Will Amazon Get a Visit From the Tax Man? 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."
Of course it will (Score:4, Interesting)
These states will fold (Score:1, Interesting)
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.
Move at least one center to Oregon? (Score:5, Interesting)
...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.
Re:Of course it will (Score:3, Interesting)
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:That will close a distribution center... (Score:5, Interesting)
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:The sure things in life... (Score:2, Interesting)
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.
Re:Of course it will (Score:2, Interesting)
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:The loophole has to exist (Score:4, Interesting)
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:
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.
Bezos and Taxes (Score:5, Interesting)
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.
Subsistence crime (Score:5, Interesting)
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.
You cannot evade taxes so easily. (Score:3, Interesting)
Then they just have that covered under another equivalent tax.