Amazon has fought long and hard to avoid collecting sales tax in states where it believes it does not have nexus, and for the most part has been successful. But in its quarterly filing with the Securities and Exchange Commission Friday morning, the online retailer reported that in September Texas issued an assessment saying that Amazon owed the state $269 million for uncollected sales tax for the December 2005 to December 2009 period. The total includes interest and penalties. In the filing, it wasn’t clear why Texas determined that Amazon should have collected sales tax, and Amazon stated that, “we believe that the State of Texas did not provide a sufficient basis for its assessment and that the assessment is without merit. We intend to vigorously defend ourselves in this matter.”
Texas has been examining the issue of online sales tax for years, although no officials were available to discusss whether the state will begin collecting sales tax from all out of state online retailers or why they determined that Amazon owed the sales tax. When New York State determined that Amazon owed it sales tax, it based its decision on the fact that Amazon affiliates in the state gave the company a presence there, making it responsible for collecting sales tax. In its filings with the SEC, Amazon regularly lists the possibility that it could face additional taxes as one of the risk factors in investing in the company, and it noted that over the next 12 months it was possible “we will receive additional assessments by various tax authorities.” Amazon further noted that “we are under examination, or may be subject to examination, in the following major jurisdictions for the years specified: Kentucky for 2005 through 2009, France for 2007 through 2009, Germany for 2003 through 2009, Japan for 2006 through 2009, Luxembourg for 2005 through 2009, and the United Kingdom for 2004 through 2009.” The company is also involved in a lawsuit in North Carolina in which the state has asked Amazon to turn over its sales records so it can collect sales tax from state residents who haved bought items from Amazon. North Carolina asked for the records after Amazon let go all of its affiliates in the state after officials said the presence of affiliates provided the necessary nexus for Amazon to collect sales tax.
The ABA has long believed that Amazon, and other online retailers, should collect sales tax in states where they have a presence, calling it a matter of “e-fairness.” On hearing the Texas decision, ABA CEO Oren Teicher praised the ruling. "We applaud the State of Texas for taking action against Amazon for its refusal to collect and remit sales tax despite its having clear nexus in the state. The state government should not be in the business of picking and choosing favorites. Our independent bookstores in the state follow the state sales tax laws - so should Amazon.com.” ABA had sent letters to Texas and other states calling on them to move on the issue and Teicher observed that “the state noted it was committed to resolving the issues we were raising, and we are pleased that it has decided to take action."