Amazon.com’s Texas tax break in doubt

The 2011 Special Session of the Texas Legislature came to a close yesterday. Among the bills passed and heading for Gov. Rick Perry’s desk is SB 1, which covers a hodge podge of state fiscal matters, most notably education finance. Also in the bill passed yesterday is a provision that requires online retailers, such as Amazon.com, to collect sales taxes if they have a physical presence in the state. While lawmakers could have cut the provision from the bill, they did not as it had significant support in both chambers. Collecting sales taxes from Internet retailers is also popular with many Texans who’ve seen education and other essential state services slashed in this latest round of state budget balancing. Bricks-and-mortar retailers also largely support the provision, saying Amazon and its ilk enjoy an unfair advantage.

Perry, an as-yet-undeclared Republican candidate for president, has recently been touring the nation wowing fellow Republicans with tales of the Texas economic miracle and his job-creating prowess. When Amazon threw a hissy fit and threatened to shut down its distribution center near Dallas (see previous post) after it was presented with a bill for $269 million in uncollected sales taxes, Perry took the company’s side, vetoing a similar bill (HB 2403) during the legislature’s regular session.

The Texas Tribune reported that Amazon last week (interesting timing) offered to invest $300 million in about half a dozen warehouse and distribution centers in the state in return for a four-and-a-half year exemption from collecting sales taxes (read here). Perry is keen on the deal, but state lawmakers are not. A $300-million infusion from Amazon would certainly burnish Perry’s pro-business/job creation credentials.

What will the Gov. Perry do? Stay tuned …

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Alexandra Biesada

Alexandra Biesada shops everyday, whether she wants to or not, and pines for the days when it was strictly a recreational activity. She has covered the retail beat for Hoover’s since 2001. Follow her on Twitter.

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Comments

  1. Chris Huston Chris Huston says:

    I’m a fan of Amazon’s, but I love this line: “When Amazon threw a hissy fit…” That’s definitely an Alex Biesada blog post! Good stuff, Alex!

  2. Brick-and-mortar charges sales tax. Online charges shipping. The price amounts to about the same in the end. There is no unfair advantage. The advantage that online retailers have is generally they have more old stuff in stock. Borders and Barnes and Nobles brick-and-mortar book stores tend to not have the book you want because it isn’t popular, but Amazon has it. Same with movies. Best Buy doesn’t carry that ten year old movie because they don’t think many people will buy it; but Amazon has it.

  3. And, obviously, if Amazon charged sales tax for every state they do business in, this would give brick and mortar the unfair advantage. 8c to texas , 20 to Cali (I assume theirs is high since they’re all nuts), and so on. Anyone wanting this is stupid, and evil. Grow up. Internet sites can’t collect sales tax.

  4. alex biesada says:

    jun — You’re right that for customers shipping charges appear to nullify the sales tax savings. The difference of course is that shipping fees go to FedEx, UPS or the USPS, while sale taxes go to the state for things like education, hospitals, police and other essential (and some non-essential) services.
    I can’t tell you how many times I’ve gone to a Barnes & Noble or Book People here in Austin and walked out not finding what I need. You’re right that Amazon can’t be beat for selection.
    As for proponents of collecting Internet sales tax being stupid and evil, it appears the tide is turning in their favor. They may eventually win this one.

  5. alex biesada says:

    Chris, Me too! I’m a huge fan of Amazon and have the greatest respect for the business Jeff Bezos built and continues to grow into a powerhouse. On Stores magazine’s new list of 2011 Top 100 Retailers Amazon had the highest change in retail sales in 2010 vs. 2009 — a whopping 46%! Second place went to Apple Stores/iTunes with 32%. I think Amazon’s great success is going to its head through. Its action in Texas was akin to “taking its toys and going home.”

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