Three years on, a much-watched deal to settle a sales tax collection dispute between Texas and Amazon.com appears to have benefited both sides...
Three years on, a much-watched deal to settle a sales tax collection dispute between Texas and Amazon.com appears to have benefited both sides, according to an analysis published Sunday by The Austin American-Statesman.
The agreement saw the state drop its demand that the e-commerce giant pay $269 million in back sales taxes in exchange for Amazon agreeing to collect state sales taxes beginning July 1, 2012. The Seattle-based firm also got incentives to create jobs and make capital investments statewide.
The Statesman used Texas comptroller’s office data to show that collecting sales taxes from Texas residents on Amazon purchases added hundreds of millions of dollars to state coffers. Meanwhile, Amazon told state officials this summer that it had 3,500-plus Texas employees and had made $300 million in capital investment statewide through the end of last year – exceeding benchmarks set as part of the agreement.
Comptroller Glen Hegar, who wasn’t in office when the deal was struck, is nonetheless praising it.
”I believe Texas benefited from the deal with Amazon. The agreement meant Amazon began collecting and remitting taxes to the state, which the comptroller’s office felt were legally due,” Hegar said. ”The agreement also allowed Amazon to start building warehouses and to greatly expand their physical presence in the state, which was largely beneficial to the economy.”
The 2012 agreement, reached under then-Comptroller Susan Combs, ended two-plus years of back tax battles between Texas and Amazon and also saw the company offer an ”immaterial payment” to settle the state’s complaint.
Since July 2012, sales tax revenue in Amazon’s sector has gone up more than $325 million. State law prohibits the comptroller’s office from releasing sales tax collections by individual companies, but since Amazon is the world’s largest online retailer, its sales in Texas likely constitute a significant portion of that increase.
The spat began in September 2010, when Combs ordered the company to pay $269 million for uncollected sales taxes from 2005 to 2009.
Amazon responded by threatening to close a facility it operated in Irving, eliminating 119 jobs and shutting Texas out of future expansion plans. The company had long opposed collecting taxes, though it had reached a previous agreement with Nevada that delayed its sales tax collections there until 2014.
When Texas struck its agreement with the firm, Combs called it ”the best deal in the United States,” because while other states were waiting years to collect the tax, Texas only waited 60 days.
Michael Mazerov, senior fellow with Washington, D.C.-based Center on Budget and Policy Priorities, called the Texas-Amazon agreement a national game-changer.
It ”completely turned the tide nationally in terms of how Amazon dealt with this issue,” Mazerov said.
In addition to collecting sales taxes, the deal mandated Amazon achieving hiring and investment benchmarks by the end of 2014.
In a May 7 letter to the comptroller’s office, Paul Misener, Amazon’s vice president for global public policy, wrote that the company had now ”satisfied the capital investment and job creation requirements as agreed to in the . agreement signed April 24, 2012.”
Mazerov says for Amazon too, the agreement was smart: ”They got rid of a big potential tax liability as a reward to do what they had very good reasons to do, which is keep warehouses in Texas.”