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Will Amazon Get a Visit From the Tax Man?

ScuttleMonkey posted more than 6 years ago | from the cat-and-mouse dept.

The Almighty Buck 334

theodp writes to tell us that according to the Wall Street Journal, Amazon.com has raised a few eyebrows with their strategy to avoid paying sales tax in eight states where they have warehouses or distribution centers. "As an online retailer, Amazon can avoid collecting sales tax in states where it has no presence, at least until Congress changes the law. But in states where a company has actual facilities, such as warehouses, states tax officials can require the company to collect sales tax. Despite operating hundreds of thousands of square feet of distribution facilities in the eight states, Amazon says it doesn't have any presence in them. The company argues that it doesn't operate the plants, its wholly owned subsidiaries do."

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hey, isn't today Gates' last day at Microsoft? (-1, Troll)

Anonymous Coward | more than 6 years ago | (#23969647)

shouldn't we be jerking our microshafts about that?

Re:hey, isn't today Gates' last day at Microsoft? (5, Funny)

heliocentric (74613) | more than 6 years ago | (#23969709)

It was his last day, but then Lumberg asked him if he could just go ahead and come on in on Saturday then too, mmmm'kay?

Re:hey, isn't today Gates' last day at Microsoft? (-1, Troll)

Anonymous Coward | more than 6 years ago | (#23969775)

Office Space is a great movie. My favorite scene is this [youtube.com] one.

Re:hey, isn't today Gates' last day at Microsoft? (0)

Anonymous Coward | more than 6 years ago | (#23969847)

I once worked at a company in Silicon Valley that built network ASICs. The company focused on Traffic Management, QoS, etc. features for Oc48-Oc192 switches/routers. The company had a new chip in the lab that was very late and needed to work for some "critical" customer demos in just a few weeks. Management asked the engineering team to all come in and work all weekend to bring up the new chip, and of course they'd comp us the days later, etc. etc. What management didn't say was that on Monday morning they were going to lay off 1/2 the company. So much for comp time. Blah!

Re:hey, isn't today Gates' last day at Microsoft? (-1, Offtopic)

morari (1080535) | more than 6 years ago | (#23970165)

Do you really think that Bill Gates is as spineless of a coward as most of the livestock at cube farms are? If you don't want to come in on a unscheduled day, then tell your boss when he asks. Simple as that.

It's almost as bad as avoiding to answer the telephone when an employer calls, or making up lame excuses if you do pick up. "Come in today? I don't think I can... I have a, um, a, uh... I have plans already! My family is coming over and, er, stuff..."

Geez!

Re:hey, isn't today Gates' last day at Microsoft? (-1, Offtopic)

Anonymous Coward | more than 6 years ago | (#23970385)

I'm using ubuntu and it's not giving me a handjob. I thought linux did that. lying slashdotters

Of course it will (4, Interesting)

howardd21 (1001567) | more than 6 years ago | (#23969727)

They have the same problem any distributor does, the relationship with the facilities they control. If they make income from the facility in a domain, then the domain will exercise a level of control over them.

Re:Of course it will (5, Insightful)

ottothecow (600101) | more than 6 years ago | (#23969799)

"Amazon is benefitting from police and fire protection, and other services in the states where it has facilities, it ought to be collecting sales tax just like any other local business." -FTA

I disagree, they should be paying property tax for these services (which I am sure they are). They should only be paying sales tax on retail sales not on products that are merely being distributed and since this is a warehouse not a storefront, state sales tax is not the answer.

Really though, sales tax is always a regressive tax and I don't think it is a great idea in general for that reason...

Re:Of course it will (2, Insightful)

XanC (644172) | more than 6 years ago | (#23969939)

Agreed about Amazon owing property tax and not sales tax.

But defining a tax as "progressive" or "regressive" carries the underlying assumption that every tax is an income tax. There's no particular reason to compare the amount paid via sales tax to a person's income; compare it to the amount he consumes. It's not regressive. It's perfectly flat.

Re:Of course it will (4, Insightful)

the eric conspiracy (20178) | more than 6 years ago | (#23970229)

There's no particular reason to compare the amount paid via sales tax to a person's income; compare it to the amount he consumes. It's not regressive. It's perfectly flat.

Of course there is a reason, and it is that a person with a lot of income spends a lower percentage of that income on consumption.

The result: a sales tax is regressive.

Re:Of course it will (1)

XanC (644172) | more than 6 years ago | (#23970369)

What does he do with the rest of it that he doesn't consume? Would you call that "spending", or would you call it "investing"? Is it something that should be encouraged or discouraged?

Re:Of course it will (2, Informative)

Anonymous Coward | more than 6 years ago | (#23970627)

Who cares if it should be encourages or discouraged, that's irrelevant to whether it is regressive or not.

You're the one who seems to be assuming that "regressive" is by definition a bad thing. Why?

Re:Of course it will (2, Insightful)

Retric (704075) | more than 6 years ago | (#23971005)

Spending on maid/layers/accountants/travel are outside of the sales tax arena so it's still regressive when you look at in terms of total spending.

Re:Of course it will (5, Insightful)

sherriw (794536) | more than 6 years ago | (#23970415)

So.. you're saying the rich should pay more? Why exactly?

With a sales tax, the rich tend to buy more non-necessities, and more expensive ones like cars and homes. So they naturally would pay more in sales tax than a lower income family.

True, they would only pay a smaller percent of their income if they tend to save and invest that income. Rather than spend it. But how many rich people do you know who don't go out and buy fancy cars and big homes?

