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June 22nd, 2011, 12:56 PM #1Amazon Offers a Compromise To Texas
The news seems to be buzzing about a compromise that Amazon has proposed to Texas in order to secure 4.5 more years without the need to collect sales tax. Here's the deal..
Amazon had a distribution center in Irving Texas. Amazon also owns Woot, which is based in Texas. The comptroller has been trying to get Amazon to collect sales tax based on these two factors, but primarily because of the distribution center. Representative Otto Introduced HB-2403, which is designed to give teeth to the comptroller's bid to force the "distribution center nexus" on Amazon. It made it all the way to Governor Perry, which veto'd it. History of bill here:
Texas Legislature Online - 82(R) Text for HB 2403
Soon afterward, Otto introduced the same bill into the education finance bill, which Perry will have a harder time veto'ing, because he would have to kill the entire finance bill and call another special session. The senate finance bill, SB-1 is here, and you can find Otto's section by searching for "ARTICLE 29. SALES AND USE TAX COLLECTION AND ALLOCATION"
82(1) SB 1 - House Committee Report version - Bill Text
Now that it becomes more likely that Perry won't be able to veto Otto's bill this time, someone has leaked out what Amazon was offering in exchange, e.g. 5,000 extra jobs and $300 million in investment. South Carolina recently passed a similar measure.
Here is a pretty decent Statesman article which seems to get the facts correct, as opposed to a lot of the other articles, which are as clear as mud.
Austin news, sports, weather, Longhorns, business | Statesman.comMerchants, any data you provide to Google Shopping should also be in your affiliate network datafeed. More data means more sales!
June 22nd, 2011, 01:30 PM #2
Paying for special treatment? Isn't that a .....oh, what is it called? ....Oh....uh....,
Yea, a BRIBE.
Don't individuals go to JAIL for that?
June 22nd, 2011, 03:58 PM #3
That's not a very fair statement. Surely you know the difference between this and a bribe.
With this, Amazon is offering the state mutually beneficial things (jobs) to encourage a good decision. It's fairly common for taxing jurisdictions to offer tax breaks for companies who make a significant job-producing investment into the jurisdiction.
With a bribe, someone offers an individual something that benefits the individual with influence if they use that influence to benefit the one making the bribe. The person taking the bribe is using their position to benefit themselves rather than the company/state they're supposed to be representing.
June 22nd, 2011, 04:19 PM #4
You are right. I over-reacted, because this post hit on two very hot issues that are each causing me a lot of aggrevation:
1. The whole affiliate-nexus issue, especially when the CA bill passed the legislature last evening and is now on the governor's desk. Amazon is offering no deals to Ca.; and
2. The tax-trade off is a big issue in Los Angeles, with the LA City Council having already given hundreds of millions of dollars in tax breaks to two separate development groups in the past year, "influencing" them to build luxury hotels in downtown LA, and now discussing the same type of trade-off to AEG to influence this outfit that has billion-dollar-per-year profits to build a football stadium in downtown LA.
Question though, if Texas makes this deal with Amazon, will other merchants come to the state and make offers for similar exemptions? Will there be a standard of what is enough of a benefit to Texas and Texans to exempt other merchants from collecting taxes? How about individuals who spend a lot of money in Texas - will they be able to give something to the state (pay for a new building at the U/Texas or Donate an art collection to a museum, for example) and be exempt from paying state taxes. Where does the line go?
June 22nd, 2011, 04:52 PM #5
- Join Date
- January 18th, 2005
It's not a bribe, and trading various tax concessions for business investment in a state is quite common. It's also wrong, in my opinion -- why should Amazon get a special tax break that smaller companies cannot possibly get? Why should a big tech company get a discount tax rate if they stay in downtown San Francisco instead of moving to a nearby city with lower tax rates, while other companies in downtown San Francsico continue to pay the higher rate? Tax laws should be evenly enforced, without handing special benefits to companies that have enough political clout.
As a business decision, I really can't offer an opinion; it really doesn't sound to me like it's worth it for Texas, especially if Amazon retains its exemption even if other out-of-state merchants are required to collect sales tax (for example, if Congress enacted authorizing/enabling legislation, or if the Streamlined Sales Tax Project reached critical mass, within 2-3 years). But considering the cost and delays from litigation, and the possibility that Amazon might prevail legally, it might not be a bad business decision -- and for some legislators, the only important goal might be the ability to "claim it as a win."
Last edited by markwelch; June 22nd, 2011 at 04:55 PM.
June 22nd, 2011, 06:05 PM #6
I probably disagree with special tax breaks as often as I agree with them (many aren't fiscally beneficial), but in this case I think it's good for both Texas and Amazon. If Amazon does bring the jobs here, Texas will see a lot of revenue from those jobs. If Amazon moves its warehouse elsewhere, we'll lose jobs (and still won't get any sales tax revenue).
These types of breaks aren't only for the ultra-large corporations. If I approached the legislators in Venus, TX, I bet they would be willing to give me a property tax abatement if I built a warehouse that would employ 50 people. Similar, Amazon bringing 5000 jobs to Texas is big enough to get the attention of the state legislators.
This is how business is done on a smaller basis, too. My wife was going to make a large order with a supplier, and I told her to ask if they could give her a further discount (off of her wholesale prices). They gave her another 5% off. I bought four items from an eBay seller and he was willing to upgrade the shipping for free, because the expedited shipping was cheaper than if he had received four smaller orders.
June 22nd, 2011, 06:39 PM #7
A merchant giving a price or shipping break to a customer is a lot different from a public official giving a tax break for a project that may or may not benefit the public. 5000 permanent jobs is one thing, but giving substantial tax breaks among other benefits in exchange for building a stadium (with no guarantee of a team to play in it) or renovating a convention center that would mean regular business is out of luck for two years and may never return, are often not in the public interest, but are rather more ego-massages for the public officials than anything else.
Wanna bet the official who claims responsibility for keeping Amazon in Texas will run for higher office?
Last edited by Phil Kaufman aka AffiliateHound; June 22nd, 2011 at 07:08 PM. Reason: typo
June 22nd, 2011, 07:03 PM #8
If this goes through it should put to bed any notion that the Amazon Tax has anything to do with helping small retailers compete. How can you spin that? They all surely know that "Main Street" retailers have nothing to do with this, and this type of deal would surely prove it. eh?
June 22nd, 2011, 11:12 PM #9
Despite our different political views, I think we pretty much see eye to eye on this one. Mega jobs is great for a state. A stadium, much less so.
June 30th, 2011, 05:16 AM #10
- Join Date
- December 4th, 2008
Does the final Texas legislation have the Affiliate-Nexus tax language similar to what just passed in California this week?
June 30th, 2011, 09:55 AM #11
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