Amazon to close Irving, TX dist cntr and scrap plans for expansion

[MadMonk]

Looks like Amazon is going to close up shop over a tax dispute with the state. This is a distribution center, not a sales office so I'm not sure how the state can lay claim to sale taxes. Anyone know how that works? I don't want to make a L.I.D.
http://news.yahoo.com/s/ap/20110210/...es_tax_dispute

It seems like a case of "a dollar waiting on a dime" to me. Perhaps we could take advantage and try to get the company to come here. With our crossroads of I-35 and I-40, it seem to me that we would be an ideal distribution center location.

[MustangGT]

As the tax implications over internet sales continues I see more shaketouts since internet companies will want to locate a "tax and/or business nexus" in locations that are favorable to them.

[USG'60]

Hey, Crossroads mall has hope. .....

[Eep]

Perhaps we could take advantage and try to get the company to come here. With our crossroads of I-35 and I-40, it seem to me that we would be an ideal distribution center location.

Highly unlikely. Their biggest distribution center is right across the border in Coffeyville, KS.

[bluedogok]

As the tax implications over internet sales continues I see more shaketouts since internet companies will want to locate a "tax and/or business nexus" in locations that are favorable to them.

Yep...and states will just get worse about getting "theirs" from business and people. After all, most states have developed the same failed strategy as investors, a focus on the short term and sacrificing the long term.

[MustangGT]

After all, most states have developed the same failed strategy as investors, a focus on the short term and sacrificing the long term.

Sadly that is almost the mantra of troubled American businesses, their slavish devotion to the next quarters results and a lack of a viable 10, 15, 20 year strategy.

[Larry OKC]

Looks like Amazon is going to close up shop over a tax dispute with the state. This is a distribution center, not a sales office so I'm not sure how the state can lay claim to sale taxes. Anyone know how that works? I don't want to make a L.I.D.
http://news.yahoo.com/s/ap/20110210/...es_tax_dispute

It seems like a case of "a dollar waiting on a dime" to me. Perhaps we could take advantage and try to get the company to come here. With our crossroads of I-35 and I-40, it seem to me that we would be an ideal distribution center location.

Oklahoma has been looking at doing the same thing as Texas

Not sure if this is the same as the decades old Use Tax that requires people to pay the equivalent of the state & local sales tax on any purchases made by catalog etc. (as long as the selling state doesn't collect its own sales tax).

If the selling entity has a brick-n-mortar location in the state (such as if you buy something from Sears catalog), they are supposed to collect the sales tax at point of sale. After that it is up to the individual to report it on their state income tax form (started appearing a couple of years ago). If you don't have records, the state has a handy dandy formula based on a percentatage of your income for you to contribute.

The state then distributes the appropriate share to cities (which goes against the Mayor's recent contention to the President that cities are losing out on millions). If they aren't getting what they think they should, the complaint should be wiith the state and not the Feds.

[Kerry]

Without a national internet sales tax (not to be confused with the so called "Flat Tax") that would be remitted to the states, sales tax as we know it is a dying revenue source.

A national internet sales tax wouldn't solve the problem in this case. Which state would get the money? The state where the customer made the purchase, the state hosting the server the purchase was made on, the state of the corporate reporting company, or the state where the merchandise actually resides and is shipped from? Maybe governments need to stop finding new ways to tax and learn to live on less. Government has priced themselves out of the market place - we can't afford them anymore.

[Larry OKC]

While City sales taxes are a result of a direct vote (MAPS etc), don't think other sales taxes are (don't think the state sales tax was by a direct vote, but may be mistaken). Also, at least in Oklahoma, cities already get an internet sales tax. They aren't losing out on anything because it doesn't exist, it does, has existed for decades (it is the Use Tax). The problem may be in the form of collection. Rather than being collected at the point of sale, they are depending on the honor system and people self-reporting it on their income taxes at tax time. The state then remits a city's appropriate amount. Even though it has existed for decades, it didn't show up on the common state tax forms until recently. If you don't have the records of what you bought on EBay, catalog etc, the state has a handy-dandy formula based on your income. Each time I have used it the actual amount based on receipts was significantly lower than the formula amount (half or less). Your mileage may vary. This is assuming I hadn't paid a tax at point of sale either.