Progressive taxes (income tax which increases in percent as the principal increases) are nonsense. Why should someone who works harder, innovates, starts their own business, or pursues a higher-wage career be penalized? It is not 'unfair' that some people have higher salaries than others.

Re:Of course it will (2, Insightful)

Veretax (872660) | more than 6 years ago | (#23970703)

Define Rich. Liberals running for office always talk about the rich, but what they call rich I don't see as being anything but upper middle class.

Re:Of course it will (3, Insightful)

spun (1352) | more than 6 years ago | (#23970857)

Socio-economic stability is a prerequisite for business success. The rich benefit more from programs that help create such stability. Therefore, they should pay more.

Re:Of course it will (-1, Offtopic)

Anonymous Coward | more than 6 years ago | (#23970951)

Why should someone who works harder, innovates, starts their own business, or pursues a higher-wage career be penalized?

Rich people do not work harder than poor people. That's a fact.

Subsistence crime (4, Interesting)

tepples (727027) | more than 6 years ago | (#23971019)

Why should someone who works harder, innovates, starts their own business, or pursues a higher-wage career be penalized?

It is in the interest of the people to provide a safety net for those who cannot earn enough to feed, clothe, house, and educate their families. A slight subsidy to lower-income families helps keep them out of subsistence crime.

Re:Of course it will (2, Insightful)

Anonymous Coward | more than 6 years ago | (#23971045)

Why should someone who works harder, innovates, starts their own business, or pursues a higher-wage career be penalized?

The greatest predictor of social class is the social class of your parents.

Almost all high income individuals became that way due to the social advantages of being born into high income families.

Why should someone be rewarded for their "choice" of parents?

The wealthy in American society "deserve" their wealth in the same way a feudal aristocracy "deserved" their wealth.

Quote:

A series of scrupulously bipartisan new studies by the Economic Mobility Project of the Pew Charitable Trusts hints at an answer â" and the explanation is not a funk but a fact. Even in a growing economy, only about a third of Americans can be considered upwardly mobile â" meaning they will end up with more inflation-adjusted income and a higher relative economic standing than did their parents. The rest are maintaining their standing or falling behind; about one-third slip down the income scale over the course of a generation.

http://www.nysun.com/opinion/decline-of-upward-mobility/66431/

(yes I know it is the NY Sun reporting this. The original source is highly credible)

Societies with a high degree of income inequality tend to be corrupt dictatorships - and for a reason. Political power follows economic wealth, and where wealth is highly concentrated, power unabashedly supports the wealthy and needs to make no pretense to the common good.

Again quoting the source article:

When a society has neither equality nor mobility, it is an aristocracy. Conservatism accepts inequality as an economic fact of life â" but it cannot accept the existence of a class-ridden society where inequality is hereditary and permanent.

Though I suspect most American conservatives are just fine with a hereditary aristocracy, as long as they can delude themselves into believing they are a part of it.

Disagree with your reasoning... (1)

Firethorn (177587) | more than 6 years ago | (#23970709)

Of course there is a reason, and it is that a person with a lot of income spends a lower percentage of that income on consumption.

That is NOT guarenteed by any means. There are people out there that make half of what I do and save money, there are people who earn ten times what I do and spend every cent of it and then some.

Me, I save 10-20% of my income. In my state, food from a grocery store isn't subject to sales tax.

Is the sales tax still necessarily regressive?

Re:Of course it will (2, Interesting)

ottothecow (600101) | more than 6 years ago | (#23970251)

By definition (in the discussion of taxes, progressive and regressive are economic terms, not political, and are thus well defined) a sales tax is regressive. You are correct in your statement that it is perfectly flat--you just forget the step where a flat tax is regressive.

A regressive tax will take a larger proportion of a poor person's income than that of a rich person in any particular exchange. If you are buying a stick of butter for $1 and there is a 10% sales tax (hey...it is almost that high here in chicago on non-food items) then the rich person pays 10c in tax and the poor person pays 10c in tax. If the poor person is making chicago minimum wage, their tax rate works out to be about 1.3% of thier income. If the rich person is making $25 an hour, the effective tax rate is .4%. They are being taxed at about 1/3 the rate of the poor person relative to their ability to pay.

http://en.wikipedia.org/wiki/Regressive_tax [wikipedia.org]

Re:Of course it will (1, Interesting)

XanC (644172) | more than 6 years ago | (#23970421)

You're right about that being the accepted definition, but it's that definition that I'm taking issue with. The only reason to bring income into the question at all is an underlying assumption of Marxism.

Re:Of course it will (1)

Firethorn (177587) | more than 6 years ago | (#23970767)

Except, to use your butter example, the poor person's buying cheap store brand margarine at $.20/stick, while the rich guy is buying Organic hand-churned at $2/stick.

So it all evens out, and is flat - with modifications caused by the individual spending habits of the person.

Definitions aside... (1)

msauve (701917) | more than 6 years ago | (#23970863)

You act as if a tax which is applied equally to everyone, and is blind to factors such as race, sex or economic status, is a bad thing.

Re:Of course it will (1)

EastCoastSurfer (310758) | more than 6 years ago | (#23970905)

Your math is correct, but the same transaction also takes a larger % of the poorer persons income regardless of tax. Should we lower the price of the butter to people who make less? Should we adjust all prices based on a % of income?

Re:Of course it will (0)

Anonymous Coward | more than 6 years ago | (#23970313)

Regressive tax is an accurate technical term, describing how the implementation of a particular tax plays out, to people with differing levels of wealth.

