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Will Amazon Get a Visit From the Tax Man?
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."
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.
no comment
...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.
Quo usque tandem abutere, Nimbus, patientia nostra?
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...
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.
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.