Amazon Pulling Out of Texas Over Sales Tax

Rather than comply with an assessment from the state of Texas to pay $269 million in uncollected sales tax, Amazon.com has announced that it will close its distribution facility in the Dallas suburb of Irving on April 12 and will cancel plans to build additional facilities in the state.

Rather than comply with an assessment from the state of Texas to pay $269 million in uncollected sales tax, Amazon.com has announced that it will close its distribution facility in the Dallas suburb of Irving on April 12, as reported by the Associated Press. In addition, the online giant said it has canceled plans to build additional facilities in the state.

The distribution facility near Dallas/Fort Worth International Airport employs an unknown number of people, and Amazon contends that new operations would have created 1,000 new jobs, as reported by the Dallas Morning News [1].

In its September 2010 quarterly filing with the SEC, Amazon.com reported the state’sassessment [2], and the State Office of Administrative Hearings is currently hearing the case. ABA has contacted the comptroller’s office numerous times regarding Amazon.com’s refusal to collect sales tax in Texas. In a May 2008 letter, ABA CEO Oren Teicher wrote: “It is indisputable that Amazon.com has a physical presence in the state of Texas. When a Texas-based customer buys a book from one of our Texas-based bookstore members either as an in-store or online purchase, our bookstore members follow existing Texas sales tax laws and collect and remit sales tax. We believe Amazon.com should do the same.”

Despite the dramatic act of brinkmanship, officials in Texas appear resolute. “We regret losing any business in the state of Texas,” said Allen Spelce, spokesman for the comptroller’s office. “But our position hasn’t changed: If you have a physical business presence in the state of Texas, you owe sales tax,” as reported by the Dallas Morning News. Texas loses an estimated $600 million a year in uncollected sales taxes for online sales, according to the comptroller’s office.

“Rather than obey the law and collect sales tax – as do all other Texas-based retailers – Amazon.com has instead chosen to shutter a distribution center in the state and put its Texas employees out of work,” said Teicher. “Amazon has once again taken a drastic step to maintain the inequitable strategic advantage it gains by not charging sales tax. The company’s charges of an ‘unfavorable regulatory climate’ are really nothing more than spin, smokescreen, and pique. The truth is that officials in Texas have taken a strong stand in favor of equitable and evenhanded enforcement of existing laws, and retailers in Texas applaud them for it.”

“Texas retailers collect and remit sales taxes every day –  whether the sale happens in a store or online,” said Danny Diaz, a spokesman for the Alliance for Main Street Fairness. “Amazon.com was asked to play by the same rules, and has responded by eliminating hundreds of Texas jobs. Amazon could have chosen to collect the sales tax as Texas retailers do, but instead they opted to protect their special sales tax loophole to the detriment of hardworking families.”

The move to close its distribution facility in Texas is the latest in a series of moves Amazon.com has made to avoid collecting sales tax. Following the passage of e-fairness legislation Colorado, North Carolina, and Rhode Island, Amazon.com severed relationships with affiliate businesses in all three states to avoid collecting sales tax.