The fact that you don't like it is irrelevant. You might as well get upset that shared memory isn't shared with *everyone*, or that direct memory access involves accessing memory through a controller, and is therefore slightly indirect.

If you call a sales tax "perfectly flat", you're not being clever or accurate. You're just misusing technical words.

Re:Of course it will (4, Informative)

jellomizer (103300) | more than 6 years ago | (#23970011)

Sales Tax is a tax the consumer pays not the company... Amazon is already paying for property taxs, revenue tax, employee wage tax.... Paying sales tax is a tax that We pay as a consumer to the company who then resends it to the apporprate state/county/city on your behalf. So if they are based in Delaware but not in New Jersy they are not paying taxes for their services in Deleware they are paying New Jersey because they want the income from that person.

Re:Of course it will (1)

ishobo (160209) | more than 6 years ago | (#23970645)

That is incorrect. There is no requirement that the seller must collect the sales tax from the buyer, only that the seller pay the sales tax to the state. A seller can pass a sales tax along to the buyer or pay it themselves.

Re:Of course it will (1)

rootofevil (188401) | more than 6 years ago | (#23970671)

sales tax is something the state compels the company to collect. if not they can request it (through several means) from the company doing the selling.

even though we pay for it, amazon is still 'responsible' for collecting it, and the state will come after them if they decide they should be collecting it.

Re:Of course it will (1)

steveo777 (183629) | more than 6 years ago | (#23970739)

Right, but if the feds find Amazon guilty of tax evasion or fraud then Amazon is going to have to eat the tax of all those states' sales going however far back. I don't know where they have a presence but some states have sales taxes up to 7% and local taxes that shoot even higher. That's quite a bite.

How is Sales tax regressive? (3, Informative)

howardd21 (1001567) | more than 6 years ago | (#23970041)

Really though, sales tax is always a regressive tax and I don't think it is a great idea in general for that reason...

Sales tax is flat, it is only implied to be regressive because we assume, for example, the first $50,000 a person spends must be on necessities, and since that was all they had to spend as a $50,000 earner it was regressive when compared to a person spending 50,000 from a 100,000 in earnings. If the person earning 100,000 spent other 50,000, they would pay twice as much in sales tax as the 50,000 earner. The fact is that they both spent the same amount in taxes at the same spending level. That is not regressive, that is flat.

The income system in the US regressive, the sales tax is flat.

Re:How is Sales tax regressive? (4, Insightful)

ivan256 (17499) | more than 6 years ago | (#23970225)

It's actually progressive, since necessities are usually excluded from the sales tax. Thus people with more expended disposable income are taxed more.

Re:How is Sales tax regressive? (-1, Redundant)

sherriw (794536) | more than 6 years ago | (#23970445)

Mod parent up. Exactly!

Re:How is Sales tax regressive? (1)

Veretax (872660) | more than 6 years ago | (#23970727)

Not in West Virginia, though we are working on it. what is it 4-5% tax on groceries now?

Re:How is Sales tax regressive? (1)

Fulcrum of Evil (560260) | more than 6 years ago | (#23970805)

it varies according to state, county, and city. Seattle excludes staples from taxation, while Fairfax, VA doesn't.

Hardly. (0)

Anonymous Coward | more than 6 years ago | (#23970939)

Show me someone who can get buy with only the 'necessities' excluded from sales tax and I'll show you the Amish - and even then it's a stretch.

Re:Of course it will (1)

Z00L00K (682162) | more than 6 years ago | (#23970241)

So then move the business to a state without sales tax then? New Hampshire maybe?

Re:Of course it will (1)

NeoSkandranon (515696) | more than 6 years ago | (#23970321)

Excellent point, however I wonder if they're already paying little to zero property tax due to whatever incentive package the local government offered to have the distribution center built wherever it is.

These states will fold (1, Interesting)

Anonymous Coward | more than 6 years ago | (#23969773)

All Amazon has to do is threaten to move their facilities. The threat of a loss of jobs will dwarf whatever gains they hope to make from pulling in sales taxes.

Re:These states will fold (1)

thrillseeker (518224) | more than 6 years ago | (#23970235)

Well, they should probably carry through in at least one to show they're serious.

Re:These states will fold (1)

MarkvW (1037596) | more than 6 years ago | (#23970845)

The States probably won't fold. They can't just walk away from collecting taxes. They have a duty to administer the tax laws equally. To just let one business walk would be to openly invite claims of unequal administration. That would be a bad thing. The cavalier nature of the question does not invite further response.

The loophole has to exist (2, Insightful)

Gewalt (1200451) | more than 6 years ago | (#23969795)

Can you imagine every transaction paying sales tax to 8 states? Just because they have a distribution point?

Re:The loophole has to exist (2, Insightful)

jwkfs (1260442) | more than 6 years ago | (#23969835)

I was under the impression you only had to pay sales tax if the sale was made in that state -- ie, the consumer resides in that state. Is this not true?

Re:The loophole has to exist (5, Informative)

TooMuchToDo (882796) | more than 6 years ago | (#23969907)

Typically, if you're a customer, you have to pay sales tax to the seller if they have a "business presence" in your state. Business presence, of course, is quite ambiguous. Several online retailers have simply rolled over instead of fighting against this (Crucial.com comes to mind; they charge sales tax even if they don't have a presence in the state, and remit the tax to the taxing body in your state). Amazon on the other hand doesn't have the luxury of rolling over. Part of their competitive edge is not having a sales tax, and frankly, they shouldn't have to pay one as someone else mentioned, as the services their distribution centers use should be covered by their property taxes.