[MikeOKC]

Amazon is making a name for itself in doing everything it can from obeying tax laws. They are an excellent example of the problem (internet sales) and why it is turning into such a nightmare to correct the issue.

Amazon doesn't feel they do retail business with the people of the state of Texas. A distribution center doesn't qualify in the strictest sense of the law. The states can change the law and begin anew. They shouldn't be sending ridiculous tax bills to companies that play a big part in driving our economy based on hazy interpretations of the brick and mortar law.

[bluedogok]

It depends, I think the criteria has always been having a physical presence through a headquarters or bricks and mortar store. If they are headquartered in Texas, then they are not exempted. You have to pay a sales tax on orders from Gap.com because they have physical sales outlets in the state. A friend of mine has an online boutique business based in Austin, if someone in OKC buys something off her website, they do not pay a sales tax to Oklahoma, she does have to pay a tax to the State of Texas/City of Austin because the sale originated here but that varies from state to state. Dell has paid huge sales taxes to the City of Round Rock and the State of Texas based on computer sales all over the world, since the sale originated in Round Rock, a sales tax is applied. I don't think sales taxes are paid to Oklahoma or Tennessee for sales in those states by Dell just because they have service and/or manufacturing facilities in those states. Some do not charge a sales tax on out of state sales, Texas taxes everything they can since there is no state income tax, they have to make it up from somewhere else. Hence the "new interpretation" and going after Amazon after years of not interpreting the tax laws that way, couldn't be because there is a massive shortfall in the state budget and they are looking to squeeze dollars out of anything they can.

The Amazon affiliate program has been the cause for most of these problems, it has to do with the place where the business is located in trying to get tax money out of Amazon for acting as an intermediary, I know a Texas based business is responsible for paying those taxes, not Amazon but not all states handle it the same way. What many states are trying to do is double tax final sales if it is being facilitated through a national intermediary like Amazon, this is on top of some states that do tax every transaction whether for resale or not. If Amazon drops the affiliate program because of these state taxation authorities it will close many businesses because there are many who depend on that presence for their livelihood. Just another example of the state government cutting off their nose to spite their face and focusing on the short term and not the long term.

[bluedogok]

The thing is that distribution center was opened in 2006, the state didn't enforce a sales tax collection for five years but now when there is a "budget crisis" they are going after them for back taxes. To me, if the state doesn't enforce a law then it shouldn't be on the books and certainly should not be back dated for five years owed. I guarantee you that if this particular ruling had been in place before the 2005 announcement Amazon would have built that distribution center there. The state sure liked the money they received from investment and employment from Amazon for five years. To me it is the comptrollers office trying to address a short term need by killing off a long term asset. I don't blame them for closing up shop and moving elsewhere since the game was changed on them, I would imagine they will get a more favorable atmosphere in Kansas. Also, the City of Irving economic development tax subsidy is slated to run out next year but it might have been renewed for another four years (Dallas Business Journal - Amazon.com to locate massive distribution center in Irving). This reminds me a lot of the Jan Eric Cartwright debacle of going after GM over the plant in MWC for taxes a few years after it was up and running. Of course, it was a little different circumstance, he was trying to run for governor and thought going after big, bad GM would get him votes.

I just see things headed towards a VAT like like the UK has, of course that will be on top of every other tax in existence today and still not solve the state tax issue.

[Kerry]

So I buy a book from Amazon. Who gets the sales tax?

1. Florida, where I live
2. Texas, where the book is shipped from
3. Kentucky, where the owner of the business reports income
4. California, where the server is that processed the sale

[Kerry]

So a company based in Kentucky would have to register as a business in Florida if a customer in Florida bought something from them over the internet? If not, how would Florida know about the purchase and tax liability and how would the company go about submitting the tax payment? Any idea what that would do to e-commerce? I think the State of Kentucky would take exception to your idea that a business in their state doesn't submit sales tax to them.

