In a move that sent Amazon’s shares reeling, President Donald Trump complained on Twitter Thursday that the online retail giant pays “little or no taxes to state & local governments.”
But his attack on the company, ostensibly in defense of brick-and-mortar retailers, was misleading.
Although Amazon had once collected sales tax in only a few states—those in which it had warehouses or offices—it now collects those taxes in all 45 states that have a sales tax.
I have stated my concerns with Amazon long before the Election. Unlike others, they pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!
— Donald J. Trump (@realDonaldTrump) March 29, 2018
Where Trump is correct: Amazon doesn’t collect taxes on behalf of third-party vendors, and it still may not collect some local taxes, giving it an advantage over some traditional retailers, according to the Institute on Taxation and Economic Policy, a think tank.
According to an analysis from the ITEP, the gap between the tax rate that some local tax jurisdictions impose and what Amazon collects can be as much as 7.5 percentage points in Homer, AK., for example.
“This analysis reveals that in seven states (Alabama, Alaska, Idaho, Iowa, Mississippi, New Mexico, and Pennsylvania), Amazon is either not collecting local taxes or is charging a lower tax rate than local retailers,” the ITEP found by entering dozens of shipping addresses into Amazon’s website. Some “localities, however, are not collecting tax from out-of-state or even out-of-town businesses because of problematic restrictions in state or local law.”
Though according to the ITEP, localities and states may have an easier time collecting those taxes after next month, when the Supreme Court is expected to revisit a precedent set by the 1992 Quill vs. Wayfair ruling. That ruling said that retailers must collect sales taxes only in states in which they have a physical presence.
Early Thursday, Deputy Press Secretary Raj Shah added to the President’s tweet during a segment on Fox News’ Fox and Friends.
“Right now there is no internet sales tax,” said Shah, adding his own misdirection about Amazon’s tax collecting. “And as a result companies like Amazon can buy and sell goods without having to pay basic retail taxes that your stores and your convenience stores and all the folks around—when you walk out of the studio over there and grab something, you have to pay. And that puts brick-and-mortar retail stores at a disadvantage.”
Shares of the company fell as much as 6% in trading Thursday, though rebounded by about 1% by the day’s end.
Trump’s interest in Amazon may also be linked to his displeasure with Amazon founder and CEO, Jeff Bezos, who owns of the Washington Post. Unhappy with its reporting, Trump has accused the newspaper of being “phony” and “fake news.”
“Amazon is getting away with murder, tax-wise. (Bezos is) using the Washington Post for power,” Trump said in a May 2016 interview with conservative talk show host Sean Hannity. “So that the politicians in Washington don’t tax Amazon like they should be taxed.”
This isn’t the first time that Amazon’s been in the crosshairs over its tax practices. European governments, in particular, have gone after the e-commerce giant over its corporate incomes taxes. Amazon, for instance, settled a tax dispute with French authorities in early February. While the amount of settlement was not disclosed, France had been seeking nearly 200 million euros, or $250 million. Additionally, the European Union also ordered Amazon to pay $294 million, 250 million euros, to Luxembourg over an “illegal tax advantage.” Italy has also reportedly made similar allegations.
