Sales Tax Issues-Amazon & Texas Face Off

A recent blog post mentioned an article I wrote entitled “The E-Commerce Conundrum: Taxing Virtual Businesses and Their Investors and the Law”. In that article, I discuss at length the tax issues e-commerce and virtual business face, specifically tax pressures from state governments interested in capturing sales taxes from them. Well, this week the Houston Business Journal featured an article Amazon, Texas comptroller negotiating sales tax deal that demonstrates how quickly the virtual business landscape can change.

According to the article, Susan Combs, Texas Comptroller of Public Accounts, and Amazon.com are working to resolve the following tax problems:

  • Amazon’s tax bill for $269 million for uncollected sales taxes
  • Disagreement over future sales tax collection

According to the article, Amazon was given the bill for $269 billion in September 2010 that reflected uncollected taxes for sales from 2005 to 2009. The grounds for the assessed sales tax debt is that the Seattle-based Amazon has a distribution center in Irving, Texas, thereby having a physical presence in the state and therefore obligated to pay sales tax. According to Coombs’ estimates, Texas loses about $600 million a year from untaxed online sales.

After receiving the $269 million assessment, Amazon threatened to divest in Texas by:

  • Closing the Irving facility.
  • Eliminating 119 jobs due to the facility closure even after proposing in 2011 to add up to 6,000 jobs in the state.
  • Ending proposed plans to invest further in Texas including investing up to $300 million over three years.

A tax resolution between the two parties appears to hinge on a request by Amazon for a 4 ½ year exemption from sales tax collection on online sales in Texas in exchange for keeping business in the state.

As previously stated, as a tax debt resolution expert, I have yet to assist clients with auditing or legal issues regarding e-commerce laws, but it appears the tide is changing. The tax resolution reached by Amazon with the state of Texas over back taxes will most certainly impact the future of e-commerce and it won’t be long before there is an increase in IRS audits for e-commerce businesses due to unpaid sales taxes.  I also predict a surge in lawsuits and a need for IRS tax relief as small businesses attempt to interpret the ever-changing and complex United States tax code.

More Tax Help, IRS News and Tax Relief Tips:

  1. Michael Rozbruch Interviewed in Opportunist Magazine
  2. Tax Man Explains IRS on Big Biz Show
  3. Tax Resolution Services Offers Returning Veterans Free Tax Advice
  4. Tax Relief Weekly News Round-Up
  5. New Offer in Compromise Policies Bring Tax Relief

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