 PM on February 11, 2011


w0mbat: Amazon aren't tax cheats. They are trying to save their customers from paying tax

They're tying to maintain a lower point-of-sale cost to the end user by skirting their due payment of sales tax to the state, is what they're doing.
posted by paisley henosis at 7:08 PM on February 11, 2011


Trying, not tying. Obviously.
posted by paisley henosis at 7:08 PM on February 11, 2011


Amazon aren't tax cheats. They are trying to save their customers from paying tax.

No, they are trying to crush local retailers that have to collect sales taxes by under-pricing them and putting them out of business -- local retailers that provide jobs to local residents.
posted by JackFlash at 7:12 PM on February 11, 2011 [1 favorite]


first amazon would bear costs of collection and reporting/enforcement on top of that sales tax; it's not like they would get to keep a share of the state tax collected, right?

Every other company that does collect sales tax has to do this, so why should Amazon be a special case?


i'm not arguing the way it should be, either way. just curious about the result. if amazon had to pay state tax to texas and not other states, and if they're operating on as tight margins as mentioned, would the administrative cost of handling that tax be passed on to all amazon customers? just to the customers in texas?
posted by fallacy of the beard at 7:12 PM on February 11, 2011


Would the administrative cost of handling that tax be passed on to all amazon customers?

The administrative cost it trivial. It's just some bytes in a spreadsheet generated by a computer. Amazon has over 30,000 employees. A handful could take care of sales taxes. There are thousands of one-person on-line retailers who already do this for their own state.

Amazon already collects sales taxes in six states. Adding one more isn't going to be difficult.
posted by JackFlash at 7:24 PM on February 11, 2011 [2 favorites]


As pointed out in prior threads there at tone of retailers who have to manage with local sales taxes all over the place. They all buy software from one of the many providers who provide you with a simple sdk so you can track this. It is a trivial programming challenge for companies of this scale. The only cost to them is potentially billions in lost sales to local merchants. Why should Borders go bankrupt and take millions out of the local economy because amazon isn't playing by the same tax rules. I don't want to pay for Bezos' mansion of Lake Washington while staring at a vacant mainstreet and wondering where all the money went for the roads and schools.
posted by humanfont at 7:56 PM on February 11, 2011 [4 favorites]


Haters gonna Hate.

/40 ounce Amazon.
posted by Senator at 8:14 PM on February 11, 2011


Three points here.

First, we really need to ditch the concept of sales tax - And I don't say that for my usual "starve the system" reasons; I say that because, unlike income taxes, it doesn't buy us representation in government. If I travel out of my home state, retailers don't magically exempt me from paying for their state government. (As an interesting aside, when I go to Canada, they do let me file to get back whatever GST I paid while there, for precisely the above reason.)

Second, we really need to ditch the concept of sales tax. I don't say that because of the addition to my cost of living, I make enough that it really amounts to nothing more than a nuisance in trying to tally up my shopping cart as I go. For those living paycheck to paycheck, however, it represents a much larger burden proportional to their cash flow. I may not support bleeding the rich dry, but I certainly don't think we should keep an outright regressive tax system in place.

Third, we really need to ditch the concept of sales tax; Not for its cost to me, but for its cost to the retailers tasked with attempting to collect it. That doesn't sound so bad for one shop in one place sold on-site; Start selling product you deliver to even a small local region, however, and keeping track of the patchwork mess of state, county, and even city-level taxes quickly becomes a nightmare to manage. JackFlash, my employer "only" operates in three states over a small area - You wouldn't believe how much time we waste trying to deal with the various taxes and differing tax regulatory environments (just knowing "how much" to collect and submit only counts as a tiny fraction of the real work involved) between them. A spreadsheet? You realize whole companies exist that do nothing but manage cross-jurisdiction sales and regulatory taxes for other companies? Companies like Amazon might have the resources to afford that. Mom & Pop's Flower Shop on a tristate border does not.

And for one more for good measure - Quit hiding more damned taxes in every transaction! If the state needs more money, have the balls to go to the taxpayers and demand they fork it over instead of hiding taxes under every tree, rock, permit, and sale.
posted by pla at 8:15 PM on February 11, 2011 [9 favorites]


Because Borders has stores in every state. This argument has gotten more than a little ridiculous. Amazon obviously thinks that their structure is such that they do not have to collect sales tax in Texas. They are not taunting Texas or being "brazen." What would their motivation for that be?

