The state of Texas has a two year budget deficit estimated at $21 billion. As they look for ways to recover from the shortfall, they begun hunting Amazon for sales taxes they say they owe. Texas sent Amazon a bill for $269 million to cover sales taxes it says the company owes from online sales made between 2005 and 2009 to Texas residents. The figure also includes interest and penalties owed for nonpayment of taxes. Texas claims to lose around $600 billion each year in untaxed online sales.
In 2008, The Dallas Morning News questioned Amazon’s lack of sales tax payments because the company maintains a distribution center in Irving, Texas. After questioning, the comptroller’s office in Texas investigated Amazon, and the result was the $269 million bill sent to Amazon for the uncollected sales taxes.
Later that same year, Amazon’s regulatory filing with the SEC disclosed that they believe Texas “did not provide a sufficient basis for its assessment and that the assessment is without merit. Depending on the amount and the timing, an unfavorable resolution of this matter could materially affect our business, results of operations, financial position, or cash flows. We intend to vigorously defend ourselves in this matter.” As a result, the spokesman for the Texas Comptroller of Public Accounts, R.J. DeSilva said that Amazon will be going through an ongoing audit and would have to send documentation for review before a decision can be reached.
All of this comes despite a 16% increase in Amazon’s earnings this quarter, as reported on AOL’s Daily Finance site, with revenue over $7.56 billion. Even with the sales tax controversies, the company’s stock price continues to increase over the last few weeks. They’ve also reported that Amazon’s uncollected tax problems are more than just the state of Texas. Most recently, North Carolina has also started their attempts for collecting sales tax from Amazon sales. With 46 states reporting budget deficits as they attempt to create budgets for the current fiscal year, it’s not likely to be the last state to look to Amazon and other online retail companies for uncollected sales taxes.
Amazon defends itself regarding uncollected sales taxes in Texas by saying they don’t own the distribution center they use in Texas. The distribution center is owned by Amazon.com KYDC LLC, which is a subsidiary apparently, and technically based in the state of Kentucky.
This post was published on December 10, 2010