Amazon Announces It's Leaving Texas In Tax Dispute; Governor Blames Comptroller, Says He'll Fix

from the politics-is-about-power dept

You may recall late last year that the state of Texas sent Amazon a tax bill for $269 million. The issue, as always, is the question of whether or not Amazon has to collect sales tax. Technically, e-commerce companies have always said they don’t have to collect sales tax in states where they have no physical presence. Of course, Amazon actually has a giant distribution facility in Texas, and also bought Woot (based in Texas) last summer. It’s still tried to avoid the tax issue by claiming those are subsidiaries, not itself.

Apparently, that strategy wasn’t working, so last week Amazon announced that it was leaving Texas over the issue, making sure to announce that it had planned to hire 1,000 additional workers at the facility. Hearing a major employer leaving the state is generally a pretty bad thing for state politicians and Governor Rick Perry realized that, because it took all of one day for him to throw the state comptroller under the bus and claim that the whole thing was a mistake by the comptroller:

“That is a problem and I would suggest to you that we need to look at that decision that our comptroller made,” he said. “The comptroller made that decision independently. I would tell you from my perspective that’s not the decision I would have made.”

In fact, Perry publicly began to explain why Amazon shouldn’t have to pay sales tax on items shipped in Texas:

“You couldn’t go in and buy anything out of that store, and that, historically, has been the way we defined whether you pay taxes or not — if you had a storefront. This obviously didn’t have a store front. It was specifically there to manage products that need to be shipped out.”

Perry then asked the state legislature to make sure that it crafts some new rules that keep Amazon from leaving. Looks like Amazon just successfully called Texas’ bluff.

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Companies: amazon

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Comments on “Amazon Announces It's Leaving Texas In Tax Dispute; Governor Blames Comptroller, Says He'll Fix”

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Spaceboy (profile) says:

Re: Re:

How is Amazon responsible for this tax? It’s up to the buyer to declare and pay the tax, not Amazon. And Amazon is well within its rights to threaten to relocate. Basically, it comes down to the Comptroller overstepping her bounds. She obviously has no grasp on the situation, or she would have seen what has happened in every other state that went after Amazon. Yes judges went against Amazon but in return Amazon severed ties with their affiliates in those states. Who really won?

More and more politicians are waking up to the fact that they don’t have the final say anymore. They see a company that is thriving within the framework of the current laws and then they amend, twist or re-interpret the laws to their own financial benefit (government, not personal) while completely ignoring all other ramifications. That $269M would certainly help Texas out, but how much of that would go towards unemployment for the warehouse employees? How would it impact the local businesses? The question boils down to whether Texas needs the $269M or the jobs more.

Johnny says:

Re: Re: Re: Re:

Correction: there is no sales tax in Europe. There’s something called Value Added Tax (which is somewhat different). It’s also not “federal” (if there would be such a thing in Europe), it’s a country level tax. There are European level agreements between countries and EU wide dealing with who pays V.A.T., it’s somewhat complex, but the consumer ends up paying it somewhere.

Which is good because it doesn’t give an unfair advantage to some companies over others just because they happen not to have a store front (or can apply some other loophole).

Richard (profile) says:

Re: Re: Re:2 Re:

Correction: there is no sales tax in Europe. etc

Yes I know all that – I live here!

VAT replaced most local sales(purchase) when it was introduced – so it is usually regarded as equivalent. Certainly it indistinguishable from a sales tax to the consumer, although its impact on business is somewhat different.

For simplicity I conflated “federal” with “country wide” because some European states have a federal system (eg Germany) whilst others have less powerful local authorities (France) and in the UK we have the Scottish, Welsh, and NI assemblies which approach US state levels of responsibility and power.

John S. says:

Re: Re: Amazon

No, Spaceboy (appropriate!), Texas requires us sellers to charge, record, and remit sales taxes on what we sell to our customers. (And we get to do all that for free! This violates the constitution’s prohibition on involuntary servitude!) I started my business in Texas in 1983, so I just might know what I’m talking about. Out of state purchases from out of state vendors cannot be legally regulated or taxed – it is out of Texas’ jurisdiction. Only the fed government has the ability to regulate interstate commerce. It boils down to what is right and lawful. If the vendor is selling something that is actually (physically) within the state then the state can, by present law, tax the transaction. Of course, things unconstitutional can be made “lawful” – Hitler did it…

Shawn (profile) says:

Re: Re:

The stupidity of this is beyond me. Basically, Amazon are arguing that they don’t have to pay a tax when they do. That’s Tax Evasion, right?


