May 21, 2012

#Amazon to start sales tax fight?

OK, for the past few years, here in Texas and elsewhere, states have been trying to get Amazon, wherever it has a shipping or packaging center, to cough up sales taxes. And, Amazon has steadfastly resisted.

But, recently, deals have been made and cut.

However, what’s happening in California shows that silver clouds may have leaden linings for governments, and certainly for citizens.

Here's the basics:
As part of a pact reached last year with state lawmakers, some online retailers agreed to begin collecting sales taxes this fall. About half of the projected $316 million raised in the first full year is expected to come from merchandise sold by Amazon, which is also setting up two California fulfillment centers that will employ at least 1,000 workers each.

San Bernardino and Patterson, where the centers will be located, will gain not only jobs but also a tax bonanza: Sales to Amazon customers throughout California will be deemed to take place there, so all the sales tax earmarked for local government operations will go to those two cities. It's a windfall so lucrative — about $8 million a year initially for each city — that local officials are preparing to give Amazon the lion's share of their take as a reward for setting up shop there.
OK, picture that happening in Texas.

California, like Texas, has localities having about 10 percent of the total sales tax "bite." 

But ... Texas, and most other Southern states, have one additional angle, at least as an option, at the municipal level.

The old economic development tax. AND, incentive funds from said tax, while ultimately approved by a city council, get preliminary approval from an appointed economic development corporation, one usually controlled by the council.

Can you see where I'm headed?

Especially if Texas courts rule that all Amazon sales from a "fulfillment center" or whatever in Texas are from that point, Amazon's got huge incentive to lobby for economic development funds, knowing that cities are going to get a local sales tax gravy train, and fight for it.

And, Amazon would therefore also have huge incentive to intervene in local council elections. And, to make sure candidates stay bought, etc.

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