Re:The loophole has to exist (1)

ishobo (160209) | more than 6 years ago | (#23970737)

There is not legal requirement that a buyer has to pay a sales tax, only that the seller pay the state the sales tax.

Re:The loophole has to exist (1)

TooMuchToDo (882796) | more than 6 years ago | (#23970837)

No business would last long if they paid the sales tax without collecting it from the buyer. Also, how would you build it into the cost of your products, since sales tax varies state to state (and county to county sometimes).

Re:The loophole has to exist (1)

jak10900 (1144239) | more than 6 years ago | (#23969921)

You are correct. Parent is just blowing things out of proportion...

Nope (0)

Anonymous Coward | more than 6 years ago | (#23969999)

I was under the impression you only had to pay sales tax if the sale was made in that state -- ie, the consumer resides in that state. Is this not true?

Buy from Microcenter.com and if they have a store in your state, they will charge you sales tax and shipping - even though there warehouse that they ship from is in Ohio, they charged my GA sales tax.

I'll never buy from them online again. If they don't have it in the local store, I won't buy it.

Anyway, after a bunch of googling on the matter; if they have a physical presence in the state you are buying it from, they have to charge you sales tax for that state. I don't think it differentiates between a retail presence or any physical presence, IIRC.

Re:Nope (5, Insightful)

tompaulco (629533) | more than 6 years ago | (#23970541)

Buy from Microcenter.com and if they have a store in your state, they will charge you sales tax and shipping - even though there warehouse that they ship from is in Ohio, they charged my GA sales tax.
Why are you upset about that? If they hadn't charged you sales tax, then you would have been required to file use tax, which would have cost you the same amount and taken you a few extra minutes, whereas Microcenter saved you all the effort.
Let me guess, you don't file use tax and so you will single out and punish companies who don't aid you in your attempt to evade taxes.

Re:The loophole has to exist (2, Informative)

Anonymous Coward | more than 6 years ago | (#23969855)

They only have to pay one tax for each transaction in a state where the buyer is a resident. There are 8 different states. Each transaction involving a buyer and a seller in that same state is subject to the tax of that state.

Re:The loophole has to exist (1)

KookyMan (850095) | more than 6 years ago | (#23969883)

Actually, only every transaction within them states.

If you live in Denver and a Distro Center is in Colorado, you pay sales tax. If you live in Michigan, and there is no distro center, then you don't pay sales tax.

So residents of those 8 states would pay sales tax on purchases from Amazon, but the remaining 42 would not.

Re:The loophole has to exist (3, Interesting)

dgatwood (11270) | more than 6 years ago | (#23970491)

This is why if you're a smart businessperson, you should avoid putting your headquarters and facilities in states that have both sales tax and large populations. The best way to keep costs to a minimum is to pick states with no sales tax, followed by states with low population. So Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon have no sales tax at last count, though not all of them are ideal location-wise. So here's what you do:

  • Delaware covers the northeastern U.S. New Hampshire would work in a pinch.
  • Oregon would take care of California and the western U.S.
  • Billings, Montana area would take care of the midwest.
  • Arkansas covers the southern U.S. while impacting the smallest number of people.
  • Headquarters in Wilmington, Delaware (just outside Philadelphia) so you have ample qualified people willing to to work there.

By setting up a company in this way, you can basically cover the entire U.S. comfortably while charging sales tax for less than 1% of the population of the U.S.

Re:The loophole has to exist (0)

Anonymous Coward | more than 6 years ago | (#23969889)

No, that would be residents in those 8 states have to pay their state sales tax. Not every transaction.

The US constitution enshrines this loophole (1)

Crazy Taco (1083423) | more than 6 years ago | (#23970259)

Can you imagine every transaction paying sales tax to 8 states? Just because they have a distribution point?

I agree. This has to exist. Think of this from a grocery shopper's perspective. I work for General Mills, and I know we have distribution points in a number of different states. Should you, as a customer going into a grocery store and buying a box of cereal, have to pay sales tax for your state as well as eight states you don't live in, just because the product came through those distribution points on its way to you? Of course not! This is just an attempt by several states to tax interstate commerce, which is constitutionally outside their realm, and they should be justly smacked down for this.

Note: I think it is probably ok if a state like New York wants to pass a law saying Amazon has to collect sales tax for New Yorkers buying on its site. In that sense, it is treating Amazon like any other retail option selling in New York. But you can't just tax goods bought by people from other states. Unless such a law is in place, Amazon should be paying property taxes, and that's it.

In conclusion, I really think Amazon's argument is flawed in this case; it's not about whether they or a subsidiary truly owns the distribution points. It's about the constitutionality of a state levying an interstate commerce tax, and that's what they should be disputing.

Re:The US constitution enshrines this loophole (1)

Firethorn (177587) | more than 6 years ago | (#23970849)

The problem with your statement is that, lacking any presence in NY, NY doesn't have any legal right to force amazon to collect sales tax for them.

It's different if they DO have a presence, which is where this conflict comes in.

And to simply try to ban Amazon from selling to NY residents if they DON'T comply with your sales tax idea is getting into interstate commerce - which they're not allowed to do. That's the feds domain.

Re:The loophole has to exist (0)

Anonymous Coward | more than 6 years ago | (#23970517)

Yeah, it's a sad day when the masses light torches and grab pitchforks to demand increased taxes and collection and complexity.

Ron Paul had it right. Knock this shit off as much as possible.

Monkey see, Monkey do (1)

Valacosa (863657) | more than 6 years ago | (#23969881)

That's some Guantanamo Bay-esque logic there. How can they "not have a presence" if they own buildings, even if it is indirectly?

