question: How did Amazon get away with not paying any taxes this year?
comment: I'm a tax accountant at a large public accounting firm. Not going to claim I'm an expert, but I took a quick look at the income tax footnote in their 10-K. Amazon paid $1.2 billion in income taxes worldwide in 2018. They explain that they have a significant tax credit carryforward (which reduces their taxes) due to research and development along with a fairly large net operating loss carryforward (prior year losses can be used to offset future taxable income). They also have a worldwide current provision of $756 million, which is what they expect to pay in income taxes next year. The part that everyone is upset about is that their current federal provision is a benefit of $129 million, basically saying that their federal deductions and credits will not only offset their total income, but give them a benefit as well. This is primarily being driven by a benefit of $1.1 billion due to excess stock based compensation. When their employees exercise their stock options, Amazon gets a deduction (which does have limitations) equal to the difference between what the employee paid for the stock and what it sold for. That's my basic understanding of the situation.
passages: Amazon paid no federal income taxes in the U.S. in 2017 and 2018, and actually got tax refunds worth millions of dollars, despite recording several billion dollars in profits each year. CNN reported that Amazon's tax bill was zero because they took advantage of provisions in years when they were losing money that allowed them to offset future taxes on profits, as well as various other tax credits. Amazon was criticized by political figures for not paying federal income taxes.
  
  Section::::Controversies.:Comments by Donald Trump and Bernie Sanders.
   Amazon tax
  
  Amazon tax collection policy has changed over the years. In the U.S., state and local sales taxes are levied by state and local governments, not at the federal level. In most countries where Amazon operates, a sales tax or value added tax is uniform throughout the country, and Amazon is obliged to collect it from all customers.
   Many U.S. states in the 21st century have passed online shopping sales tax laws designed to compel Amazon.com and other e-commerce retailers to collect state and local sales taxes from its customers. Amazon.com originally collected sales tax only from five states , but , Amazon collects sales taxes from customers in all 45 states that have a state sales tax and in Washington, D.C.
  
  Section::::Controversies.:Income taxes.
   Amazon does not collect sales taxes from Alaska, Delaware, Montana, New Hampshire, and Oregon, since those states do not have state sales taxes. Additionally, approximately half of all Amazon.com purchases are sold on the Amazon Marketplace through 3rd-party vendors, and these purchases remain free of tax except for in Washington state, where these purchases (starting in 2018) are now taxed.
  
  Section::::Background.
   Amazon began collecting sales tax in Colorado on February 1, 2016. On February 23, 2016, the Federal 10th Circuit Court of Appeals court upheld the law against a legal challenge by the Direct Marketing Association. Ruling Judge Neil M. Gorsuch contended that overturning the law would create a statewide "tax shelter" for online retailers. Following the ruling, policy experts predicted that the decision could lead to a unified push for national internet sales taxes. It is unclear whether or not Amazon collects local taxes.
  
  Section::::State legislation.:Connecticut.
   In July 2009, the Tokyo National Tax Agency ruled that Amazon had to pay 14 billion yen ($119 million) in back corporate taxes, despite its operations in the country being formally represented by the U.S.-based subsidiary Amazon Int'l Sales, Inc. Amazon refused to acknowledge the tax debt, claiming Japan had no jurisdiction on Amazon, due to Amazon not having a physical presence or registered company in Japan.
  
  Section::::Competitive advantages.:Tax avoidance in the UK.
   In a 2011 editorial "The State" (A South Carolina paper) criticized the Kentucky incentives given to Amazon to build a distribution center in Lexington. They wrote, with respect to the South Carolina deal, that that deal with Amazon created "...yet another exemption in our Swiss-cheese tax code, and surrender[ed] what little leverage we have to collect taxes on the fastest-growing segment of the retail sector — from which we derive the largest share of the revenue that runs state government. It’s only a small step from giving Amazon a five-year exemption from collecting the sales taxes from S.C. residents to giving that same break to Walmart, Target and all the other businesses that offer online shopping — as one Senate amendment actually proposed to do."
   On October 1, 2015, Amazon started collecting sales tax in Michigan in accordance with a state law compelling online retailers to do so if they have a physical presence in the state.
  
  Section::::State legislation.:Minnesota.
  
  On October 1, 2014, Amazon started collecting sales tax in Minnesota. There is no state law compelling it to collect taxes. This decision came ahead of Amazon's decision to open up a distribution center in Shakopee that is opened in early 2017.
  
  Section::::State legislation.:Mississippi.
   Amazon announced in May 2015 that it will start paying tax in the UK on British retail sales rather than booking sales through Luxembourg, this will mean the group will not have to pay the diverted profit tax.
  
  Section::::Diverted profits tax.:Australia.
   Many U.S. states have passed online shopping sales tax laws designed to compel Amazon.com and other e-commerce retailers to collect state and local sales taxes from its customers. Amazon.com originally collected sales tax only from five states as of 2011, but as of April 2017 collects sales taxes from customers in all 45 states that have a state sales tax and in Washington, D.C.
   Amazon has collected sales tax in North Dakota since at least 2001 because they operated a fulfillment center in Grand Forks at that time until 2005. Even after closing the fulfillment center, they still collect sales tax even though North Dakota still has not passed any Amazon tax laws.
  
  Section::::State legislation.:Ohio.
   Amazon attempted to avoid being required to collect Tennessee sales tax during negotiations with economic development officials to build two warehouses outside of Chattanooga. Amazon argues that its warehouses are not directly affiliated with the company and thus do not create a nexus that would require the collection of sales taxes. Tennessee revenue officials will not reveal any specific information on a deal with Amazon as they claim doing so would violate state confidentiality laws.
   Amazon has created subsidiaries that are treated separately for tax matters, a legal technique called "entity isolation". The subsidiary that developed the Kindle is in California, but because it doesn't sell the Kindle directly to customers, Amazon's legal position was that it wasn't required to collect sales taxes in California. In the company's financial report for the quarter ending September 30, 2009, the company stated that the imposition of sales-tax collection by more states or Congress could "decrease our future sales." 
  