They are not required to pay any taxes on purchases their customer’s make. Even the order from the comptroller was not to “pay” taxes it was to COLLECT taxes from the customers and send them to the state.

Anonymous Coward says:

Re: Re: Re:

No, you’re confusing the issues of Sales tax with Use tax. Sales Tax is always required by law to be collected by the Seller. As Amazon operates in Texas they have to collect Sales Tax to Texas residents.

USE Tax is required to be paid by the purchaser as a way to keep buyers from buying items out of state and then bringing them into the state tax-free and is the responsibility of the Buyer. Use Tax is very difficult to apply because it’s hard-to-impossible to get people to declare what they’ve bought out of state. The only time you tend to get hit with Use tax is when you buy a vehicle which you then have to register in your home state and then they’ll want to see the receipt and hit you with any USE tax you were trying to avoid.

Anonymous Coward says:

Re: Re: Re: Re:

Sales Tax is always required by law to be collected by the Seller.

Actually, this is also incorrect. Sales tax only needs to be paid if the seller has “nexus” in the state. Nexus used to be defined as a storefront but now includes any “presence”, as in a building or employees located within the state. Amazon has argued that the “nexus” standard isn’t well defined as some states are now claiming that affiliates are considered “employees.”

I’m a little divided on this one. Amazon does have a physical presence in Texas and should technically be paying sales tax. On the other hand, our current state sales tax system is a HUGE burden for online retailers. Most people don’t realize that different states have different tax rules and Texas is one of the most burdensome (along with New York, Alabama, and a few others). Sales tax is set based on state, city, county, school, transportation, and SPD (special purpose district) levels. For example, there is a slightly higher tax rate around most sports stadiums.

The other thing most people aren’t aware of, most states do not provide any tools to help determine these tax rates. Texas publishes a pdf document about collecting local sales tax ( but nowhere will you find information on how to determine what tax rate to use. All of the laws on this assume that you have a store and you only need to worry about the tax at that location, which isn’t true for an internet retailer.

Here is a 50 page pdf of tax rates for Texas ( Unfortunately, while it may help with city and county you are left to decipher all the other districts. And by the way, this is updated quarterly.

As long as states continue to make collecting sales tax so difficult they should expect internet retailers to avoid it. The problem could be easily resolved if states would simply change their sales tax laws to be a flat rate for the state (with MAYBE a county level rate).

Dark Helmet (profile) says:

Re: Giants

“Wow – Amazon sells Giants now!
Never knew that.

I suppose Texas (being a large state) is a good place for the distribution facility. I wonder how they will manage to fit it anywhere else if they have to leave.”

Actually, two other states have tried to sell Giants as well, some with marginal success. A New York facility has been doing this for years, but there’s been a major problem with both location and product quality. As it turns out, they were manufacturing their Giants in New York, but them distributing them as a product in New Jersey. It created almost as much confusion as the oddity of one of their most popular Giant lines having an enormous gap in its teeth.

Even more unsightly were the Giant products being produced in San Fransisco, California. One of their most expensive and popular lines were found to have been produced with a dangerous cocktail of growth chemicals that rendered the product undigestable. Most problematic was a nausea-inducing exponential growth in the Giant’s cranial cavity, a direct result of said chemical compounds. They’ve since retired that particular product and are going instead for a more fasionable “Long-haired heroin-addicted teenager” line, which has proven to be more successful….

Anonymous Coward says:

Bottom line...

The bottom line is that Amazon owes those taxes.

1. They sell things to people in Texas.
2. They have a physical presence in Texas.
3. They have a responsibility to collect and pay sales taxes in Texas because of items 1 and 2.

All they are doing is using a corporate shell game with subsidiaries to get out of doing what they are supposed to do. It’s high time that lawmakers closed those loopholes, especially since a corporation is now a “person”.

I can’t get out of taxes by saying my mouth did the sales in one state, but my foot delivered the product from another state. A corporation shouldn’t be able too either.

Chris Rhodes (profile) says:

Re: Bottom line...

They have a physical presence in Texas.

They have a subsidiary distribution center in Texas. If someone from Texas buys something from me in Florida, I don’t have to collect taxes merely because Fedex, who I use to ship the product, has a facility in Texas. Separate companies.

It’s high time that lawmakers closed those loopholes

If they think it’s a problem then they should do so, and then companies can decide to stop doing business there. You’re basically admitting with this sentence that what Amazon is doing is legal, and yet are still somehow arguing that they owe those taxes. So which is it?

RD says:

Re: Re: Re: Bottom line...