The truth is that retail gets kind of screwed* by sales taxes, because unlike other business taxes, they can't be easily avoided. The cynical part of me would say this is because the burden of sales tax falls mostly on the poor and middle class. (*When I saw "screwed" I just mean relative to other types of business. I do not think avoiding tax is good. I am just pointing out that no one bothers to invent structures to avoid taxes that the rich don't pay.)

Amazon's strategy is basically to do the same thing most big companies do with their corporate taxes, but with the burden to collect sales tax. They have structured things very carefully to attempt this. You may think this is a bad thing, but tax structuring is a very common and accepted business strategy, and not an Amazon innovation by any means. If you have problems with it, the reforms necessary are a hall of a lot deeper than sending a bill to one company.

Now, it is certainly possible that they fucked up, and will have to pay. But I really don't see how that makes them "tax cheats" any more than every other company out there. And deciding to remove the distribution center seems like a good idea for them, based on their strategy. If Texas needs money they could try to tax an oil company from time to time. But no, because that money buys votes in Texas.
posted by Nothing at 8:21 PM on February 11, 2011 [1 favorite]


Or to put it another way: I don't defend them because they are an internet company. I defend them because I don't see what is different about what they are doing, from what every other big company does, except that the tax burden Amazon avoids falls on lower income people than the tax burden Exxon avoids.
posted by Nothing at 8:27 PM on February 11, 2011


After 40 years in development hell, the film adaptation of Ayn Rand's Atlas Shrugged opens in theaters on April 15.
posted by Bokononist at 8:29 PM on February 11, 2011 [1 favorite]


Now playing in Texas, starring peoples jobs!
posted by buzzman at 8:33 PM on February 11, 2011


But...but Rick Perry was going to use that money to fund science fairs!
posted by sapere aude at 8:35 PM on February 11, 2011 [1 favorite]


Texas has not taken Amazon to court and sued them. They have simply presented them with a bill. Therefore they are not obligated to provide the details of their estimate to Amazon. Amazon has two choices. First, they can agree to pay the taxes and provide supporting documentation of what they actually owe, in which case the Texas estimate is moot. Or second, they can refuse to pay and Texas will sue.

The more I read this the less sense it makes. What is the purpose of the number that Texas gave to Amazon? Describing it as "a bill" suggests that the matter will be settled if Amazon pays that amount. But you say that if Amazon pays they still need to provide documentation of their accounting, just as if they'd been paying in the normal course of business. So why does Texas give Amazon a number at all, if the number has no documented connection to reality? Why not just "Pay your taxes, or we'll sue (and during discovery will find out exactly how much you owe)"?
posted by hattifattener at 8:43 PM on February 11, 2011 [1 favorite]


Starrrrrring. Texasized pronunciation, and spellin.
posted by buzzman at 8:44 PM on February 11, 2011


MikeMc wrote: "Pretty much every state has a Use Tax that almost nobody pays, I don't see where it's Amazon's fault that we're mostly all tax cheats."

It's not, but you might note that mail order houses have always collected sales tax in states in which they have nexus (hence the "plus 6% tax in CA" or whatever in fine print). If Amazon owns and operates a warehouse in Texas, clearly they have nexus there and should be collecting sales tax on sales to people in Texas. This is long settled law, and Amazon is being a tax cheat if they're trying to get away without doing this.

If they want to avoid that, they have two options. First, they can outsource, paying someone else to stock stuff for them, like Newegg does with most of "their" warehouses. (they own one in California, but others are third party suppliers who drop ship to you in Newegg's name) Alternatively, they could have but one warehouse in Idaho or Kansas or wherever they feel like it would piss off the fewest people to collect sales tax (or New Hampshire, where there is no sales tax, IIRC) and ship only from there.

They had a good argument with their affiliate program, but it's utterly indefensible to claim they don't have to collect sales tax in a state where they have physical operations.
posted by wierdo at 8:50 PM on February 11, 2011


What is the purpose of the number that Texas gave to Amazon? Describing it as "a bill" suggests that the matter will be settled if Amazon pays that amount. But you say that if Amazon pays they still need to provide documentation of their accounting, just as if they'd been paying in the normal course of business.