  Section::::See also.
  
  BULLET::::- Alliance for Main Street Fairness
  
  BULLET::::- "National Bellas Hess v. Illinois"
   “We opposed this new tax law because it is unconstitutional and counterproductive. It was supported by big-box retailers, most of which are based outside Connecticut, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue," Amazon said in a letter to its affiliates.
  
  Amazon has agreed to collect state sales tax of 6.35% in CT starting November 1, 2013. Amazon has also agreed to invest $50 million in Connecticut and to create hundreds of new full-time jobs in the state.
   In 2008, Amazon began collecting sales tax in Washington, their home state, after a state law was passed requiring in-state online retailers to collect sales tax. On January 1, 2018, Amazon began enforcing and collecting tax on third-party merchant sales to Washington state customers, as required by a new state law. Washington was the first to have this policy enforced, with plans to bring merchant order taxes to other states in the future. 
  
  Section::::State legislation.:Wisconsin.
  
  Amazon began collecting sales taxes in Wisconsin on November 1, 2013, about a year before its Kenosha distribution center was set to open.
   In May 2014, Amazon started collecting sales tax in Florida after starting plans to build two warehouses in the state. Amazon agreed to collect the state sales tax of 6%, but there was no mention of collecting local sales taxes 
  
  Section::::State legislation.:Georgia.
  
  Georgia had passed a law that became effective in January 2012 expanding the definition of what constituted a physical presence in the state in hopes that it would force online retailers to begin collecting sales taxes. However, Amazon did not collect sales taxes until Amazon agreed to start collecting Georgia sales tax on September 1, 2013.
   The Pennsylvania Department of Revenue released a sales tax bulletin on December 1, 2011 outlining the Commonwealth's interpretation of the Tax Reform Code of 1971 (TRC). The bulletin focuses on the Commonwealth's definition of a nexus for the purposes of collecting sales tax, and points out that the TRC defines a business as "maintaining a place of business in this Commonwealth" if that business engages in an activity within the Commonwealth "either directly or through a subsidiary, representative, or agent, in connection with the lease, sale or delivery of tangible personal property."
   Section::::State legislation.:Rhode Island.
  
  On February 1, 2017, Amazon began voluntarily collecting Rhode Island's 7% sales tax. Back in 2009, Rhode Island had passed a law which would have forced Amazon to collect sales taxes if it had "affiliates" in the state. As a result, Amazon cut ties with its affiliates in Rhode Island.
  
  Section::::State legislation.:South Carolina.
   Section::::State legislation.:South Dakota.
  
  On February 1, 2017, Amazon agreed to being collecting sales tax in South Dakota. This followed legislation passed in 2016 requiring retailers to remit sales tax even if they did not have a physical presence in the state.
  
  Section::::State legislation.:Tennessee.
   Responding to Amazon, Nancy Skinner said, "This is really about e-fairness. It's really to be fair and show our California Businesses that we're not hanging them out to dry." According to the American Independent Business Alliance, the corporation has operations in at least seven California cities and should be forced to collect sales tax regardless of its threats.
   Amazon's state sales tax collection policy has changed over the years since it did not collect any sales taxes in its early years. In the U.S., state and local sales taxes are levied by state and local governments, not at the federal level. In most countries where Amazon operates, a sales tax or value added tax is uniform throughout the country, and Amazon is obliged to collect it from all customers. Proponents of forcing Amazon.com to collect sales tax—at least in states where it maintains a physical presence—argue the corporation wields an anti-competitive advantage over storefront businesses forced to collect sales tax.
   On October 1, 2014, Amazon started collecting sales tax in Maryland ahead of a planned opening of a new distribution center in Southeast Baltimore. Maryland does not currently require online retailers without a physical presence in the state to collect sales taxes.
  
  Section::::State legislation.:Massachusetts.
  
  On November 1, 2013, Amazon began collecting the states' 6.25% sales tax for Massachusetts residents. The collection only applies to purchases made on Amazon and not to third-party sellers through Amazon. Amazon is now collecting sales taxes primarily because it now has a physical presence in Massachusetts.
  
  Section::::State legislation.:Michigan.
   Amazon.com used this ruling to justify not charging sales tax on its online sales, which gave it a competitive advantage over retailers from 1995 until 2012, when pressure from states made Amazon collect sales tax in some of the states.
   South Carolina has passed legislation that required Amazon and other internet retailers to start collecting sales tax in 2016. Prior to 2016, Amazon was not required to collect sales tax on purchases made by South Carolina residents. However, the company was responsible for notifying South Carolina residents via e-mail that they faced liability for sales tax and residents were still required to report the value of all purchases made on Amazon in the previous year and pay the appropriate sales tax on their South Carolina tax return . As of January 1, 2016, the tax legislation has expired, meaning that Amazon is now required to collect sales tax at the point of sale from South Carolina residents.
   Section::::State legislation.:District of Columbia.
  
  Amazon began collecting DC's 5.75% sales tax on October 1, 2016.
  
  Section::::State legislation.:Florida.
  
  In a 2012 editorial supporting tax equity, the Florida "St. Petersburg Times" wrote, "As long as Internet-only sellers such as Amazon.com can get away with not collecting state sales tax and effectively sell their products for at least 6 percent less, Florida merchants pay the price. It's past time for lawmakers to work toward a level playing field."
  
raw_presuppositions: Amazon did not pay any taxes.
raw_corrections: Amazon paid $1.2 billion in income taxes worldwide in 2018.