Re:Monkey see, Monkey do (1)

homer_ca (144738) | more than 6 years ago | (#23970185)

Back when they were around, Good Guys tried to avoid sales tax the same way, spun off their e-commerce site to a subsidiary with "no presence" in the state. It didn't work.

Brilliant though.. (1)

HerculesMO (693085) | more than 6 years ago | (#23969895)

One of the main reasons I go back to Amazon time and time again, is for no sales tax. The savings are usually good too, and the MP3 download service rocks.

I really like how Amazon has matured over the years.

YOU pay the tax, not Amazon. (1)

k1e0x (1040314) | more than 6 years ago | (#23970893)

Exactly.. it's not Amazon that is paying the tax, it's YOU. Corporations do not pay taxes, they only raise the cost of their products and services. Amazons customers pay that tax, and I think they are dammed well in their right NOT to charge it.

What a biased story.

Oppsie for Amazon! (-1)

gnuman99 (746007) | more than 6 years ago | (#23969909)

Sorry, but that will NOT fly in court!

IANAL, *but* I know enough that you can't wiggle out of tax situations by simply creating new companies. At least here in Canada, if company A is 100% owned by company B, then they essentially considered to be one entity, at least for tax reasons. If tax(A + B) pay less tax than tax(A) + tax(B), the revenue agency will take a very close look.

In this case, Amazon *owns* the warehouses by owning the 3rd party. Case closed. Otherwise, people would just set up 50 companies, each one in different state, and sell stuff to each other avoiding all state taxes. Works if you want your ass in jail!

Since Amazon will probably be liable for the taxes it was suppose to collect, how would that affect their bottom line? How long for such cases to reach conclusion in the US? Years? Decades?

In Canada, Amazon.ca collects local taxes from almost the start.

Re:Oppsie for Amazon! (1)

Anonymous Coward | more than 6 years ago | (#23970079)

You're not a lawyer, you don't understand US corporate law, and you don't understand US taxes. Thanks for providing valuable insight!

Re:Oppsie for Amazon! (4, Informative)

jcr (53032) | more than 6 years ago | (#23970105)

IANAL, *but* I know enough that you can't wiggle out of tax situations by simply creating new companies.

What you think you know, is flat-out wrong. One of the primary reasons for creating subsidiary corporations is precisely to deal with tax issues.

-jcr

How subsidiaries including Amazon's work (0)

Anonymous Coward | more than 6 years ago | (#23970675)

I was involved with an Amazon subsidiary in California. Amazon stayed very far on the safe side of the border between subsidiary and satellite office. For one thing Amazon did not have any day to day say in the operations of the company. Everything was done by board meetings. And I believe Amazon bigwigs made a point of not visiting California for those meetings. Many if not all meetings would instead happen in Seattle.

That's not to say that the subsidiary's employees didn't occasionally work on projects with Amazon employees. And back when every Amazon employee dropped their work to go work in distribution centers at Christmas many of the subsidiary employees went too (voluntarily).

But everything was really separate. Health plan, retirement plan, HR, IT and especially day to day management were independent.

How long? (4, Funny)

JSBiff (87824) | more than 6 years ago | (#23970425)

There's a joke about lawyers. . .

      A bad lawyer can let a case drag on for years. . . a good lawyer can make it last even longer.

Re:Oppsie for Amazon! (1)

cptsexy (948021) | more than 6 years ago | (#23970471)

IANAL, *but* I know enough that you can't wiggle out of tax situations by simply creating new companies. At least here in Canada,

I wasn't aware Mounties had WiFi for reading /.

Amazon for 1000 (5, Funny)

mapsjanhere (1130359) | more than 6 years ago | (#23969919)

"what is Chutzpa"

That will close a distribution center... (4, Insightful)

tjstork (137384) | more than 6 years ago | (#23969941)

Let's see a state with an Amazon distribution center tax it, and then let's see Amazon.com close it down. That which happened to Ohio and Michigan, will happen again.

Re:That will close a distribution center... (2, Informative)

Raineer (1002750) | more than 6 years ago | (#23970133)

Same reason Walmart is moving some of its operations to SW Missouri, big companies get to make the laws, not necessarily follow them.

Re:That will close a distribution center... (0)

Anonymous Coward | more than 6 years ago | (#23970267)

Regulating interstate commerce is *the* domain of the federal government.

If these big companies keep pissing on state laws, the states will make a pact with the federal government.

"Collect the taxes we can't, give us the bulk, and keep some for your trouble."

I've never met a government that didn't take to taxes and corruption like a duck takes to water.

Quack quack.

Re:That will close a distribution center... (4, Interesting)

ivan256 (17499) | more than 6 years ago | (#23970317)

It's not that big companies get to make the laws... It's that governments need to realize that their decisions have consequences.

Why shouldn't a company move their operations to an area where the local authorities are going to take a smaller cut of their profits, or impose a lower overhead on their operations? Those other governments seem to do just fine without the additional revenue...

Re:That will close a distribution center... (1)

Raineer (1002750) | more than 6 years ago | (#23970911)

I didn't mean to make it sound like a knee-jerk reaction against "big companies", and I do not fault them for moving. Jacking up local taxes is SUPPOSED to move companies out, if that isn't happening then things are out of balance.

Re:That will close a distribution center... (3, Insightful)

NMerriam (15122) | more than 6 years ago | (#23970967)

It's that governments need to realize that their decisions have consequences.