The bill Texas presented would be the maximum Amazon has to pay. They can pay that amount and the matter is settled. If Amazon disagrees and thinks they owe less, then they would have to provide documentation supporting their lower figure. The burden is on Amazon to provide proof since they are the only ones who have the precise data.
posted by JackFlash at 9:02 PM on February 11, 2011 [1 favorite]


You wouldn't believe how much time we waste trying to deal with the various taxes and differing tax regulatory environments (just knowing "how much" to collect and submit only counts as a tiny fraction of the real work involved) between them.

If you are wasting a lot of time you are doing it wrong. I operate a business that has to handle sales taxes covering every county, city and zip code in my state. There are lots of inexpensive options that make this easy. You can buy databases for a few hundred bucks that provide all the data you need. Or you can buy canned software that plugs into your accounting system. Or you can buy live software services that plug into your internet web forms. Or you can get contract services that will provide the whole thing -- your website, the order forms, credit card handling and sales tax calculations -- for any jurisdiction in the U.S. They aren't very expensive. Compared to the credit card transaction fees, which you can't avoid, the sales tax processing costs are minuscule.

There is a lot of regulatory stuff that complicates a business -- income taxes, payroll taxes, withholding, 401(k)s, workman's comp, unemployment insurance, building and safety codes, OSHA, etc. Sales tax handling is a trivial piece of all that.
posted by JackFlash at 9:17 PM on February 11, 2011


This thread has taught me that of the two evils on mefi, Texas is eviler than the mighty soulless legal fiction that is a corporation.
posted by hockeyfan at 9:35 PM on February 11, 2011 [1 favorite]


If Texas needs money they could try to tax an oil company from time to time.

Did you know that oil and gas production in Texas are taxed?
posted by grouse at 10:16 PM on February 11, 2011


MetaFilter: they want that 8%-ish discount so fuck Texas.
posted by one more dead town's last parade at 10:29 PM on February 11, 2011


when I go to Canada, they do let me file to get back whatever GST I paid while there

Haven't been to Canada in a while, have you?
posted by one more dead town's last parade at 10:35 PM on February 11, 2011 [1 favorite]


Is Amazon turning into Walmart in its effect on civil society?
posted by anadem at 10:58 PM on February 11, 2011


humanfont: As pointed out in prior threads there at tone of retailers who have to manage with local sales taxes all over the place. They all buy software from one of the many providers who provide you with a simple sdk so you can track this. It is a trivial programming challenge for companies of this scale. The only cost to them is potentially billions in lost sales to local merchants.

Or, more likely, billions in lost sales to the competing online retailers without a point of presence in Texas.

Enforcing the current broken system is no good. It just forces online companies to either attempt bizarre legal maneuvers (like Amazon is doing), or consolidate their distribution centers in the states they can most afford to forfeit sales in. This results in greater shipping distances and more fuel waste... it's stupid. We need a better system.

I personally tend to favor the idea of just getting rid of the sales tax entirely and compensating by raising the income tax, as the sales tax is expensive and fiddly to charge and enforce and it's also regressive. But I'm sure that arguments could be made for other systems as well.
posted by Mitrovarr at 11:54 PM on February 11, 2011


There is no legal leg to stand on here. They were in state sales. The code expressly requires them to collect. They didn't do it at all.

But, as someone pointed out, there's two companies involved here.

If you're in, say, Arkansas, and you order from Amazon, Amazon then gives a separate corporation in Texas some money, your name, and address, and the product is shipped to you, from Texas to Arkansas. No sales tax accrues. Arkansas use tax may apply.

If you're in Texas, and you place an order, the Texas fulfillment center (and presumably the entire Texas shipping corporation) is explicitly not used. Instead, Amazon gives money and your address to a subsidiary in Utah. The product is shipped to Texas from Utah. No sales tax accrues. Texas use tax may apply.

