Amazon (AMZN) is the top retailer on the web and has always been obsessed with efficiency in every one of its operating fields. Tax efficiency has been a primary concern in all of its acquisitions and how it does business in general. Why? As a retailer with no “physical stores,” it does not fit in the old version of what business should be taxed.
That is changing in some states as the state governments, looking for money to balance their budget are changing the definitions of what type of business should pay these taxes to include “ecommerce.” Amazon has been fighting this very hard, threatening to close out any business ties in states that pass such laws. Its threats have worked in some states that either dropped the law projects or gave “exceptions” to Amazon. These are not empty threats as Amazon has closed some offices in some instances.
California Follows Steps By Smaller States
The most recent event occurred in early July when California lawmakers decided to include Amazon in the businesses that must charge (and pay) sales taxes. Amazon followed that threat by dropping its 10,000 affiliates (sale partners) in California:
“We oppose this bill because it is unconstitutional and counterproductive. It is supported by big-box retailers, most of which are based outside California, that seek to harm the affiliate advertising programs of their competitors,”
How Hard Is Amazon Fighting Such Measures?
To give you an idea, the main reason why Amazon is rumored to not buy LivingSocial entirely is because that would create a presence in many states which would draw costs. Instead, Amazon is a major shareholder in this and other ventures,
Is Amazon doing the right thing by minimizing its taxes at any cost, in order to maximize (among other things) shareholder returns? Or is fighting taxes like this morally “unacceptable?” The question is certainly open for debate but I personally think Amazon has every right as a business to maximize its profits. It will eventually have to pay those taxes in my opinion but it has every right to delay that for as long as it can. I can see how other retailers such as Target find it unfair to compete when they must charge taxes to their consumers that Amazon does not have to but those are the current rules and it would be bad business for Amazon to not search for better tax efficiency.
What is your opinion?