But businesses have consequences to their decisions, as well. Amazon doesn't have those warehouses and distribution centers spread across several states just because they liked the scenery -- it offers a business advantage to them, in lower labor costs, faster shipping times, whatever. Sure, they could just shut them all down to "punish" the states, but they risk losing business if shipping takes longer or they have to raise prices to reflect higher local wages.

I'm already paying tax on Amazon purchases (3, Insightful)

my $anity 0 (917519) | more than 6 years ago | (#23969989)

The full 8.75% sales tax rate. Not only that, but the price taxed also includes the shipping. Not that that should surprise me but it certainly does annoy me. Amazon is suddenly becoming much less of a good buy than it was. Thank you Albany.

Re:I'm already paying tax on Amazon purchases (0)

Anonymous Coward | more than 6 years ago | (#23970591)

With the state tax, Amazon is not competitive enough. But I still like to shop at their Market Place, buying 2nd books is good for my pocket book and the environment. Ebay 2nd book market is not as good, no reader comments.

Re:I'm already paying tax on Amazon purchases (1)

dbcad7 (771464) | more than 6 years ago | (#23971029)

but the price taxed also includes the shipping

That's just wrong.. I know some companies misinterpret the tax laws and do this, but that is paying double tax, because the shipping companies also charge tax on shipping.. If the shipping charges are reduced (they charge you the rate without tax) then tax on the total would probably work out pretty close.. would have to see their freight bills to know that though.

The sure things in life... (1)

Torinaga-Sama (189890) | more than 6 years ago | (#23969995)

If you think you understand how taxes work, you aren't looking hard enough.

When something is purchased through amazon.com, usually the point of purchase is in Washington state (I therefore have almost always paid sales tax through Amazon). It shouldn't matter where the item is shipped from. A warehouse is not a retail location. They pay taxed for property, employment, ect. Why should they double dip for the sales tax?

Now this maybe changing on Monday with destination -based sales tax reform [wa.gov] . I know that this is causing my company a lot of headaches because we are having to deal with municipalities in some states that are straight up ridiculous ( I am looking at you Colorado and Oklahoma).

The burden of paying a tax is always on the company. You could have a Tax in Tinyshittownville that you would never know about until you get a letter requesting back taxes. It is a freaking nightmare to manage. Municipalities can just keep piling things on.

Re:The sure things in life... (0)

Anonymous Coward | more than 6 years ago | (#23970197)

I live in Colorado, and would be interested to know what's unusual about the state's (or local government's?) sales tax system?

I know there's a number of counties that have sales tax on everything except pre-packaged food. Is this what your talking about? Please educate me.

Re:The sure things in life... (2, Interesting)

Torinaga-Sama (189890) | more than 6 years ago | (#23970357)

In Colorado cities (if they choses to have a sales tax) can either have the State collect sales tax for them, or if they don't trust the state or think that they can collect tax more efficently they can collect it themselves. You can imagine the ensuing nightmare of figuring out who to pay what and when.

Move at least one center to Oregon? (5, Interesting)

Penguinisto (415985) | more than 6 years ago | (#23970025)

...or any other state that has no sales tax.


(just random thoughts here.)


They could then threaten to move the distribution centers to other states, and fire everyone there unless they relocate. Yes it's cold-blooded and etc.


But, it would make most states (esp. states where jobs and money are tight) stand up and take notice that you're about to cut a chunk of jobs (and income tax revenue, property tax revenue, injection of money into the local and state economy, etc) out from under them. Call the state next door and say "I'd like to build a large distribution center and hire (n*1000) employees for it in your state... we'll pay all the other taxes, but please don't charge us for sales tax. If the benefits outweigh the loss of sales tax, I'm willing to bet the state (esp. hard-hit or not-so-large states like Mississippi and etc.) would happily take the deal.


IIRC, Wal-Mart does this all the time (at least with local governments) - getting sweetheart tax waivers in exchange for the locality getting jobs and other economic benefits.


Now sure, it wouldn't be easy to just pull up stakes and move, but distribution centers are warehouses, which means that it's not a very complex infrastructure to move... the hardest part would be shifting the logistics.

/P

Re:Move at least one center to Oregon? (1)

DerekLyons (302214) | more than 6 years ago | (#23970539)

They could then threaten to move the distribution centers to other states, and fire everyone there unless they relocate. Yes it's cold-blooded and etc.
 
But, it would make most states (esp. states where jobs and money are tight) stand up and take notice that you're about to cut a chunk of jobs (and income tax revenue, property tax revenue, injection of money into the local and state economy, etc) out from under them. Call the state next door and say "I'd like to build a large distribution center and hire (n*1000) employees for it in your state... we'll pay all the other taxes, but please don't charge us for sales tax. If the benefits outweigh the loss of sales tax, I'm willing to bet the state (esp. hard-hit or not-so-large states like Mississippi and etc.) would happily take the deal.


Sure, but the problem is that not all states are equally desirable for locating distribution centers. There's issues of transportation infrastructure connectivity, availability of workers, taxes other than sales (I.E. property, employment), etc. etc. (Not to mention the physical plant of the distribution centers isn't exactly cheap.)
 
Its not nearly as simple as you'd like to believe.
 
 

IIRC, Wal-Mart does this all the time (at least with local governments) - getting sweetheart tax waivers in exchange for the locality getting jobs and other economic benefits.


Sure, but there is also an increasing public backlash against such practices. There's also an increasing desire by the states to collect sales tax on internet sales - Amazon [for example] will soon run out of desirable states.