At no time, apparently, does a Texas-based corporation ship to a customer in Texas. Therefore, the state has no legal ability to collect sales tax. Whether or not you happen to agree with this setup, it's strictly legal. Texas seems to believe it can collect sales tax anyway, based on some evidence it refuses to reveal. Amazon is saying 'screw that!', and is bailing.
posted by Malor at 12:18 AM on February 12, 2011 [2 favorites]


If Texas needs money they could try to tax an oil company from time to time.

Or they could apply a progressive income tax system, if Perry wasn't trying to groom himself for a 2012 presidential run where he can parade an anti-income tax stance (nevermind that his policies are decimating Texas). It's easier to try to push around an out-of-state business for tax revenues that amount to a drop in the bucket of the state's shortfalls, anyway.
posted by Blazecock Pileon at 12:18 AM on February 12, 2011


It's probably obvious to say but if somebody said make a list of states by "unfavorable regulatory climate", Texas would would typically be very far down on that list. Guess it depends on which type of company and which type of regulation.

Unfortunately, in the race to the bottom, there's always someone willing to whore themselves out for a buck less than you.
posted by rodgerd at 1:39 AM on February 12, 2011


Everyone's your brother 'till the rent is due.
posted by fullerine at 1:40 AM on February 12, 2011


Is Amazon turning into Walmart in its effect on civil society?

Pretty much, except that since Amazon sells stuff upper-middle class nerds want, MeFi will rage at anyone getting in their way while tut-tutting over the dreadful state of Main Street and wringing hands over why inner cities only have liquor stores.
posted by rodgerd at 1:58 AM on February 12, 2011 [3 favorites]


"Ten years from now, the typical person will be all wired," [former] Dallas Mayor Ron Kirk says, launching into a popular joke. "He'll have his high-speed Internet link, buying everything online. His life will be dependent on computers and the Internet. Then one day, in all that electronic equipment, he'll have a short, and it will start a fire in his house. And when he calls 911, we'll fax him a picture of a fire truck."

That was back in 2000.
posted by Carol Anne at 5:44 AM on February 12, 2011 [6 favorites]


one more dead town's last parade : Haven't been to Canada in a while, have you?

Huh... Actually visited last fall (I go about every six months), but haven't spent enough to bother filing fir a rebate in a few years, no.

Pity, I really respected them for that rebate program.
posted by pla at 5:54 AM on February 12, 2011


pla writes "And for one more for good measure - Quit hiding more damned taxes in every transaction! If the state needs more money, have the balls to go to the taxpayers and demand they fork it over instead of hiding taxes under every tree, rock, permit, and sale."

The evils of sales taxes are many but hidden is rarely one of them; they are called out as a separate line item when you pay them. It's one of the reasons they are so unpopular.
posted by Mitheral at 6:06 AM on February 12, 2011 [1 favorite]


except that since Amazon sells stuff upper-middle class nerds want, MeFi will rage at anyone getting in their way while tut-tutting over the dreadful state of Main Street and wringing hands over why inner cities only have liquor stores.

Where did that come from, rogerd? I see plenty of people in this thread calling out Amazon and the mefi I read is no friend of Amazon. What are the comments you are ascribing the "rage at anyone getting in their way" to?
posted by madamjujujive at 6:22 AM on February 12, 2011 [1 favorite]


If you're in Texas, and you place an order, the Texas fulfillment center (and presumably the entire Texas shipping corporation) is explicitly not used. Instead, Amazon gives money and your address to a subsidiary in Utah. The product is shipped to Texas from Utah. No sales tax accrues. Texas use tax may apply.

Nope. That is not the way the law is written, to intentionally prevent such tax avoidance schemes. It does not matter where the product is shipped from. It only depends on where it is shipped to. This is known as a destination-based sales tax. All that is required is that the company have a business presence in the state, in this case the Amazon fulfillment center. It is not required that the fulfillment center actually ship the product. It can be shipped from any state into Texas and it is subject to sales tax.
posted by JackFlash at 7:42 AM on February 12, 2011 [1 favorite]


It is not required that the fulfillment center actually ship the product.

You may have missed the part where the corporation doing fulfillment in Texas is not participating in any Texas-bound orders.
posted by one more dead town's last parade at 7:54 AM on February 12, 2011 [1 favorite]


That is not the way the law is written, to intentionally prevent such tax avoidance schemes. It does not matter where the product is shipped from.

