Nexus in Texas? State to Investigate Amazon.com's Irving Facility

Posted Thursday, May 15, 2008

The State of Texas Comptroller's Office is currently investigating whether the presence of an Amazon.com-run distribution facility in the Dallas suburb of Irving means the online retailing giant has a physical presence in the state. If the Comptroller's Office determines that Amazon.com does have nexus, the retailer would be responsible for collecting and remitting sales tax for purchases made by Texas residents and potentially would be liable for back taxes.

The issue over the Seattle, Washington-based Amazon.com's Irving facility was first reported by the Dallas Morning News on May 9, after the newspaper contacted the Texas Comptroller to inquire why Amazon.com did not collect and remit sales tax even though it had a distribution facility in the state. The inquiry prompted the state to launch an investigation into the matter.

Following news of the investigation, Amazon stated publicly that, under Texas sales tax laws, it is not required to collect and remit sales tax because the distribution facility is operated by a subsidiary, Amazon.com.kydc, Inc.

But this is not necessarily the case, according to R.J. DeSilva, a spokesperson for the Texas Comptroller's Office, who explained that there are circumstances where a subsidiary could, in fact, constitute nexus. "It varies," DeSilva told BTW. "Part of it would be dependent on the business mix -- so it's possible that a subsidiary would constitute nexus."

As part of their investigation, the state's Business Activity Research Team will be checking into what legal entity owns the facility, DeSilva said, as well as the involvement of Amazon in the facility. While Amazon argues that a subsidiary owns the facility, the company's website notes that Amazon.com has "offices, fulfillment centers, customer service centers, and software development centers across North America, Europe, and Asia" and lists a fulfillment center in "Dallas, TX." There is no mention of any subsidiaries, and, as reported by BetaNews, Amazon.com is listed as the owner of the distribution center in 2006 and 2007, not Amazon.com.kydc.

Amazon.com's website notes that it runs fulfillment facilities in Kentucky, Pennsylvania, Kansas, Texas, Nevada, Delaware, Arizona, and Indiana. The company lists customer service centers in North Dakota, West Virginia, and Washington. At present, Amazon only collects sales tax in Kansas, Kentucky, North Dakota, and Washington. Delaware does not charge sales tax. --David Grogan

In related news, the national campaign for e-fairness continues, and booksellers are urged to write, fax, or e-mail their governors about this important issue. To make this communication easier, ABA has prepared a template letter that can be adapted and sent. The association asks businesses that contact their governors to send a copy of the letter to ABA Public Policy Liaison David Grogan at dave@bookweb.org.

Additionally, on Friday, May 2, and again on May 9, ABA COO Oren Teicher e-mailed the booksellers in the 21 states with the largest projected budget deficits as reported by the National Conference of State Legislators, and asked those with any connections with a state legislator to arrange a meeting with the legislator regarding e-fairness.

"We will provide you with the necessary briefing, materials, and information -- and, in some cases, might be able to participate in the meeting with you," Teicher wrote in the e-mail. "Given the victory here in New York, which has brought about concrete and positive change for state businesses, it is imperative that we maintain our momentum and keep the pressure on." ABA is also in the process of preparing state-specific material to assist booksellers, available upon request.

Any bookseller who has a legislator in mind, or would like to discuss this issue further, is asked to contact ABA Public Policy Liaison David Grogan at (800) 637-0037, ext. 6662, or via e-mail at dave@bookweb.org. ABA public policy staff can help walk interested booksellers through the process of setting up a legislative meeting and answer any questions about ABA's Campaign for E-Fairness.
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