What if the state you live in charges sales tax at the point of consumption but the state it was bought in charges at the point of sale - do you pay taxes twice? Since this is interstate commerce should the states have any says at all? Aren't these just tariffs between states at that point?

[SoonerDave]

The smart states right now are the ones who are doing what the state of Delaware did years ago - and that was to construct a body of laws that made Delaware an extremely banking-and-business-friendly state. There are a *ton* of financial companies and business entities that incorporate specifically in Delaware for that reason. Oklahoma could start crafting laws favorable to businesses like Amazon and bring in a new source of jobs and a chance to repurpose now orphaned real estate.

I have no problem with Amazon jumping ship in Texas. It creates competitive opportunities for other states who want the long-term viability of taxable real estate, income-producing jobs, all serving as fuel to a state's economy, as opposed to a knee-jerk reaction to a lack of foresight in the budgeting process. Sending Amazon a tax bill like this may be expedient in the short term, but its incredibly stupid in the long term. They'd rather sacrifice all I've listed above for the one-time tax payment that Amazon will keep tied up in the courts for as long as they possibly can.

[Larry OKC]

I think you are right. The complexity of our tax system coupled with the complexity of our layers of government, and I suspect eventually we will reach tax fatigue and want to simplify everything under a VAT tax. The "Flat tax" popularity is a good example of how frustrated a lot of people already are.

I have enjoyed this discussion. Appreciate your insight and perspective. I will be watching this debate unravel and am really interested in seeing how it all plays out.

Presume you are talking about Value Added Tax and from what little I have read on it, I am not a fan. Each time it goes through the process, the taxing entity gets paid the taxes on not just the increased (value added) portion, but the entire product?? This amounts to double, triple, quad etc etc taxation on the same product.

Just as i don't think property/homes should be taxed until they are actually sold (instead of the appraised value and what other houses in the neighborhood have sold for). Then only the amount the selling price of the home has increased frpm the last time it was sold should be taxed (instead of the entire amount). If the selling price goes down from the previous sale, there should be a rebate of taxes.

I know this would be disasterous (sp) to those entities that have come to depend on that tax, but they would somehow adjust, I am sure.

[Kerry]

Companies are already paying taxes on the amount of value they add - it is the corporate income tax. In America was call that added value Profit. You can't have both VAT tax and a corporate tax. To do both would ignore the expense the company goes through to add the value (which countries in Europe do and that partly explains why they are losing manufacturing jobs to 3rd world countries as fast as we are). As for Switzerland - they are hardly an industrial giant. Their entire economy is service oriented.

[Kerry]

Wouldn't anything less than that be in violation of states rights? The way it could work doesn't have to complicated, but yeah, we have 50 states with 50 different ways they govern business. That was the intent and I don't see how a computer should change that.

The computer changes it because it changes where the transaction takes place. I went down to Best Buy 2 days ago and bought an item. I paid Florida sales tax. However, the product wasn't in stock so they shipped it to me from a store in Georgia. Are you saying I should have paid Georgia sales tax instead of Florida sales tax?

Here is another example. I work from my home in Florida. The company that I do the work for is in Georgia. The company that sends me a check is in Virginia. Where should I pay my income tax?

[Kerry]

States can't regulate or tax interstate commerce. Only the federal government can do that and since there is no federal sales tax, there is nothing to regulate. The States are SOL in my book. Texas lost a distribution center and will probably fail to collect the sales tax money as well. This is what happens when the margins get squeezed by excessive debt; they try to find money where money doesn't exist - and then express shock and outrage when it isn't there.

I would personally like to see states go to a flat 'person tax'. Figure out how much the state spends and send each person a bill for their share. Parents pay for children under 18 and after age 18 they pick up their own share of the bill. If you can't afford the tax then move. In turn, that would result in fewer people living in the state that need state assistance, which in turn will push down the tax burden. At some point an equilibrium will be reached that keeps people from living off the government.


