Amazon Bargains Its Way Out of Paying Taxes
The company was able to win a temporary reprieve from collecting California state sales tax until September 2012 in exchange for agreeing to create at least 10,000 full-time jobs and hire 25,000 seasonal employees within the state's borders by 2015. This compares with the original offer to create 7,000 full-time jobs in exchange for a reprieve until 2014. The state will miss out on an estimated $200 million in tax revenue over the next year.
The September 2012 deadline would be in effect in the absence of any federal law to govern the issue. Amazon Vice President Paul Misener said, "The sales tax issue must be resolved in Congress. It's the appropriate way and the only way California will be able to collect all of the sales tax owed by customers."
California Gov. Jerry Brown signed the compromised legislation into law last Friday with Amazon's blessings. The deal even won support from the California Retailers Association, which has been Amazon's biggest opponent throughout the tax battle, contending that Amazon has an unfair advantage over brick-and-mortar retailers in the organization, such as Wal-Mart (NYS: WMT) .
Thousands of Amazon affiliates took major hits in revenue -- some lost more than half of their income -- when Amazon cut ties to dodge the duty. With the concessions, many of the affiliates will be able to get back into business.
It will be good for Amazon to put this episode behind it. Expensive and prolonged legal battles typically only drain everyone involved. As a frequent Amazon shopper, I'm glad the company sticks up for me when it comes to paying the taxman, but it's never been a deciding factor for why I avoid big-box retailers like Best Buy (NYS: BBY) like an overpriced plague.
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