The online retailer, which has been doing business in Texas since 2005, owes $269 million in state sales taxes according the Texas comptroller. The Texas Legislature recently reaffirmed a bill provision that forces online retailers with physical presences in Texas to collect the sales taxes.
Now, Amazon has countered that with an offer: 6,000 jobs (up from an original 5,000) plus $300 million for facilities, in exchange for 4.5 years of sales tax exemption from the state.
In a letter sent to the Texas Legislature, Amazon VP Paul Misener said that counting indirect jobs that would result from the deal, Texas stood to gain at least 10,000 new jobs in all.
Misener also referred to a similar deal that Amazon made with the state of South Carolina where it provided 2,000 jobs in exchange for five years of tax exemption, claiming that that total had more than doubled.
Despite the fact that it’s fairly common for online retailers to collect sales taxes in states where they operate, in the recent past Amazon has shown - at least partially - that it’s not afraid to play hardball. Originally the retailer had threatened to close its physical presence in Texas, a distribution facility in Irving. Following the move by the Legislature, Amazon let all 112 of its distribution center employees go.
The center remains open, but it’s currently staffed by temps hired through Chicago-based Staff Management-SMX.
Though it hasn’t been discussed publicly, Amazon could also move its wholly owned subsidiary, Woot.com, which does collect sales taxes, out of state.
Interestingly, Amazon has also requested that the Texas comptroller’s office set up a website where Amazon customers can voluntarily send state tax payments.
Yet short of the proposed deal, there doesn’t seem to be another way out of the taxes for Amazon. Texas Gov. Rick Perry had vetoed a previous bipartisan bill calling for the tax collections, so lawmakers inserted its language into the larger bill that provides financing for Texas schools. The governor will have to veto that bill in its entirety to get rid of the requirement.
Legal wrangling also continues as to what constitutes a physical presence, or “nexus,” in a given state.
It’s likely that the result will not include affiliates, or those independent companies who offer Amazon deals on their sites.
There is no conclusion to any of this yet. Amazon wants the proposal worked into a current bill, SB1, and accepted. No Texas officials have yet commented on either the bill or the offer.
What do you think? Taxes, or jobs? Is Amazon overstepping its bounds?