Skip to comments.Amazon, Texas talk deal: 5,000 jobs in exchange for exmption on collecting sales tax
Posted on 06/21/2011 2:59:48 PM PDT by DeaconBenjamin
Amazon.com is negotiating a deal with Texas officials that would see the online retail giant promise to create more than 5,000 jobs and invest $300 million in the state over the next three years.
In exchange, lawmakers would have to grant Amazon a 4½-year exemption from collecting tax on online sales in Texas, according to documents obtained by the American-Statesman.
The proposal would be attached to Senate Bill 1, the fiscal matters bill being debated in the Legislature's special session. SB 1 is a must-pass measure essential to balancing the state's 2012-13 budget.
The American-Statesman obtained a draft copy of the conference committee report that would add the language to SB 1, in an action that critics called a Hail Mary pass for Amazon in its dispute with Texas over whether it should have to collect sales taxes on Texas transactions.
The proposal does not name Amazon and would apply to any retailer able to create 5,000 jobs and invest $300 million over the next three years. It would not exempt Amazon or any other affected retailer from paying property or franchise taxes.
The proposal defines a "new job" as one that "is created at the time a new distribution center is initially staffed." It also requires that the new jobs must include "comprehensive health plan coverage."
The proposal says if the retailer doesn't meet the job and investment goals, it would forfeit its sales tax collection exemption. It does not spell out how many facilities Amazon would be expected to build in Texas, or where those facilities might go.
Mark Miner, spokesman for Gov. Rick Perry, confirmed Monday that the governor's office has seen a draft of the proposed legislative language.
"The governor is always working to create jobs in Texas, and he supports any kind of legislation that would accomplish that goal," Miner said. "His focus has always been on the Texas economy and creating jobs in this state. He's always talking to companies in Texas that want to expand, or companies outside of Texas who might want to locate here."
Amazon officials declined to comment on the proposal.
Paul Misener, Amazon's vice president of global public policy, said in an e-mailed statement only that Amazon would "support legislation, similar to law enacted elsewhere, that would allow us to bring Texas new jobs and investment."
Bernard Weinstein, an economist at the Cox School of Business at Southern Methodist University, said that if Amazon does create 5,000 jobs and invest $300 million in Texas in the next three years, "the additional state and local revenues generated by this economic activity should far exceed the foregone sales taxes."
However, Weinstein said he was concerned that the proposal's sales tax exemption provisions "may put existing storefront retailers both in Texas and elsewhere at a competitive disadvantage. And Amazon may soon be the largest retailer in America."
The proposed exemption on collecting sales tax drew criticism from traditional retailers. There are about 1,500 brick-and-mortar retailers in the state from mom-and-pop stores to Walmart that employ nearly 2 million people, according to the Texas Retailers Association.
The proposal amounts to a Hail Mary attempt by Amazon to strike a last-minute deal, said Ronnie Volkening, president and CEO of the association.
"The Texas Retailers Association certainly opposes this eleventh-hour proposal, and we hope and believe the Texas Legislature will continue to stand with Texas main street retailers," Volkening said.
Amazon recently struck a similar deal in South Carolina. Legislators there approved a 4½-year exemption on collecting sales tax in exchange for Amazon creating at least 2,000 jobs and investing at least $125 million through 2013.
The promised average annual salary for those jobs is about $33,000, according to documents filed with the South Carolina Coordinating Council for Economic Development.
Dick Lavine of the Center for Public Policy Priorities, which lobbies on behalf of low-income Texans, questioned whether the jobs Amazon proposes to bring to the state are the types of jobs Texas should be pursuing.
"I understand we need jobs at all wage levels, but what we're looking for is people who write books, not people who sell books and move them around," Lavine said. "Warehouse jobs are not the way to build a 21st century economy."
The proposal is the latest twist in Texas' standoff with the world's largest online retailer over online sales taxes. Last September, Comptroller Susan Combs sent Amazon a notice that it owed $269 million in sales taxes it failed to collect from 2005 to 2009.
