Amazon May Cut Ties to California Over Tax Issues; Texas Distribution Site Closed Over Similar Issues Last Month; Litigation Issues Move to Forefront

Cash strapped states are furious with Amazon.Com over sales tax collections. Several states passed laws or have sent Amazon bills. Amazon's response in every case so far is to leave the state.

Amazon to close Texas distribution center amid sales tax fight

The Statesman reports Amazon to close Texas distribution center amid sales tax fight

Online retail giant Amazon.com will close its suburban Dallas distribution center amid a dispute with the state over millions in uncollected state sales taxes, The Associated Press reported Thursday.

The AP obtained an e-mail Thursday sent to Amazon employees by Dave Clark, the company's vice president of operations.

Clark wrote that the center in Irving will close April 12 because of the state's "unfavorable regulatory climate."

Last year the Texas comptroller's office sent Amazon a demand for $269 million in uncollected sales taxes, plus penalties and interest, from 2005 through 2009.

The state contends that Amazon.com is responsible for the sales tax it has not collected on online sales made in Texas.

The state is seeking money from Amazon because its distribution center in Irving.

Under a 1992 U.S. Supreme Court decision, that physical presence means Amazon potentially could be required to collect sales tax on transactions in Texas, according to legal experts.

Amazon, which reported $34 billion in sales last year, has also been the target of numerous lawsuits filed by other states seeking sales taxes on online purchases.

Amazon officials have not commented publicly on the tax bill from Texas, but the Seattle-based company said in a securities filing last year that it intended to fight the demand.

Amazon filed a lawsuit against the state last month, demanding that it produce the audit that it used to arrive at the $269 million figure.

In his e-mail to staffers, Clark said Amazon also is scrapping plans "to build additional facilities and expand in Texas, bringing more than 1,000 new jobs and tens of millions of investment dollars to the state."

Comptroller Susan Combs has estimated that the state loses $600 million a year from untaxed online sales. The comptroller's office said last year that it has sent demands for payment to  other online retailers similar to what it sent Amazon.

ACLU, Amazon face North Carolina tax collectors in Seattle court

Flashback October 13, 2010: ACLU, Amazon face North Carolina tax collectors in Seattle court

North Carolina tax collectors say they want Amazon.com to turn over the names and addresses of customers in their state and a description of all purchases so they can get the sales-tax money they're owed.

But the American Civil Liberties Union argues that if Amazon is forced to comply with North Carolina's data demands, Internet users would start to think twice about buying controversial books, music and movies, violating their constitutional rights to free speech.

Amazon, which is being audited in North Carolina, says it has provided massive amounts of data about sales to state residents since 2003, including the city, county and ZIP code to which an item was shipped, the product code and total transaction price, but it did not turn over names and addresses.

Amazon says disclosure of such data would have a chilling effect on people's willingness to buy books, music and other "expressive works" that might reveal an intimate fact about them. The ACLU agrees, saying the seven Amazon customers it represents include an elected official in Asheville, N.C., who is an atheist.

"The intervenors have bought books about divorce, atheism, personality disorders, cancer and numerous politically charged issues," said ACLU lawyer Aden Fine. "It's no surprise the intervenors want to keep that information private and free from government scrutiny."

North Carolina is one of several financially strapped states that have made more of an effort to collect sales tax from online purchases in the past two years.

While the recession has hit many stores hard, Internet-only retailers continue to grow as shoppers become more comfortable buying online. North Carolina argues that because many online shoppers never pay sales tax, Amazon enjoys an unfair advantage over bricks-and-mortar stores. (North Carolina merchants collect state and local sales tax of 7.75 percent in most counties.)

Under a 1992 U.S. Supreme Court ruling, North Carolina cannot force Amazon to collect its sales tax if it doesn't have a physical presence in the state.

Amazon has no offices or warehouses in North Carolina, so state lawmakers last year decided the company's relationships with local marketing affiliates amounted to a physical presence. Amazon responded by severing ties with its North Carolina affiliates, a move it also made in Rhode Island and Colorado.

A few days after Amazon filed its lawsuit, North Carolina offered a deal to Internet retailers, saying it would give them until the end of August to sign an agreement to begin collecting sales tax on products sold to state residents. In return, the state would not come after them for years of back taxes, penalties or interest, and it would not demand data about customers who bought from them.

Of about 450 e-commerce companies that received the offer, 24 entered into an agreement with North Carolina, said revenue-department spokeswoman Beth Stevenson. The state estimates it will lose $162 million in uncollected sales tax from online purchases this year.

Meanwhile, U.S. Rep. Bill Delahunt, a Democrat from Massachusetts, has introduced federal legislation that would allow states to require online retailers to collect sales tax regardless of whether they have a local presence.

Texas Tries a Different Tack

Unlike North Carolina, instead of requesting information from Amazon,Texas Sends Amazon a $269 Million Sales Tax Bill

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 Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com