Re:Move at least one center to Oregon? (1)

dwiget001 (1073738) | more than 6 years ago | (#23970557)

This is heavily abused also. Local company, Tampa, Florida area, some years ago, got major tax breaks and other *cough* incentives *cough* to build a building not far from downtown and move their operations to that building. Within a year or two, the business was sold to another company, who promptly moved the operations out of state. So, the local community in regards to employment and some other revenue in the area that was generated, did not even come close to the tax and other incentives given to the original company. Yet, the CEO and other senior management, made a small fortune off of the sale of the business and walked away. It's a shame, damn shame.

Re:Move at least one center to Oregon? (1)

general scruff (938598) | more than 6 years ago | (#23970973)

"I'd like to build a large distribution center and hire (n*1000) employees for it in your state... we'll pay all the other taxes, but please don't charge us for sales tax."

That and you get to tax all the income we pay our n*1000 employees.

I consider states that charge income AND sales tax to be double dippers.

Has Amazon expanded inventory, again? (3, Funny)

fuzzyfuzzyfungus (1223518) | more than 6 years ago | (#23970157)

Now, I like tax free(er, I mean, untaxed at time of sale, later calculated and payed by me, in accordance with the law) purchases from Amazon; but their logic seems, at best, deeply tortured.

In fact, my first thought on seeing that explanation was "Wait a second, Amazon has started up a defence contracting department?"

Messin' with the Government's Income (1)

DaveV1.0 (203135) | more than 6 years ago | (#23970217)

Never a good idea. After all the government makes the rules and interprets the rules. Imagine if the government decides to seize the warehouses and their contents. Amazon will have a serious problem at that point.

Re:Messin' with the Government's Income (1)

ivan256 (17499) | more than 6 years ago | (#23970547)

No... They'll just move their warehouse to another jurisdiction, depriving the original locality of income taxes from all the laid off workers, corporate taxes, property taxes, fees, and payroll taxes. (and probably creating unemployment liabilities)

There's a saying that comes to mind when the frequent topic of heaping the responsibility of poor governmental fiscal decisions on corporations comes up. It's: "Biting the hand that feeds you".

Re:Messin' with the Government's Income (1)

DaveV1.0 (203135) | more than 6 years ago | (#23970761)

See, the local/state government can say "All your warehouse and their contents belong to us now because you didn't pay your taxes." It is called seizing the assets of a tax cheat.

The fact that Amazon is trying to cheat the tax system kind of make your "biting the hand" statement irrelevant.

Re:Messin' with the Government's Income (1)

ivan256 (17499) | more than 6 years ago | (#23970859)

What makes you think the contents of one warehouse is a significant hit over the long term costs of being forced to do the government's dirty work for them? (Not to mention the loss of business associated with being forced to become the tax collector?)

How is moving to a locality with different rules "cheating"?

Your logic is exactly the kind of logic that has led many states into economic trouble.

Some flawed logic in the article... (1)

BUL2294 (1081735) | more than 6 years ago | (#23970255)

From the article...

Michael Mazerov, senior fellow at the Center on Budget and Policy Priorities in Washington, D.C., says that because "Amazon is benefitting from police and fire protection, and other services in the states where it has facilities, it ought to be collecting sales tax just like any other local business."

First off, that sales tax would be for all Amazon sales within the state of the facility. So you can figure that only some (I'm guessing between 1/5 and 1/20) of the sales would be taxed in that facility's state. Second, that subsidiary is paying for the services mentioned above by way of corporate / property / employment taxes, etc. True, not as much as the local hardware store down the street that charges sales tax as well, but they are paying the lion's share. Third, going after Amazon could cause them to be dicks to all of these states by threatening to let go of all the employees in the respective facilities and move out of the state--leaving the state with none of the taxes mentioned above and an empty warehouse that, if it's not worth much, the subsidiary might just abandon & let foreclose. (After all, if there's sufficient legal distance between Amazon & that subsidiary, it might not harm Amazon's bottom-line or credit rating).

All it would take is 6-12 months to buy & build warehouses in states with no sales tax (i.e. NH), or a state with few Amazon customers they would be forced to charge sales taxes to (MT, NM, WY come to mind), and presto! Problem solved.

Re:Some flawed logic in the article... (1)

ivan256 (17499) | more than 6 years ago | (#23970683)

Second, that subsidiary is paying for the services mentioned above by way of corporate / property / employment taxes, etc. True, not as much as the local hardware store down the street that charges sales tax as well, but they are paying the lion's share.

They're actually probably paying *more* than the local hardware store down the street. This is because the local hardware store doesn't pay sales tax either (purchases for resale are exempt). They do, however, *collect* sales taxes from their customers. It is wrong to attribute those as paid by the store, though.

How popular would this guy be if he didn't spin the facts though? He'd have to tell people that *they* should be paying more taxes, instead of implying (read: lying) to people that some faceless corporate entity should be paying more taxes.

Re:Some flawed logic in the article... (1)

ishobo (160209) | more than 6 years ago | (#23970937)

A local hardware store is indeed paying sales tax, but they choose to pass along that tax to the buyer as a separate line item on the bill. As I have commented on this topic many times, there is no legal requirement in any state that has sales taxes, that the buyer pay the sales tax only that the seller pay the state the sales tax.

nice try, Amazon and New York State (1)

dysmey (1165035) | more than 6 years ago | (#23970273)

If the distribution centers are run by wholly-owned companies, then they are probably not independent by law. An item owned by a company A wholly owned by company B might just as well be owned by company B.

