Sales Tax Avoidance

Amazon has “built an entire business model based on tax avoidance,” said Assembly tax committee Chairman Charles Calderon (D-Montebello).

In 1992, the U.S. Supreme Court decided that catalog retailers did not have to collect sales tax from consumers living in  a different state. At the time, the rationale was that it would be far too difficult for a catalog company to track and collect sales tax in thousands of different cities.

How things have changed.

Computers now make it easy for big companies like Amazon.com to automatically collect sales tax in every tax district they do business in. No longer would collecting sales tax be a significant burden for retailers.

But what about the local businesses who compete with Amazon?

With more and more people buying goods online, companies like Amazon.com have an unfair advantage over local business owners who are legally required to collect sales taxes. When New York state passed a law in 2008 to correct this inequality, Amazon.com filed suit, saying that the law was “unconstitutional.”

Amazon – how is leveling the playing field unconstitutional? You should have to collect sales tax just like every other retailer.

In 2009, a judge agreed, throwing out Amazon.com’s suit saying “There is no basis upon which Amazon can prevail.”

Still, Amazon.com continues to avoid paying sales tax like your local retailer. After New York passed a law requiring Amazon.com to collect sales tax, Rhode Island, Colorado, and North Carolina have passed similar laws. Each time, Amazon.com has “fired” it’s affiliates (often small business owners) in an attempt to force a political showdown (read more on how Amazon.com hurts small businesses).

Federal Tax Avoidance

The corporate execs at Amazon.com don’t believe their company should have to pay taxes. According to BusinessWeek, Amazon and it’s affiliated companies generated more than $19 billion in revenue in 2008, making them one of the largest online retailers in the world.

Amazon earned more than $830 million in profits in 2008, yet between the years of 2004 and 2008, Amazon.com averaged a 4% corporate tax rate – that’s less than most individual Americans! BusinessWeek found that Amazon.com pays less in taxes (as a percentage) than 488 of the companies listed on the S&P 500.

Amazon doesn’t like to pay federal corporate taxes.