Let’s use Oklahoma for an example. The state budget is $7 billion and 3.5 million live in the state.. That is $2000 per person. For that there is no state sales tax, no state income tax, no state corporate tax, no franchise taxes, no car registration tax, no state gasoline tax, no state beer of cigarette tax, no state cell phone tax, etc. For a family of 4 they would owe $8,000 payable in equal installments over 12 months. Of course there are people who can’t afford this so they would move away. However, they would be replaced by people who find that quite a bargain not to mention all the corporations that would take advantage of the huge tax savings. As the people at the bottom end of the income bracket move away and are replaced by people in the middle and upper end the number of people state government needs to help goes down causing the price per person to go down.


Even the mess California is in could be solved this way. They have an $86.6 billion budget and 37 million people. That is only $2340 per person and all California state taxes would disappear. Of course, there is a reason why this won't happen. It is because some of the populace sees the tax code as tool for social justice and not as means of raising money to fund the government.

[Kerry]

Social programs are one of the biggest government expenses yes. Most people in Oklahoma pay far more in all forms of taxation than $166 per month, even the poor ones. Judging by all the states in debt upto the eyeballs and a federal government that is now underwater in debt - progressive taxes don't seem to be working either.

Here is where Oklahoma spends money at the state level. Care to guess how much of the 'education' funding is really human services spending disguised as educaton spending. Think free and reduced lunch programs and after school programs.

[Kerry]

sid - it isn't class eradication (that is what Ruth Bader Ginsberg believes in). What I want is for everyone to have to pay their share of what they are voting for. It is easy to vote for program after program after program if you are not personally paying the bill for it. Want to get rid of government subsidized airports, make 100% of the people pay for the subsidy. The only things that would be funded are things that 50% + 1 agree on, and that isn't much. Here is a tough question and I will see if you can answer it. How do you know if a social program failed? Being poor is supposed to be temporary - the fact that we have generational poor is an indication that the programs failed.

In business it is much better to have your income spread across a lot of customers. Our government gets 90% of it is revenue from just 40% of the customers. If those 40% don't do really well the business goes under. You also can't outspend what that 40% is able to pay. Take a look around. We need a tax system that discourage rampant spending to get votes. Of course, that isn't going to happen with our current government which is why I give us until 2020 before the first state (or states) say, "Enough of this crap." We already have and example of the private sector, Amazon, telling a government, Texas, enough of this crap, we're leaving.

[Larry OKC]

...What I want is for everyone to have to pay their share of what they are voting for. It is easy to vote for program after program after program if you are not personally paying the bill for it. Want to get rid of government subsidized airports, make 100% of the people pay for the subsidy. The only things that would be funded are things that 50% + 1 agree on, and that isn't much....

Will throw in my two cents worth...

I agree in theory. Just as renters have no problem voting for a bond issue that is paid for by raising property taxes (not realizing that those increased property taxes are passed along to the renter). "I'm not paying for it, so why not?"

I would take your 50% + 1 idea and expand it. Require for any election to be valid, that 50% + 1 of the residents actually vote (not just the registered voters), although that would be an improvement over what we have now, where in nearly every election, local, county, state etc is decided by a significantly small minority of the population. Case in point, roughly half of Oklahomans are registered to vote, typically in a local, single issue election, voter turn-out is 15% (7.5% of the population) and that's presuming you have 100% of those voting, agreeing. When you divide it up between the yes/no, the percentage goes down even further.

Not really that radical of an idea, as our elected government bodies operate under the same principle. A quorum has to be present before any business (votes) can be conducted, then the 50% +1 kicks in for passage of most items (unless if there is a super-majority requirement).

This doesn't require that everyone vote, just that for the election to be valid, at least half of the residents have to care. The politicians talk about wanting improved voter turnout but seem to do everything they can to make sure it doesn't happen.

[Kerry]

It effectively becomes that. Not by design, but by the result of simple math. If you tax a class out of a state/country, you have effectively eliminated them.

You assume that people at the lower end of the spectrum will vote to self-eradicate. Most people vote with their pocket book and very few vote for their own taxes to go up (MAPS votes withstanding).