The latest legislative proposal makes no mention of forgiving Amazon that bill, which Amazon is appealing.
Combs has said Amazon is required to collect sales taxes on Texas transactions because it was operating a distribution center in Irving, constituting a physical presence.
Under a 1992 U.S. Supreme Court decision, a company with a physical presence in a state can potentially be required to collect sales tax there, legal experts say.
Seattle-based Amazon, which had $34 billion in sales in 2010, has consistently opposed collecting taxes. That has drawn fire from state governments facing budget shortfalls and from traditional retailers, who say online sellers essentially give customers an automatic discount when they don't collect taxes.
Combs has estimated the state loses $600 million a year from untaxed online sales.
After Combs' assessment, Amazon said it would close the Irving facility, eliminating 119 jobs. Amazon also said it was scrapping plans to expand in Texas.
Perry criticized Combs for her pursuit of Amazon and said in February that he hoped legislators would try to keep Amazon from leaving.
Instead, the Legislature to this point has gone in a different direction.
During the regular session, the House and Senate passed a measure by Rep. John Otto, R-Dayton, that tightens the state's rules on when online retailers such as Amazon must collect sales tax. House Bill 2403 spells out that a distribution center or warehouse in the state qualifies as a physical presence, as does having a "substantial ownership interest" in a subsidiary operating in the state.
Perry vetoed that measure, but the bill's identical language was attached to SB 1. On June 9, the House defeated an amendment by Rep. Bill Zedler, R-Arlington, to strip the language from SB 1.
James Henson, director of the Texas Politics Project at the University of Texas, said the state's continued efforts to keep Amazon operating here show "a mixture of politics and policy."
"Pretty clearly, the governor didn't want to alienate Amazon or any other high-tech companies," Henson said. "I think it's consistent with a couple of things he's saying that he's a high-tech guy trying to build business and jobs with an eye toward the future. It sends a message to the national business community that he is going to make hard choices for those he sides with."
Sounds like extortion.
Really ... how? Sounds more like Capitalism. They don't have to go along if they do not feel it's in their best interests.
maybe they should set up shop in California or Michigan. Texas already has enough jobs.
How about smart on both sides.
Let's say I'm starting a new business. I go to you and tell you "Invest in my business or I will steal your car."
You don't HAVE to invest in my business, but you may just be PERSUADED to by the threat of the loss of your car. That is not capitalism. It is extortion.
I don’t consider it extortion, but I also don’t consider it appropriate. I would prefer that no states offer special perks to some businesses and not to others. However, in the real world, with most states doing the same thing, I’ll cheer for TX for beating California at their own game, offering both a good business deal and the opportunity to live in the free state of Texas.
Sounds interesting. Better than anything the fed.gov proposes. Could we sell regular light bulbs to the other 49 states thru Amazon? ;o)
Hardly. The derivative economic benefit of 5,000 jobs will more than offset any loss in corporate tax revenue.
If you shop in Amazon.com or ebay.com through business selling their wares, and reside in the same state that your purchase comes from, your still subject to the local sales tax rates.
But if your a resident of say Washington state and purchasing the item on amazon.com through a business in Texas, you aren’t subject to Texas sales tax. Makes sense, yes?
It always says it very clearly in the buy it now type purchases & auctions that if your a resident of the state your purchasing the product in, sales tax will apply. This usually applies to new and manufacturer refurbished/demo items (B stock items, etc...). Local businesses that have to charge sales tax under state law.
I believe they want to stick their parasitic tax fangs in the sale of used items by individuals and sales to out of state people. Those types of transactions, you don’t pay sales taxes on. The ultimate double tax since whenever the item was bought new, sales tax was probably paid for it depending on state of origin.
Yes, it’s extortion. But that’s what happens when you have state governments that can’t stop spending more than they generate, and thus go looking for new streams of taxes. Especially during recessionary times like now.
