More Ancap Good News: Amazon holds sales tax edge in 45 states

Advantage pinches rival retailers as well as governments

Before settling on Seattle as the home of Amazon.com, the founder, Jeff Bezos, considered placing the company on an Indian reservation near San Francisco. "This way, we could have access to talent without all the tax consequences," he said in a 1996 interview with Fast Company.

The reservation couldn't be used as a sales-tax haven, after all, Bezos said he learned, so he had to look elsewhere. Offering prices free of sales tax to customers in California would be possible only if the company were placed elsewhere.

"You have to charge sales tax to customers who live in any state where you have a business presence," he said then.

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Today, Amazon collects sales tax in only five states, which gives it an advantage over companies who do collect them in all or most states. Competitors aren't the only ones hurt by Amazon's stance on sales taxes: It also means the loss of considerable revenue to states and localities that badly need it.

The tally on holiday sales isn't yet in, but Amazon's revenue for the four most recent quarters, ended Sept. 30, approached $21.7 billion. Amazon will not disclose how much tax it collected on those sales.

In addition to its home in Washington state, Amazon has facilities in North Dakota, Kentucky and Kansas, and collects sales taxes in these states. The company also collects sales tax in New York.

Yet these five do not exhaust the roll call of states in which Amazon has additional facilities. Fourteen more, including Michigan, are listed in the company's last annual report. But Amazon.com does not collect taxes for them.

Amazon has found a way to put portions of its business into the tax-haven equivalent of reservations. By creating wholly owned subsidiaries for the parts that are treated separately for tax matters, Amazon is under no obligation to collect sales tax.

Amazon has offices in four cities in California, for example, including those that are home to the subsidiary that developed the Kindle reading device. "Because the subsidiary isn't selling the Kindle directly to consumers, Amazon can drive a truck through the loophole," said Michael Mazerov, a senior fellow at the Center on Budget and Policy Priorities in Washington.

He said Amazon is deliberately maximizing "the significant competitive advantage."

An Amazon spokesman declined to comment.

http://detnews.com/article/20100101/BIZ/1010366/Amazon-holds-sales-tax-edge-in-45-states

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More Ancap Good News: Amazon holds sales tax edge in 45 states

More Ancap Good News: Amazon holds sales tax edge in 45 states

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