How Amazon Dances Around Taxes So You Can Too

Amazon was almost founded on an Indian reservation, so it'd be immune to taxes. Fifteen years later, it's still outmaneuvering sales taxes so we don't have pay them either.

With free shipping if you're patient and no sales tax in most states, Amazon can undercut almost anybody by at least 5 percent—I know it's why I buy a ton of stuff from Amazon. The problem Best Buy—and every other brick & mortar store—has is that if you have a physical presence in a state, you have to to collect sales taxes. (Theoretically, we're supposed to calculate the taxes on stuff we buy online, and send it to the state ourselves.) Knowing not charging sales tax is a huge competitive advantage, Amazon studiously avoids them.

For instance, the entire reason it was founded in Washington, not California, was so it didn't have to charge CA residents sales taxes. And it only charges sales tax in 6 states (like Kansas) despite having some kind of presence in 14 of them, by putting portions of its business under wholly owned subsidiaries so it doesn't have to collect tax for them. In NY, it's still fighting the "Amazon tax" bill forcing it to collect tax in NY.

What's funny is that Netflix actually does charge sales tax—its discs count as a physical presence in every state, which seems utterly perverse—but rolls it into the general cost of your subscription. Given that Amazon is a $20 billion-a-year internet monolith and state governments could sure use the cash, they'll wake up to the whole internet thing eventually, so enjoy that 5 percent freebie while it lasts. I sure am! [NYT]