Amazon's Physical Presence (Nexus) in U.S. States and the Sales Tax Battle
Executives at Amazon.com have long argued the corporation should be exempted from sales tax collection duties in states where it has no physical presence (referred to as nexus in law) because it receives no benefits from those states. Leaving aside for now that roads, airports, and other public assets are essential to deliver the products Amazon sells, Amazon has a clear physical presence in at least 19 states. Of these, 17 have statewide sales tax. Amazon remits sales tax in just six.
The following table is based on information is gathered from SEC filings, news stories, Amazon.com and other research. Also see our commentary on this issue in Bloomberg/BusinessWeek. Of course, Amazon is not the only online mega-retailer exploiting this loophole. See "Best Resources on State Sales Tax and Reform of Internet Exemption" for dozens of sources covering the issue more generally.
Amazon.com Inc.'s Physical Presence in U.S.
Updates: Amazon agreed to begin collecting sales tax in Nevada, Texas and California in return for the states foregoing uncollected taxes on past sales. Amazon has long had nexus in each state. NV gave Amazon until 2014 before the deal kicks in, while tax collection in commenced in July 2012 for TX and September 2012 for CA. As of 2012, Amazon is building distribution centers rapidly and this list is NOT comprehensive.
|New York**||New York|
|Nevada#||Fernley, N. Las Vegas||Las Vegas||Las Vegas|
|N. Dakota**||Grand Forks|
|S. Carolina|| Cayce***
(two more by end of 2012)
|Washington**||Bellevue||Seattle (Corporate HQ)
Customer Service Ctr.
|Short url for sharing this chart via social media: http://bit.ly/amazonnexus|
# California exempted Amazon from sales tax collection through the end of 2012. Collection will commence in Texas in July of 2012 and in Nevada in 2014.
* No statewide sales tax (some localities may charge tax)
** Amazon collects sales tax in this state
*** Amazon threatened to abandon this partially-built facility after the S.C. House rejected a proposal to exempt it from tax collection duties. The House reversed course and the state granted Amazon an exemption after Amazon nearly doubled its promised new job count. Amazon has shut down distribution centers in Red Rock, NV; Munster, IN; and Chambersburg, PA and Irving, TX.
Note: in addition to these sales tax subsidies, Amazon Inc received at least $348 million ($304 million since 2007) via 22 direct subsidies in 9 states, according to a 2012 investigation by the New York Times.
As Michael Mazerov has noted, Amazon’s Securities and Exchange Commission Form 10-K for 2008 (p. 16) states: “We also lease additional corporate office, fulfillment and warehouse operations, customer service, and other facilities throughout the United States , principally in [AZ, CA, DE, FL, IN, KS, KY, MI, NV, NH, NJ, ND, PA, SC, TX, VA, WA, WV, and WI]” Amazon's use of “principally” suggests facilities in additional states, so please contact us with any documented additions to this table. We also welcome your own photographs of Amazon facilities in states where the corporation claims not to be present.
Sign for Irving, TX distribution center, which Amazon Inc. threatened to close.
The corporation says it has no legal presence in Texas.
Richard Prem, Amazon’s VP for Indirect Taxes and Tax Reporting, told a conference of state tax officials: “We don’t consider [not collecting] tax as a competitive advantage.” The corporation's 2008 Annual Report (p. 14) rebuts his claim:
"A successful assertion by one or more states or foreign countries that we should collect sales or other taxes on the sale of merchandise or services could result in substantial tax liabilities for past sales, decrease our ability to compete with traditional retailers, and otherwise harm our business."
Notable Reporting on the Amazon Tax Dispute
- As tax-free sales go, Amazon looks to speed, convenience, Seattle Times, Sep. 1, 2012
- Amazon Picks Sales Tax Winners by Kathy Warbelow, Business Week, July 24, 2012
- Online sales tax battle pits Amazon against Norquist and Sen. DeMint, The Hill, April 11, 2012
- Amazon Attempts to Negate CA Sales Tax Law, Uses Affiliates as Smokescreen (AMIBA, July 12, 2012)
- Amazon Wants to Save You Money by Farhad Manjoo, Slate, July 12, 2011
- Amazon Battles States Over Sales Tax (pay wall) by Stu Woo, Wall St. Journal, Aug. 3, 2011
- Amazon Bolts Texas by Ryan Chittum, Columbia Journalism Review, Feb. 11, 2011
- (of related interest) Amazon Inc. Hits a New Low: Recruits Customers to Spy on Competitors
Update: While Amazon has proclaimed support for national sales tax reform, its lobbyists are pushing to eliminate exemptions for retailers that sell small volumes online. Amazon wants businesses with as little as $150,000 in annual sales to collect sales tax on interstate transactions. Since all major proposals exempt businesses up to $500,000 or $1 million in sales, this is impeding reform.
While obstructionism is one potential motivation, we also suspect Amazon aims to become a/the major provider of sales tax administration services to small businesses. The lower the threshold and the larger the number of small businesses forced to collect sales tax, the greater Amazon's potential new profit channel. Meanwhile, two legal scholars writing for State Tax Notes recently argued the special deals cut by some states to exempt Amazon from sales tax collection are unconstitutional. Amazon isn't shy about exploiting its advantage; the company is generating a firestorm by encouraging customers to exploit physical retailers as showrooms, then purchase from Amazon.
Interested in the broader sales tax dispute? See "Best Resources on State Sales Tax and Reform of Internet Exemption"