Texas-Ama­zon sales tax deal ben­e­fited both sides: data

The China Post - - WORLD BUSINESS -

Three years on, a much­watched deal to set­tle a U.S. sales tax col­lec­tion dis­pute be­tween Texas and Ama­zon.com ap­pears to have ben­e­fited both sides, ac­cord­ing to an anal­y­sis pub­lished Sun­day by The Austin AmericanStatesman.

The agree­ment saw the state drop its de­mand that the e-com­merce gi­ant pay US$269 mil­lion in back sales taxes in ex­change for Ama­zon agree­ing to col­lect state sales taxes be­gin­ning July 1, 2012. The Seat­tle-based firm also got in­cen­tives to cre­ate jobs and make cap­i­tal in­vest­ments statewide.

The States­man used ( http:// atxne.ws/1DFk0Pr) Texas comptroller’s of­fice data to show that col­lect­ing sales taxes from Texas res­i­dents on Ama­zon pur­chases added hun­dreds of mil­lions of dol­lars to state cof­fers. Mean­while, Ama­zon told state of­fi­cials this sum­mer that it had 3,500-plus Texas em­ploy­ees and had made US$300 mil­lion in cap­i­tal in­vest­ment statewide through the end of last year — ex­ceed­ing bench­marks set as part of the agree­ment.

Comptroller Glen He­gar, who wasn’t in of­fice when the deal was struck, is nonethe­less prais­ing it.

“I be­lieve Texas ben­e­fited from the deal with Ama­zon. The agree­ment meant Ama­zon be­gan col­lect­ing and re­mit­ting taxes to the state, which the comptroller’s of­fice felt were legally due,” He­gar said. “The agree­ment also al­lowed Ama­zon to start build­ing ware­houses and to greatly ex­pand their phys­i­cal pres­ence in the state, which was largely ben­e­fi­cial to the econ­omy.”

The 2012 agree­ment, reached un­der then- Comptroller Su­san Combs, ended two-plus years of back tax bat­tles be­tween Texas and Ama­zon and also saw the com­pany of­fer an “im­ma­te­rial pay­ment” to set­tle the state’s com­plaint.

Since July 2012, sales tax rev- enue in Ama­zon’s sec­tor has gone up more than US$325 mil­lion. State law pro­hibits the comptroller’s of­fice from re­leas­ing sales tax col­lec­tions by in­di­vid­ual com­pa­nies, but since Ama­zon is the world’s largest online re­tailer, its sales in Texas likely con­sti­tute a sig­nif­i­cant por­tion of that in­crease.

The spat be­gan in Septem­ber 2010, when Combs or­dered the com­pany to pay US$269 mil­lion for un­col­lected sales taxes from 2005 to 2009.

Ama­zon re­sponded by threat­en­ing to close a fa­cil­ity it op­er­ated in Irv­ing, elim­i­nat­ing 119 jobs and shut­ting Texas out of fu­ture ex­pan­sion plans. The com­pany had long op­posed col­lect­ing taxes, though it had reached a pre­vi­ous agree­ment with Ne­vada that de­layed its sales tax col­lec­tions there un­til 2014.

When Texas struck its agree­ment with the firm, Combs called it “the best deal in the United States,” be­cause while other states were wait­ing years to col­lect the tax, Texas only waited 60 days.

Michael Maze­rov, se­nior fel­low with Washington, D.C.-based Cen­ter on Bud­get and Pol­icy Pri­or­i­ties, called the Texas-Ama­zon agree­ment a na­tional game-changer.

It “com­pletely turned the tide na­tion­ally in terms of how Ama­zon dealt with this is­sue,” Maze­rov said.

In ad­di­tion to col­lect­ing sales taxes, the deal man­dated Ama­zon achiev­ing hir­ing and in­vest­ment bench­marks by the end of 2014.

In a May 7 let­ter to the comptroller’s of­fice, Paul Misener, Ama­zon’s vice pres­i­dent for global public pol­icy, wrote that the com­pany had now “sat­is­fied the cap­i­tal in­vest­ment and job cre­ation re­quire­ments as agreed to in the . agree­ment signed April 24, 2012.”

Maze­rov says for Ama­zon too, the agree­ment was smart: “They got rid of a big po­ten­tial tax li­a­bil­ity as a re­ward to do what they had very good rea­sons to do, which is keep ware­houses in Texas.”

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