It is understandable that Amazon.com would resist the New York law [wikipedia.org] taking effect this month, which would make it collect sales tax, not just for purchases in New York State but for those in all localities ("the retailer must charge the tax amount appropriate to the locality where the goods are shipped") — as if Indiana sales tax is any business of New York State's. (Amazon collects Indiana sales tax, anyway, since it has a distribution center northwest of Indianapolis.)

The argument that Amazon benefits from police, fire and other government services falls flat when you realize that Amazon already pays for those services in property taxes (at least in Indiana) and inventory taxes (elsewhere). And the argument is irrelevant to the law requiring the collection of the taxes of other states.

I figure this would be enough for Amazon to close its center in New York State and relocate it somewhere else on the East Coast.

I'm the taxman (1, Insightful)

Anonymous Coward | more than 6 years ago | (#23970511)

Yeah, I'm the taxman And you're working for noone but me taxmaaaaaan

Cabellas tried this in Maine (1)

oudzeeman (684485) | more than 6 years ago | (#23970543)

They said the online sales were a different company that the retail store. Maine fought it and they (Cabellas) eventually moved 4 or 5 staff from their online and phone orders into Maine so they would collect sales tax on internet and phone orders placed in Maine and the case wouldn't go to court, since if it was ruled that subsidiaries counted as a presence in the state it would affect many other states as well

Kudos to them (1)

Stormwatch (703920) | more than 6 years ago | (#23970629)

Anyone who gives the shaft to the tax man gets RESPECT+9999 in my book.

Bezos and Taxes (5, Interesting)

WolverineOfLove (1305907) | more than 6 years ago | (#23970685)

I was involved with a program through my University that put us in contact with engineers who were also entrepreneurs. We spent a week in the Silicon Valley area catch up with Alum who had gone on to become VPs of engineering at startups, or presidents of companies based on their work. One of them was a man who was Product Manager for the Kindle at Lab 126 in Cupertino.
He talked with us for a while, basically hinting at us very strongly at what the kindle was, and showing us some prototypes that eliminated any doubt as to the devices nature. He also had his staff talk to us. One man, who had worked closly with Bezos said this (paraphrased):

"Jeff HATES taxes. The reason that Amazon has made as much money as it has is because Jeff carefully played the game to avoid paying as many taxes as possible. Lab 126 is a wholly owned subsidiary, because if it wasn't, every California resident would have to pay sales tax on Amazon.com."

And that was for a research lab that was actively developing a new product for direct sales from Amazon.com. Somehow, avoiding sales tax for warehouses doesn't surprise me.

They charge it in Kentucky. (1)

CmdrPorno (115048) | more than 6 years ago | (#23970957)

Amazon's "position" notwithstanding, they have a warehouse in Kentucky, and began collecting sales tax on Kentucky orders once that warehouse opened. While they may have complained about it, they aren't putting their money where their mouth is by refusing to collect the tax.

They should play by the rules (1)

davidwr (791652) | more than 6 years ago | (#23970963)

If they want to avoid taxes, they should sell those centers to a third party and contract out the warehousing duties.

This is why we are losing in Iraq! (0)

Blimey85 (609949) | more than 6 years ago | (#23970997)

How do we expect to win our war in Iraq and the one we are about to start with Iran if we don't pay our taxes?!?!?! The simple solution most, if not all of our problems is to tax everything bought/sold/traded/etc over the intarweb. I say set the tax to 20%. It's not that much really. Just a fifth. We can afford it and think of the benefits!

We'd have more money for our endless wars. We have huge numbers of bankruptcies right now because people spend more than they should. By raising taxes people won't be able to afford as much, will think twice about impulse purchases, and will end up saving money in the long run. This means less bankruptcies in the future. Did I mention we need money for wars? We could help keep people from losing their shirts in the stock market by taking that money from them in the form of taxes. We need money for wars damn it?

20%. That's all I ask. Just one fifth of everything. We could use a little to help social security... maybe give half away to other countries... I can think of more stuff... so start giving now!

This isn't going to end well (1)

Whuffo (1043790) | more than 6 years ago | (#23971007)

Over the last decade, online and brick/mortar businesses have settled into a workable relationship. Each has benefits and disadvantages; if you buy online you don't pay sales tax but you do pay shipping. If you buy from a retail store you don't have to pay for shipping but you do pay sales tax.


So for items costing around $100, there's essentially no real price difference. You can get it today or wait a week but the final cost is pretty much the same.

But things are changing; the rapidly increasing cost of oil is having a profound impact on the shipping companies. For most of those shipping companies the largest expense they have is the cost of fuel to run their trucks, delivery vans, airplanes, etc. These companies are scrambling to find ways to cut costs and stay profitable without increasing their rates - laying off employees, cutting back on "non essential" services, consolidating routes, etc. This is only a temporary fix; energy costs continue to rise and it's just a matter of time before the cost to ship a package increases substantially.

That'll increase the total cost of online purchases - I wouldn't be surprised to see the shipping costs double over the next couple of years. This will translate directly into a loss of business for online stores and more than a few of them will shut down.

Adding sales tax into the mix will make things even worse. That would mean that instead of a $100 item costing $108 after paying for shipping it would become $124 after paying for "new improved" shipping and sales tax. The bricks/mortar store will still be able to sell for $108.

The end result of this ill conceived plan will be that we will no longer be able to access a wide range of products - or if we can they'll be a lot more expensive. The brick/mortar stores will still only carry the items that sell in large numbers (as they do now). The state governments will receive a small increase in their tax collections. And us, the consumers, will pay for all of it. Less choice, higher prices. Thank your governor for their fine public service...

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