Sounds like Texas is trying to regulate Interstate Commerce. If I were Amazon, I'd pull out, too.
posted by smcdow at 8:36 AM on February 12, 2011 [1 favorite]


You may have missed the part where the corporation doing fulfillment in Texas is not participating in any Texas-bound orders.

You seem to be confused about the law. Amazon is a business that operates in Texas. They have employees there. Amazon sells on-line products to residents of Texas. Amazon is obligated to collect sales taxes on products it ships to Texas addresses from any state. It it not required that the fulfillment center ship to Texas addresses. That is irrelevant. It would make no difference if the Amazon business in Texas was a call center that ships nothing.
posted by JackFlash at 8:42 AM on February 12, 2011 [1 favorite]


JackFlash : You seem to be confused about the law [...] Amazon sells on-line products to residents of Texas. Amazon is obligated to collect sales taxes on products it ships to Texas addresses from any state.

Speaking of confused about the law...

Uncle Sam (Houston) says, out of the blue, "you owe us $269, pay up or else". You respond, quite reasonably, "uh, for what?". Uncle Sam says "unpaid use taxes". You respond, again quite reasonably, "From whose ass did you pull that number?". And then it gets weird, when Uncle Sam responds "Sorry, can't tell you, secret stuff blah blah blah".

Amazon didn't refuse to pay what they owe. They refused to pay an entirely unsubstantiated bill. The fact that Texas refuses to back their claim with, y'know, actually data pretty much cinches it that they have no evidence, and really did pull a number out of their asses.


Don't get me wrong, Amazon doesn't count as the "good guy" here. But Texas does win the role of "bad guy" for this situation.
posted by pla at 8:51 AM on February 12, 2011


Sounds like Texas is trying to regulate Interstate Commerce.

This has already been litigated by the Supreme Court in Quill Corp. v. North Dakota based on the Commerce Clause in 1992. The court said that states could not collect sales tax on shipments from out-of-state unless a company has a business presence in the state.

This is not a new thing. Thousands of companies already pay sales taxes on internet sales, both large companies like Apple and one-person on-line businesses. In fact, Amazon already pays sales taxes in Kansas, Kentucky, New York, North Dakota, and Washington. They have so far avoided paying sales taxes due in Texas because apparently Texas has up to now just looked the other way. That does not eliminate Amazon's obligation to pay the tax just because Texas hasn't yet audited them.
posted by JackFlash at 9:00 AM on February 12, 2011


Pla, we've been over this before. Texas does not have the Amazon sales figures. Only Amazon has that. In the absence of documentation, Texas can make any reasonable assumptions they want about taxes due. If Amazon thinks they owe less, all they have to do is provide documentation to prove otherwise and pay the lower bill. But Amazon refuses to do that. Why? Amazon doesn't need to see the numbers from Texas. Amazon knows exactly how much they owe. They are simply stalling and using PR about secret numbers to buffalo people like you. It seems to be working.

At this point Texas is simply asking Amazon to voluntarily cooperate. Amazon is not entitled to the Texas numbers because Texas has not yet taken them to court. If and when Texas takes Amazon to court, then Amazon will be entitled to see all the numbers. But Amazon can avoid all that by simply fessing up and showing their records.

As for your example about Uncle Sam sending a bill out of the blue, what you describe is a common occurrence for income tax payers. For example, sometimes people forget to enter the cost basis on a stock transaction. If you buy stock for $1000 and sell it for $1200 then you only owe tax on the $200 profit. In the absence of documentation the IRS assumes you owe tax on the entire $1200 and will send you a bill out of the blue for the full amount. You can clear things up by sending the IRS documentation showing that you only had a $200 profit and everything is fixed. Amazon refuses to cooperate. They could easily clear this up by showing records for what they do owe.
posted by JackFlash at 9:20 AM on February 12, 2011


You seem to be confused about the law. Amazon is a business that operates in Texas.

You seem to be confused about the facts. Amazon is not a single corporate entity, and the corporate entity that is taking the orders is not the same corporate entity that fulfills orders shipped from Texas.

