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Amazon Cleans Up on Tax Breaks

Newsweek published an opinion piece on Christmas Day, “Why Should New Yorkers Subsidize Amazon?” The author questions the tax breaks New York has given the Washington-based company as incentives to open operations in the state and employ New York residents.

Newsweek said New York is giving Amazon $5 million in tax credits for its New York City office that will employ 500 people and said it had already given $2 million in credits to Amazon for its Brooklyn fashion-photo studio.

“Looking at Amazon as a general retailer rather than a bookseller, consider the disparity in New York government’s treatment of Walmart and Amazon,” it said. “Amazon gets $7 million in taxpayer subsidies. Walmart, on the other hand, is treated like such a pariah that politicians, including Mayor de Blasio, compete to keep it out of New York City.”

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The latest tax break raises issues that come up “whenever government at any level decides to reward a business with special tax treatment,” the author continued.

Amazon has been on an expansion spree to build out its fulfillment network to be closer to the customer, and along the way, it has negotiated with many states and local governments for tax incentives.

But it goes beyond tax breaks – states also want Amazon to collect sales tax for purchases made by their residents, and a few years ago, the online marketplace changed its stance on the issue, using it as a lever in states where it wanted to open a fulfillment center.

In just one example, Amazon entered into an agreement with Connecticut last year, agreeing to collect sales tax there beginning November 1, 2013 while committing to investing $50 million in Connecticut and creating hundreds of new full-time jobs over a two-year period.

In 2011, Econsultancy said the federal legislation Amazon had begun endorsing that requires all online retailers to collect sales tax – whether or not they have a presence – could be bad news for small sellers.

“The reason: while a federal law might, in theory, make collecting local sales tax less painful than if there was no federal law in place, it will still represent the creation of new complexity and regulatory red tape for online retailers.”

In other words, Econsultancy wrote at the time, “if Amazon can’t have its way, other online retailers shouldn’t be able to either.”

The Newsweek opinion piece raises some interesting questions, including whether government entities should enter into deals where they favor one company over another.

And, it asked, “Why should New Yorkers who own or work at Amazon’s competitors such as Barnes & Noble or small independent bookstores be taxed to support their business rival.”

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Ina Steiner

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. Send news tips to ina@ecommercebytes.com.


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