“IF a person did that, it would be illegal.”

If a person runs a mail-order (non-retail) business, they dont have to collect these taxes anyway. The PURCHASER has to (is supposed to) pay LOCAL taxes in THEIR state on their online/mail order purchases.

I’ve been in this kind of business for 2 decades, this is how it works. Amazon, by only having a MAIL ORDER DISTRIBUTION CENTER in Texas, doesnt have to pay or collect sales taxes.

The only wrinkle is, it can depend on the state. What I say above applies in MOST (but not all) states. All the states I have lived in work in, I never had to collect or pay sales tax on any mail-order type of business. If Texas were one of these, well then, I guess they would be subject to it, but as far as I can recall, they arent.

harbingerofdoom (profile) says:

Re: Re:

i think the difference is that there isnt a clear definition of what constitutes situations where sales tax can be collected. perry is saying that historically, its any company that has a store front property where you can go and buy products directly from them. since you cant just walk into their distribution facility and buy something from them directly, it does not fall under the rules for collecting sales tax.
the legislation changes he is looking for is something that more clearly defines the entire issue… and he is right in that respect.

rpk!! says:


Whether Amazon was supposed to pay those taxes or not, states are competing with one another to have corporations like Amazon setup in this municipalities. I’m sure there are plenty (49?) other states that would be happy to have those jobs and taxable incomes in their states. Why would Amazon stay in the only state that forces them to charge more?

Anonymous Coward says:

Sadly, because the US is a collection of states rather than a true single country, it is hard to come up with ways to fix the problem. Really, the answer would be a fix rate sales tax for all online sales, no matter what state the originate in, and no matter what state the end up in. The feds could then redistribute the money to the states, on a simple formula of population or similar.

It would be an amount lower that state sales taxes in many cases, but at the same time would bring everything to a uniform level.

Richard (profile) says:

Re: Re:

In the UK we don’t have local sales or income taxes only property taxes. For businesses the property tax is uniform across the country to avoid the kind of competition you mention.

Sales taxes are outdated anyway as they only tax the final stage in the chain – VAT is the only practical solution in the modern world – although even it has its problems.

Richard (profile) says:

Re: Re: Re: Re:

Umm – I was called out further up the comments for saying just that.

Strictly I would say that VAT is a particular mechanism for implementing a sales tax.

The trick with VAT – compared to other forms of sales tax is that it is levied at each stage of the production/distribution process and therefore the methods used by Amazon to avoid sales tax wouldn’t work.

Bob says: my experience

I live in Kansas…please hold your applause…When I order from Amazon the shipment inevitably comes from their largest distribution center – in Coffeyville, KS. So I pay sales tax. If I order something that doesn’t come through Coffeyville, I don’t pay sales tax. That is the method that should be applied in Texas. It is the “agreed upon” method of collecting sales tax for online goods.

If they are trying to collect sales tax for all goods shipped out of Texas they are mis-collecting.

It is the equivalent of a John Deere Dealership in Kansas paying sales to Illinois because that is where the tractor was shipped from.

Anonymous Coward says:

I would disagree that there is a agree upon standard. It seems that each state does something somewhat different. The only commonality is that each state wants the money, so these tactics are a measure of how badly they want it.

Maybe we should declare the internet the 51st state. Then it could collect whatever tax it wishes to levy (hopefully none).

Sychodelix (profile) says:

Honestly, anywhere that has a distribution facility in that state, you generally end up paying taxes in that state. It works that way for many other companies, such as Newegg. Every state that they have distribution centers in pay taxes, and in those states it is passed on to the customers. This doesn’t fit the governor’s interpretation of the law that they need to have a storefront.

If other companies that have distribution centers have to pay taxes, so does Amazon.

Ryan Diederich says:

Everyone missed the point....

If every individual, company, and entity, strictly followed every single rule, regulation, and ordinance set before it, this world would be a sad place.

The morals and general consensus of the population change with time, laws change as well. Historians often use the state of the laws to determine what the moral thoughts were of the people at the time. If divorce was frowned upon, we would see strict laws regarding it, quite simple.

But if laws change, then someone or some even must change them. I side with amazon, that a company which has no physical presence should be free from having to charge sales tax. I dont consider a distribution facility a physical presence, it is merely a logistics building.

The main point is that this facility does not serve texas in any way, it serves a large portion of the united states. That being said, the building could have been anywhere, obviously amazon understands that which is why they have decided to move out. Might as well put the facility in the state with the lowest internet sales, to make sure to keep taxes paid to an absolute minimum.