Let's say you could order online from Fruit of the Loom, and they had a distribution center only in Arkansas. You're essentially arguing that Texas can force them to collect sales taxes because BNSF runs tracks through Texas.
posted by one more dead town's last parade at 9:47 AM on February 12, 2011 [1 favorite]


What you're not getting here, JackFlash, is that there are multiple separate corporations involved. Amazon itself has no business presence in Texas. There is a separate fulfillment corporation in Texas that they contract with to ship orders all over the country, except to Texas-based addresses. For Texas residents, they contract with one of their other corporations, based in other states.

At no time does a corporation with a presence in Texas ship to an address in Texas. By the letter of the law, no sales tax should ever apply.

Texas appears to be asserting that a business relationship with a Texas corporation makes you 'present' in Texas for sales tax purposes, but the side effects of that law could be significant, reaching far beyond mail order.... and far, far beyond their borders.
posted by Malor at 10:13 AM on February 12, 2011


... there are multiple separate corporations involved. Amazon itself has no business presence in Texas.

Where did you get that idea? Did you just make it up? Amazon has not argued that they do not have a business presence in Texas. In fact, that is the reason Amazon is closing their facility in Texas, so that they can eliminate their business presence and no longer have to collect Texas sales taxes.

You may be confusing the Texas case with the Illinois case. The Illinois case involves an affiliate. The Texas case does not. There is no dispute that Amazon owns and operates the Texas distribution facility.
posted by JackFlash at 10:36 AM on February 12, 2011 [2 favorites]


Whether it's through a wholly owned subsidiary or the parent corporation, Amazon still has (had?) physical presence in Texas. The story would be entirely different if the entity owning the website and the entity owning the distribution center lacked common ownership and/or control.

I'm a little sad they're closing the Dallas warehouse, as I get a lot of stuff from there and ground shipping is only one day. The one in Coffeyville does not stock most of the stuff I like to buy.
posted by wierdo at 10:43 AM on February 12, 2011 [1 favorite]


JackFlash : Pla, we've been over this before. Texas does not have the Amazon sales figures. Only Amazon has that.

So Texas feels justified in that particular number because...?


If Amazon thinks they owe less, all they have to do is provide documentation to prove otherwise and pay the lower bill. But Amazon refuses to do that. Why?

Because for 2300 years we've understood that you can't prove a negative, and indeed the entire US system of law has that as a core premise ("innocent until proven guilty" - Except when the IRS, ICE, or HHS gets involved)?

Let's say that Amazon comes forward and presents Texas with real honest sales figures "proving" that they only owe $50 million. Texas says "nuh-uh, we don't believe you".

What happens next?


As for your example about Uncle Sam sending a bill out of the blue, what you describe is a common occurrence for income tax payers. For example, sometimes people forget to enter the cost basis on a stock transaction.

Agreed, it does happen. And the auditor that goes over your return with a microscope will point that fact out to you, which you can then refute or accept that you made a mistake. And I say that from experience (and in my favor, at that) - I forgot to file some piddling form that entitled me to a whopping $2.50 (or thereabouts) more on my refund, and the IRS sent me an amazing amount of detain on why I should have entered $8 on line such-and-such and then rolled that back into my 1040 as a deduction.

So if they can harass me in great detail about giving back a paltry sum, why can't they provide similar detail to Amazon?

Right - Because we agree that they don't know the real figure... Making this not a legitimate bill for a specific nonpayment, but a random number which, if I had to guess, probably comes close to matching the cost of some TX politician's pork-of-the-year.
posted by pla at 11:54 AM on February 12, 2011


pla, if I understand JackFlash correctly, what he's saying is that the situation is that Amazon allegedly should have been paying taxes all along, and been keeping track of their sales so that they know how much tax to pay, and been providing that documentation to the state. The state is now asking them to pay their back taxes. Now, there are two possibilities: Amazon may have the records necessary to figure out how much tax they owe, in which case they can just pay that. (This is almost certainly the case.) But what if Amazon had lost the records, or not kept detailed enough records to compute their taxes? The state doesn't have those records either (unlike your 1040 example), so how can they proceed? In that case, the state says, just pay this $269M figure we pulled out of our ass, and we'll call it good. The state has to be able to provide some estimate, even though they don't have all the information, or else companies could get out of taxes by conveniently losing their records.

