Texas tells Amazon to pay up

Well, that’s one way to attack the budget deficit.

Texas has sent Amazon.com Inc. a $269 million bill for uncollected sales taxes on purchases made by state residents from the Seattle-based Internet superstore over a four-year period.


R.J. DeSilva, spokesman for the Texas comptroller of public accounts, said the bill was sent to Amazon.com in August. It wasn’t publicly disclosed until Friday, when Amazon.com revealed it in a regulatory filing.

“The company has requested a re-determination, which means this is an ongoing audit and could be decided as part of the administrative hearings process,” DeSilva said in a statement. “The company would send documents, and this process will continue.”

DeSilva said he couldn’t answer any questions because sales tax and audit information is largely confidential under Texas law.


The Texas comptroller’s office began an investigation of Amazon’s taxing status in May 2008 after The Dallas Morning News questioned why Amazon didn’t charge sales taxes while maintaining a distribution center in Irving near Dallas/Fort Worth International Airport.

At the time, Amazon.com had sued New York over whether it needed to collect sales taxes there, arguing it had no “physical presence” in that state. That defense dates to a 1992 U.S. Supreme Court decision covering catalogs and direct mail-order companies but later applied to Internet retailers.

The News report said Amazon had been operating the Irving distribution center since at least 2006. Amazon contended the distribution center was owned by one of its subsidiaries called Amazon.com KYDC LLC, which is located at the same address as its corporate headquarters in Seattle.

In July, Amazon.com purchased the rest of Carrollton-based Woot.com that it didn’t already own. Amazon.com had held a minority stake in the quirky deal-of-the-day website since 2006.

“I don’t know if this will encourage other states, but I hope it will,” said Michael Mazerov, senior fellow in the State Fiscal Project of the Center on Budget and Policy Priorities in Washington, D.C. “Amazon is very legally vulnerable.”

The company’s defense that “the mere separation of a corporate subsidiary isolates a retail arm from having to charge sales taxes creates no limit to what any corporation could do,” Mazerov said.

He estimated in a 2009 study that state and local governments lose more than $7 billion a year in uncollected sales taxes.

I’ve already said that I don’t see any reason at this point why online sales are exempt from sales taxes. It made some sense in the 90s, but not any more. I’m rooting for the state on this one.

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4 Responses to Texas tells Amazon to pay up

  1. becky says:

    What an accounting nightmare this would be for any online merchant. They would have to file quarterly with every state and pay that share of state tax. It would make more sense to determine where the corporate office resides and allow them to operate like an entity in that given state – where the customer pays sales tax to merchants and merchants pay the state based on taxable sales.

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