Is Amazon Gearing Up For Another Tax Battle?
Amazon.com Inc.’s (NASDAQ:AMZN) new shipping centers will bring thousands of new jobs to cities in California, but the company may push for a portion of the resulting sales tax to land in its own pocket, according to reports from the Wall Street Journal.
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The retail giant is opening new shipping centers in San Bernadino and Patterson and has reportedly inquired about the possibility of sharing sales-tax revenues with San Bernadino. Amazon’s ability to skirt sales tax in states where it does not maintain a physical presence has led to massive savings and the ability to offer lower prices than physical bookstores. The battle between the retailer and states struggling with faltering economies has been ongoing.
Last year, Amazon reached a deal with the state of California to create thousands of jobs by opening shipping centers in exchange for pushing back state tax requirements until later in 2012. The company reached a similar deal with the state of New Jersey on Wednesday. With a new company as big as Amazon, which reports annual sales of $50 billion, the resulting gain for California could be as much as $83 million. In California, local governments are allowed to keep 1 percent of sales tax in addition to the state’s 7.25 percent tax rate.
Sales tax-sharing programs are nothing new, and San Bernadino already has a sharing agreement with Kohls Corp. (NYSE:KSS). But with a $4 million shortfall, the city needs income desperately. Patterson is facing a less staggering deficit, with a $300,000 shortfall.
Ultimately the decision over a sales tax-sharing program would be decided by each city council. City officials in both locations have stressed the fact that Amazon cited its reasons for choosing the California cities as low costs and logistical benefits rather than tax incentives.
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