Where it gets weird is that the state refuses to say how it arrived at that estimate. On the one hand, I think this is pretty bogus, especially the "attorney-client privilege" excuse. The state should be easily able to say, "According to thus-and-such publically-available statistics, we figure you did about $XYZ dollars of business, so that's $ZYX tax." But on the other hand, it doesn't really matter that the state's number is dubious, because we all know that Amazon does have the records necessary to compute their actual tax. If Amazon can provide documentation to support some other figure (which I'm sure they can), then the state's estimate becomes irrelevant.

At least, that's my understanding of what's being said.



On the third hand, though, I agree with other commenters here that this smells like we're just seeing the PR arm of some internal dispute between Amazon and Texas, whether it's Texas doing a shakedown or Amazon trying to extort a sweetheart deal, we can't tell from outside.
posted by hattifattener at 1:09 PM on February 12, 2011


Let's say that Amazon comes forward and presents Texas with real honest sales figures "proving" that they only owe $50 million. Texas says "nuh-uh, we don't believe you".

What happens next?


If the documentation looks legit, most likely Texas accepts the payment. If not, they go to court. That's what courts are for -- to settle disputes. At that time, Amazon has to disclose their documentation and calculations and Texas has to disclose their own calculations. Then a judge decides which calculations make the most sense. Meanwhile, Texas is giving Amazon the opportunity to settle this out of court.
posted by JackFlash at 1:33 PM on February 12, 2011


Jeff Bezos, CEO and founder of Amazon.com, also funded the opposition to Washington state initiative 1098, which would have helped fund Washington with an income tax on those earning over $200,000.

The thing is, what Amazon.com is doing is completely legal. Like Microsoft's Nevada Tax Dodge they've setup a corporate tax structure that lets them avoid taxes. Individual states probably won't be able to solve this problem, it will take a coordinated or federal response.
posted by formless at 2:32 PM on February 12, 2011


I think it's more nuanced than Amazon, Inc has a presence in Texas therefore they are removing that presence.

Specifically, I think that:

Amazon has a subsidiary in Texas, their distribution center. This is a separate corporation owner by Amazon.

In most states, this would not establish a presence unless Amazon violated some very clear rules about ownership (i.e., running day to day operations, rather than allowing the subsidiary to operate independently).

And so, in most states, it would be clear that Amazon does not have a presence.

However, Texas law with regards to sales taxes appears to broaden the definition of presence to include subsidiaries, and if I read correctly, even independent but contracting organizations.

Texas this asserts a presence based on Texas law, Amazon chooses not to fight this in court but instead to remove all question, cost, and risk by closing down their Texas subsidiary.
posted by zippy at 4:46 PM on February 12, 2011


Isn't an electronic shopping kiosk a presence in the state? When it comes right down to it, they are sending me a shopping kiosk (in HTML) and I'm making a purchase through it. How is this any different from having a retail store in my neighborhood. It isn't. I'd like to see if that legal tact would work. Let them block traffic to localities if they don't want to pay sales taxes on the transactions, don't open stores in my house.
posted by humanfont at 7:06 PM on February 12, 2011


pla writes "Amazon didn't refuse to pay what they owe. They refused to pay an entirely unsubstantiated bill. The fact that Texas refuses to back their claim with, y'know, actually data pretty much cinches it that they have no evidence, and really did pull a number out of their asses."

I'm sure there is a generally accepted, by the state, procedure for estimating sales tax owed. Texas probably invokes it thousands of times a year. I'd also bet that most if not all states that charge a sales tax have similar if not identical estimating procedures. They probably always overestimate but if they didn't teh system wouldn't work.

pla writes "Because for 2300 years we've understood that you can't prove a negative, and indeed the entire US system of law has that as a core premise ('innocent until proven guilty' - Except when the IRS, ICE, or HHS gets involved)?"

Well in this case they can prove this negative (if it was a negative, which of course it isn't). All they have to do is show their books to an auditor and if they've been adhering to GAAP they'll be able to show they don't owe any tax because they haven't sold anything in Texas (actually show that they owe a huge stack of back taxes plus probably penalties and interest, but the number whether zero or multiple millions will be proven). Now if they haven't been adhering to GAAP they'll be in trouble but I'm pretty sure that defence isn't going to fly otherwise states would find it impossible to collect sales taxes from any business.
posted by Mitheral at 9:36 PM on February 12, 2011


Isn't an electronic shopping kiosk a presence in the state? When it comes right down to it, they are sending me a shopping kiosk (in HTML) and I'm making a purchase through it.

