Thursday, May 31, 2012

Amazon: The Company Built on Tax Avoidance (the Columbia Journalism Review spanks the Wall Street Journal)

From the CJR's The Audit blog:
Amazon’s California tax squeeze
A WSJ follow story waters down an LAT scoop from two weeks ago
Amazon’s long run of not paying state and local sales taxes is coming to an end as legislatures finally force the Internet retailer to compete on something of a level playing field with everyone else.

But that doesn’t mean the company isn’t trying to squeeze every last drop out of the struggling communities whose infrastructure enables its profits.

The Wall Street Journal reports that the company Jeff Bezos built on tax avoidance has sounded out at least one municipality in California about keeping for itself some of the tax revenue it will be forced to collect from consumers starting next year.

But this is something of a weak effort by the WSJ, which basically shoots down its own thesis in the third paragraph.

The Los Angeles Times’s story, which it broke nearly two weeks ago, was much better. This one from McClatchy’s San Bernardino County Sun—although it came nine days after the LAT’s scoop—also has some key information missing in the WSJ. The LAT reported in its May 19 lede that Amazon is “poised to pocket millions of dollars in sales taxes paid by California customers.”

First, a little background. The Supreme Court ruled in the early 1990s that retailers have to have a physical “nexus” in a state to be forced to collect sales taxes there. Bezos once dreamed of building his company on an Indian reservation in California to avoid having to collect sales taxes and to give his website an unfair advantage over bricks-and-mortar retailers. Bezos later started up in Washington state because it had a relatively small population and would go on to have his employees use special business cards when traveling to California, rather than the normal ones, in case the tax authorities happened to be on the trail.

The LAT reported that San Bernardino “is working on an agreement with Amazon that would give the retailer as much as 80% of its share of sales taxes in the first few years, according to city spokesman Jim Morris,” who ought to be plugged in since he’s the mayor’s son. Morris later told the Sun that “there will likely have to be some sales-tax sharing agreement,” though he later tried to walk back his statement, saying that “it would be incorrect to say the city was actively negotiating a tax-sharing deal.”

The Journal leaves us at the not-actively-negotiating part without noting Morris’s previously published comments....MORE