Maybe the government should consider an internet sales tax (i know this sounds scary, but its not so bad if put in place INSTEAD of state level taxes). That way, all internet companies could be treated the same way, and they would place their logistical buildings in the most convenient place.

This has positive effects, it allows states to compete for businesses without having to modify their tax system. Texas can vie for Amazons facility by being in the center of the country, having cheap land and construction, etc.

Reggie says:


Actually, this isn’t the whole story (coming from someone who lives in Texas and has been following the entire issue). The issue that had was not the taxes itself. That was a separate issue. The issue that forced to threaten closing the facility in April was because of the numerical value of the tax. Amazon was told that they needed to pay $269 million in sales taxes. When Amazon asked the state to provide them with the supporting documentation as to how they came up with that number, the state refused. This went back and forth until finally stated that they would just close the distribution center altogether.

Whether or not Amazon should collect sales tax is another issue. It’s obvious that their system is setup for it because it shows a $0 for sales tax. So, if need, they could potentially begin to collect. Whether or not they should is another issue. But, in this particular case, I would have to agree with in that if you are going to tell me that I owe you nearly $300 million in taxes, you better show me the documentation you used to come up with the number. If you refuse, then I have no choice but to take my business elsewhere to a place where they will provide me with said information should it come up again.

Anonymous Coward says:

While this story is dumb (the content, not the article) I think there is a problem in the US of companies picking and choosing where they put their facilities based off tax issues.

All we get is a race to the bottom with the burden being placed on the people. NJ gives tax benefits for a company to locate in NJ which increases the burden on the people. Everything is fine because the people get jobs, then NY gives out better benefits, which screw the people more and then you have a tax war.

While this is good for companies, it isn’t so great for the people.

John S. says:

Re: Amazon

Although many, if not most, large companies tend to “screw” ‘the people’, it is, by far, government which does the most damage by taxing us to death and then wasting most of that money – all the while giving themselves nice salaries and pensions and ways out of paying what we have to pay.
Therefore I really don’t blame Amazon as much as I blame the lawyers, who have stolen the substance of ‘the people’, reducing them to slaves. Jesus Christ even had something to say about this.

Anonymous Coward says:

As a small business in Texas...

I operate a small internet retail site here in Texas and I can tell you what the currently written Texas tax code requires. If Amazon has any presence in the state (warehouse, distribution, etc) they have to collect Sales Tax on purchases made by Texas residents. All sales shipped to other states put the burden on tax collection on the buyer (Use Tax as opposed to Sales Tax) and buyer is suppose to report & pay that to their state (something no one ever does). This is how it is in the majority of states and how most large internet retailers operate (hence the ‘Sales Tax applied in states X, Y, Z’ you see on many retailers).

Amazon is basically just throwing it’s weight around in a bad economy and threatening jobs as a way to get out of paying taxes. Now I’m not saying that I think they should have to pay it, but that’s the way the law is written and if the Governor wants to allow anyone without a storefront to avoid paying sales tax to Texas residents, fine by me, but focus on changing the law rather than throwing your Comptroller under the bus for attempting to apply the law correctly. If they do change the law it could be a good move for Texas in continuing to grow middle-class jobs as I could see many companies moving their distribution centers to a tax-friendly, centrally located state as a result.

Andrew D. Todd (user link) says:

Logistics and Choosing the Right State.

The Amazon distribution center is located In Irving, a suburb of Dallas

Let’s do some mapwork. Assume that Amazon relocates its distribution center for Texas to Texarkana, Arkansas, and compute additional driving distances and delivery times to the principal cities of Texas:
Dallas: 177 mi. from Texarkana v. local to Dallas, 177 extra miles, three hours additional.

Houston 292 mi. from Texarkana v. 247 mi. from Dallas, 45 extra miles, two hours additional reflecting going over a rural U.S. route instead of an Interstate.

Austin 372 mi. from Texarkana v. 195 mi. from Dallas,
San Antonio 454 mi. from Texarkana v. 277 mi. from Dallas, in both cases, the route runs through Dallas, and is there the same extra 177 miles and three hours.
Wages are naturally lower in Texarkana than they are in Dallas. Amazon would have to get its shipments put together three hours earlier in the evening to make the same delivery deadlines in Dallas, Houston, , Austin, and San Antonio. Suppose they stick in some more robots to speed up the business of making up parcels and putting them in the right trucks, and getting the trucks away in time to make their delivery deadlines. Governor Perry of Texas backed down in the face of an entirely credible threat.