It's more like they are sending you a mail order catalogue (in HTML). And it is a longstanding point of law that while the purchaser may be required to pay tax in the state he resides, the company which sends the catalogue is not required to collect it. Maybe it is time for that to change but it's the way things currently work. In the USA anyway.
posted by Justinian at 6:35 AM on February 14, 2011 [1 favorite]


Mitheral : Well in this case they can prove this negative (if it was a negative, which of course it isn't).

How do you consider "prove you don't owe that much" not a negative?


All they have to do is show their books to an auditor and if they've been adhering to GAAP they'll be able to show they don't owe any tax because they haven't sold anything in Texas (actually show that they owe a huge stack of back taxes plus probably penalties and interest, but the number whether zero or multiple millions will be proven).

Except we've (well, not you and I, but this thread has) already touched on that issue - Amazon's books will show zero Texas-specific sales. Their Texas affiliate will show zero Texas-specific sales. Their Kentucky affiliate booked all those sales, but has no presence directly in Texas.

I'll agree that we can call this a thinly veiled tax dodge; but extend it to less clear-cut situations - Pure "holdings companies", for example. Should "Bob's Chocolates" out of CT have to pay taxes in MA because MegaCorp Inc owns both Bob and "Jim's Flowers" in MA? If Berkshire manages a hostile takeover of KYDC LLC (Amazon's Kentucky affiliate that handles orders from Texas), does Warren B magically become liable for Amazon's TX tax bill? If YOU buy 100 shares of AMZN tomorrow, can Texas send you a bill for $1268 (your "share" of that tax bill)? How about Amazon's other "real" affiliates, the thousands of bloggers around the country that receive a pittance for referrrals to Amazon.com?

The problem here comes from the slipperiness of extending corporate liability down the food chain of ownership - Because that slope ends at you and me (and Warren Buffet).

Well, no... As I already said, the problem here involves the largest regressive tax we have in this country. This particular scenario only highlights one more flaw with it, in that Soulless MegaCorp can dodge it while Mom & Pop can't even afford lube.
posted by pla at 6:02 PM on February 14, 2011


Umm... Last night, I posted a correction to that $1268 figure - I miscalculated, and it actually comes out to $60 (though my point stands) - Did it get deleted for some reason? Two sentences, and just-the-facts-ma'am, pretty sure I didn't break any rules...
posted by pla at 3:28 AM on February 15, 2011


How do you consider "prove you don't owe that much" not a negative?

The question is "prove how much you owe" and if they can't, they have to pay the estimate.
posted by polyhedron at 5:05 PM on February 16, 2011


Two articles today in local Texas media on Amazon and sales tax that may be of interest to anyone still following the discussion:

Texas Comptroller Hunts Amazon for Tax Money. (Texas Tribune)

Texas comptroller disputes claims Amazon wasn't told how assessment was calculated. (Austin American Statesman)

The first is an explainer-type article and the second is about recent developments and claims (also incorporated into the Tribune's explanation). I was particularly interested to hear that Combs had given Amazon the initial round of information they'd asked for and only on the second round had she denied the request and cited attorney-client privilege.
posted by immlass at 6:47 AM on February 17, 2011


The evils of sales taxes are many but hidden is rarely one of them; they are called out as a separate line item when you pay them. It's one of the reasons they are so unpopular.

By that time it's too late to make cost/value decisions. This really counts when low income people are shopping for groceries. What qualifies as tax-exempt food items is often occult arcana. If there were a more effective way to hide the tax I can't imagine what it is.
posted by clarknova at 9:24 PM on February 19, 2011


clarknova writes "What qualifies as tax-exempt food items is often occult arcana."

Here it's pretty obvious with a few weird edge cases for prepared foods. Can you give me an example? Is it stuff like Bananas are taxed and apples aren't?

clarknova writes "If there were a more effective way to hide the tax I can't imagine what it is."

The government could mandate it be included in the price hence hiding it from the consumer.
posted by Mitheral at 6:53 AM on February 20, 2011


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