Nope. Faulty comparison. No one`s taking anything from Texas if they don`t agree to the deal. The deal simply doesn`t happen.
No, it sounds like fascism. Amazon wants to be exempted from the law while Amazon’s competitors aren’t. Similar to the health care shenanigans, instead of fighting to stop the internet from being taxed, Amazon says “Hey, no problem, tax everyone else the internet. Just exempt us.”
That’s the kind of ‘capitalism’ Mussolini would have loved.
Yeah, keep it all among the big guys and make the little guy get hammered by taxes so he can never get as big as the ‘big guys’, therefore locking him out of competing with them. Great idea.
So collecting sales tax online is heralded as a good thing?
Terrible deal for Amazon.
The little guy is already getting hammered by taxes.
some little guys don’t want to be big guys.
you’re solution is what ? haven’t seen it in this thread.
Unemployment in Texas is 8%.
Create jobs with a trade off ? in a heartbeat.
It’s just business. Funny that so many people have a problem with that.
I have something the other guy wants, he has something I want, we trade. It call barter or business.
Oh, no, we can't do that!!! We need to have our keepers in government supplied with as much money as they possibly can get!!! They know so much better than the rest of us what to do with our money!
The little guy is already getting hammered by taxes. some little guys dont want to be big guys.
So, McDonalds got a waver. So what? A bunch of smaller companies just LOVE paying more and dealing with onerous regulations in order to stay in business. At least someone got a waver, right? BARF.
When one of you has the regulatory power of government, what it's called is fascism.
Did you feel that way about the Obamacare waivers?
Ouch. Stop making such good points.
I don’t think this is much different than Indiana, Wisconsin, and other states trying to lure business away from Illinois after their tax hike with tax breaks and incentives.
In this case, Texas is trying to keep Amazon after they announced their decision to quit their distribution and warehouses in Texas in Feb. after the Comptroller handed them a $269 million bill for uncollected sales tax and tried to order them to collect sales tax.
Amazon already left Rhode Island, Hawaii, and N. Carolina in ‘09 over the same disagreement.
Sounds better than New York State they gave some tech company a bunch of money out right and got nothing... they went belly up..
Warehouse jobs are not the way to build a 21st century economy.”
Lavine is an idiot IMO to suggest that we need companies who employ writers of books rather than movers of books. Apparently he hasn’t looked at the job qualifications of many of the people who have no jobs. Seems to me like these are exactly the kinds of jobs that could be filled quickly.
Wrong. The threat is to tax Amazon if they do not agree to the deal.
Should be 4½ years off of any sales generated by each 5 positions and 300k invested.
Scale it down to less then amazon size.
The consumer of the finished product pays a tax.
Retailers forward that collected tax payment to the state.
If Amazon doesn't want to collect and forward state and local sales taxes for products sold in Texas, to Texas consumers, it is easily done.
Amazon can simply refrain from opening an office in Texas!
When Texas exempts Amazon from collecting Texas retail sales taxes, Texas is violating both the spirit and the letter of all federal laws regarding interstate commerce.
BTW, in an effort at full disclosure,let it be clear that I refuse to buy any books from Amazon.
I love my local book retailers, and much prefer to pay an open sales tax, instead of an Internet dealers tax evading shipping and handling charge.
But that's just me....
I like the way you think.
Local areas...my town specific...created TIF areas.
It does bring in business and employment. The downside, is...when the 5 year period is up, the bigger firms pull out looking for another TIF area.
Really?! Sounds to me like win-win for any company that will meet the threshold set forth here and for the Texas economy. Sounds like capitalism at work.
You are quite correct. This is a good move by and for Texas.
Sounds good to me. 5,000 new jobs would bring a lot of revenue to the state. If other states will not create business incentives, then that is *their* problem.
Looks like Amazon and Texas consumers lost. I just got dinged for sales tax on two kindle purchases.