The same pattern repeats itself all over the country. It is usually possible to put the distribution center in a small poor state, where all employment is gratefully received. For example, you can put a distribution center in the Fort Ashby-Romney area of Eastern West Virginia, just across the Potomac River from Cumberland, MD, and I-68 leading east to Washington, Baltimore, and Philadelphia. To the west, there is a good railroad line from Cumberland, leading to Pittsburgh, and ultimately to the West Coast, so that the distribution center can get its supplies cheaply. Fort Ashby-Romney is a very poor area. It is beyond feasible commuting distance from Washington and Baltimore, and there aren’t any sizable local employment centers people could commute to. At the same time, it’s just close enough that kids can spend a couple of hours driving to a suburban mall, and come to understand just how poor they are by comparison. It’s a case of poor people up on their hill, looking down at the rich folks below. Incidentally, it’s the place which produced Lynndie England, the Baghdad torture girl, with the dog leashes and all. It is also known for producing suicidally crazy robbers, the kind who rapidly get killed attempting stick-ups against impossible odds, a variant form of “suicide by cop.” They want an Amazon distribution center, and they want it real bad!

SUNWARD (profile) says:

amazon doesn't pay the tax

everyone seems to be forgetting the tax is a retail sales tax paid for by the consumer located in Texas.

It is not an income tax that Amazon pays.

The 2 most troubling issues is the threat that Amazon is making and how local brick and mortar stores are staying quite.

Here you have Amazon telling the state what to do. And the local stores keep quite. About time stores ask for exemption on paying sales tax.

Suzanne Lainson (profile) says:

I welcome tax discussions

Maybe as people debate how to deal with taxes, they’ll also deal with how to pay for services that they want. There’s too much of a disconnect between what people want in services and how much they are willing to pay. It’s happening at all levels. Do you want public support of roads or do you want to make all roads toll roads and have private companies own and run them? Do you want to have public education or only have private schools? Do you want the city to pay for snow removal, or should you make people fend for themselves during storms?

TheRightsOfMan says:

Good for Amazon — don’t take no bull from anyone!

Look, I don’t like Corporations not paying their taxes when we have to, but its great of Amazon to tell the state(s) to shove it! Which they should; for all those wanting Amazon to pay taxes, guess what — you just cost 119 jobs because of statism. If Amazon paid up and let the state steal their money, other states would have just followed Texas’ move (domino effect), and pretty soon Amazon would have to start charging a sales tax to everyone online. That isn’t a good thing, because I wouldn’t buy from them again if they did.

Pips says:


The best part of this is that Texas has systematically removed every tax they can, every unnecessary social service, and they’re losing money hand over fist. I’m sure everyone here knows they’re about to be 98billion in the hole over the next few years, and the only way they can get out of it is from federal handouts or raising taxes like no one has every imagined. They are literally kicking senior citizens out of nursing homes because they cannot afford it any longer. Texas, is a glimpse of what is to come for the rest of the nation if we follow these practices.

krk_krk (profile) says:

Amazon sales tax/ Texas

Like girlie man Schwarzenegger, Rick Perry, gov. of the “Don’t Mess” state is kowtowing to the bullying tactics of Amazon.

The proper venue where this should be addressed is Washington, but in the present political climate anything labeled “Tax” will be regarded as Toxic for the political careers of our elected officials. Even if Washington were to resurrect the ?Sales Tax Fairness and Simplification Act,? H.R. 3396 which died on the vine in the last congress, it only gives the force of law to states which enacted the ?Streamlined Sales Tax Agreement? which 24 states have so far passed. But Texas hasn?t yet. So, state legislators should focus on this step first.

Big box retail and their commercial real-estate landlords must regard the present competitive handicap from online competitors as an existential threat and crank up their lobbying efforts.

An outfit called Alliance for Main Street Fairness ( has been formed recently to lobby to end the present online sales tax loophole.

As a tactic to bring the issue to a speedier resolution, I suggestions the following:
For the major brick & mortar retailers who also have online operations, if they reorganize their online efforts copying the Amazon playbook of “Entity Isolation” to dodge the “Nexus” issue so they too can dodge the responsibility of collecting sales tax, the states will then face the specter of revenues drying up in a major way and this tactic will raise the political profile and urgency of this issue.

This joke illustrates the pathetic lack of urgency by the states & the brick & mortar victims:

A dog is lying on the porch whining softly.
A passerby asks the owner what is wrong with the dog.
“thar?s a nail stickin? up outta da porch tha? he?s laying on.?
“Why doesn’t he move?”
?Donno. I reckon it don? hurt bad enough.?

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