Amazon to Texas: fine, we’ll close the distribution center

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Amazon is not a stranger to a tax fight, and looks like that fight has just escalated. Amazon’s VP of Operations has just sent a letter, announcing closing of Dallas suburb fulfillment center because the state of Texas demanded $269 million in uncollected sales taxes from 2005 till 2009 plus penalties and interest (you know, Texas does have a budget deficit, because schools and health care eat as much money as you throw at them).

Investigation has been going on for a while, and Amazon claimed that Irving center is technically not owned by them. It’s owned by a separate legal entity, that just happens to have the same address as Amazon, and gets contracted by them to deliver some items to people in Texas. Sounds kinda fishy, but I bet Amazon and Texas will not settle this out of court.

In the meantime, starting from April 12 that particular warehouse will close, and probably move to Louisiana, so orders for customers in Texas won’t have to travel very far, while pesky issue of sales tax will kinda vanish on the ground that they won’t have even indirect presence in the state.

Given that before e-retailer was thinking about significantly expanding the warehouse and hire about a thousand people this is not going to end well for Texas. More than a thousand new jobs and whatever was their current workforce will be lost (anyone who’s willing to relocate will be given a chance to transfer to another fulfillment center), property taxes, expenses, utilities, all of that will be gone.

Another question is how exactly did comptroller come up with that number, as Amazon wasn’t reporting any Texas sales. And if there is a chance of audit, would the amount be accurate or inflated.

The Alliance for Main Street Fairness — the group that advocates for all e-tailers to collect local sales taxes even when they have zero presence in state is all pouty-lipped about closing of the distribution center. Apparently they think that Amazon should have just started to collect the sales tax instead of avoiding it, in the name of “helping hardworking families” (strange, I thought that hardworking families usually aren’t helped by being charged a sales tax?) Mostly because it would give them a chance to pressure other online stores to collect sales tax.

While I think in this case Amazon is in wrong (have a distribution center? charge sales tax) I do support their decision to close the branch in the name of regulatory compliance.

*Update* A total of 119 jobs will be lost at the warehouse.

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