Amazon Takes Its Ball and Goes Home Over Sales Tax Bill

Sharon Ward |

According to an article in Monday’s State Tax Notes (subscription required), Amazon has decided to shutter a warehouse facility in Texas rather than pay a $269 million sales tax bill issued by the Texas Comptroller. Lost in this foot-stomping exercise are 119 warehouse jobs and any future plans of expanding in the Lone Star State.

The Texas business community is up in arms about this, but not for the reasons you would think. The president of the Texas Retailers Association said in a statement:

“We sincerely regret that Amazon’s irresponsible action appears to be resulting in 119 Texans being told their jobs are being terminated. However, to allow Amazon’s current practices to continue is blatantly unfair and injurious to the 1.9 million employees of Main Street Texas retailers who faithfully collect and remit sales taxes to the Comptroller.”

The dispute is a common one between Amazon and the states. Amazon claims it has no legal right or duty to collect sales tax from its customers, but states like Texas, Colorado, North Carolina, and New York are fighting back. Pennsylvania hasn’t joined the pack—yet.

The heart of the issue is whether Amazon has a physical presence in a given state. Amazon uses loopholes in the law to insulate itself from responsibility for collecting sales taxes. It has wholly-owned subsidiaries operate warehouses in a given state, but since Amazon, the parent company and website operator, isn’t located there, it claims it isn’t “technically” in these states, so it can’t collect sales taxes.

When competing for your online shopping dollar, this gives Amazon an unfair competitive advantage by not charging you for sales tax—something that places like Barnes & Noble, Target, or Best Buy can’t match.

Texas, Colorado, and New York have taken action by closing the loophole through legislation or issuing tax bills based on estimates of in-state sales. Amazon has responded by firing its affiliates in Colorado and closing its warehouses in Texas in an attempt to lose nexus in those states. It also has taken New York to court.

This is a big issue for Pennsylvania, too. At a state House Appropriations Committee hearing earlier this month, a representative of the Alliance for Main Street Fairness estimated that Pennsylvania is losing more than $700 million per year by allowing internet sellers, like Amazon and, to do business in the state without collecting sales tax. (The coalition is a group of bricks and mortar retailers—including many of the big box stores—who must collect and remit sales tax.)

Like in Texas, an Amazon subsidiary owns and operates a number of warehouses in Pennsylvania. The company even accepted state economic development assistance to build some of the facilities. Echoing the same refrain it uses in Texas, Amazon claims that it has no physical presence here, so it collects and pays no sales tax.

By the way, if you are buying items from internet retailers like Amazon and aren’t being charged sales tax for what would otherwise be a taxable item, you are still legally required to pay it. Just saying …