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.

Filed Under: taxes, texas
Companies: amazon

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  1. identicon
    Anonymous Coward, 14 Feb 2011 @ 11:28am

    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).

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