Amazon’s Absent Altruism (Part III of IV)

By now, hopefully readers are familiar with Amazon and its business practices. If not, I recommend reading the previous two installments in this series. This post will examine Amazon’s relationships with local, state, and federal government(s) and will be the last one in which new information about Amazon is presented (the final post will address my thoughts on how America and Americans should address the issues I have previously outlined). In all fairness, the issues this post raises are often not exclusive to Amazon, nor even to e-commerce. However, the relationships that large corporations (including Amazon) have formed with government in America are part of the problem and need to be addressed in any comprehensive analysis of Amazon.

Throughout its existence, Amazon has carefully followed the letter of the law to maximize its revenue and minimize its contribution to governments.

In 1992, the Supreme Court ruled that retailers were required to collect sales tax only if they had a physical presence in the state where the purchase occurred (Qiu). (The simple explanation of the decision is that states cannot tax interstate trade, so a company that physically exists only in one state can only be taxed in that state.) Amazon used this ruling to collect sales taxes in as few states as possible. As recently as 2012, Amazon collected sales tax in only five states (Qiu). As it gained capital and expanded its distribution network, Amazon was forced to charge tax in more and more states. By 2016, Amazon collected sales tax in 29 states. April of 2017 was the first month Amazon collected sales taxes in all states that had one (although it did not have a physical presence in all of those states) (Qiu).

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A map of the places Amazon was required to collect sales tax in 2013         Photo Credit: West Virginia Center on Budget and Policy

Not collecting sales tax enabled Amazon to charge even lower prices than it already was, making it difficult for brick-and-mortar businesses to compete. However, in South Dakota v. Wayfair, Inc. (2018), the court reversed the 1992 ruling, requiring online businesses to collect sales tax. Interestingly, this decision also probably worked in favor of Amazon, as it prevented any other company from taking advantage of the strategy Amazon used to grow to its current size (Melugin). Amazon, in fact, came out in support of mandated sales tax collection.

Sales tax, however, is not the only tax Amazon has avoided. Amazon managed to pay taxes (including federal, state, local, and foreign) at a rate of around 13 percent from 2007 to 2015, less than half of the average tax rate of companies in the S&P 500 (26.9 percent) (Qiu). Indeed, in 2017, Amazon made $5.6 billion in profit and paid zero federal income tax. Instead, the company estimated it would receive a $137 million refund (Tobias).

By 2018 filings, the new tax law passed last year which cut corporate income tax from 35 to 21 percent will be in effect, making it less likely Amazon will pay any more (and, in fact, could even gain some more) in taxes. The law also includes a stipulation for deferred taxes, allowing companies to pay them at the new tax rate. That alone will save Amazon $789 million (Tobias). Amazon is not the only company to take advantage of these tax breaks, and the criticism in this post is less about Amazon and more about a problematic tax structure.

At a more local level Amazon is currently deciding where to open up a second headquarters, a project that theoretically promises 50,000 jobs and a $5 billion investment into whatever location Amazon chooses (Dastin). Eager to secure the project, cities and states around the country began making pitches for their respective locations over the past year or so. Included in these pitches was often some monetary reward in the form of tax cuts or credits. New Jersey, for example, offered $7 billion in credits if the company located itself in Newark (Dastin).

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Amazon’s first headquarters in Seattle, WA     Photo Credit: kiewic

Amazon has already received around $1 billion in incentives in building 95 fulfillment centers across the country, as local and state governments hoped for economic stimulation from the business (Schouten). However, their gamble seems not to have paid off, as a study by the Economic Policy Institute shows no overall increase in employment in markets where distribution centers were established (Schouten). In fairness, the headquarters would be a much larger operation and would bring higher-paying jobs with it, but some economists suggest that investing in education and infrastructure are nevertheless the most reliable stimulant of local economies (Schouten). In fact, recent studies suggest that local start-ups consistently produce more job growth than the arrival of a large corporation (Casselman).

For the most part, Amazon cannot be directly blamed for the competition it causes, as the company does not force cities to offer it monetary persuasion. In fact, some studies suggest companies rarely base decisions on incentives, but simply take what they can get at whatever place they selected based on other criteria (Casselman).

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The 20 finalists for Amazon’s “HQ2”                                   Photo Credit: CNBC

However, Amazon also goes out of its way to create a situation the lends itself to competitive betting. While other companies such as Apple waited to announce their plans for new headquarters until they had significantly narrowed its list, Amazon–mirroring its tooth-and-nail work environment–set up a veritable arena for competitive bidding (Nellis). It is important to note that this practice, like everything else covered in this section, is perfectly within the confines of the law.

Amazon and businesses like it are doing what capitalistic theory predicts: they are taking advantage of every opportunity to maximize profits. Either Americans have to change corporate mentalities to prioritize the general good over another tax deduction or politicians need to rethink a tax structure which allows massive corporations to get out of taxes.

Come back next week for the final post in this series where I offer my solutions (or, at least, the solutions that I have read that make the most sense to me) in regards to Amazon. As usual, like and share the post! Comment on what I’ve written and/or share your thoughts on how we might go about changing Amazon or regulation or anything to address the issues I’ve raised (or, conversely, why it would be better to refute these few posts and stick with Amazon).

Happy early Bastille Day!


Works Cited

Casselman, Ben. “Promising Billions to Amazon: Is It a Good Deal for Cities?” The New York Times26 Jan. 2018,

Dastin, Jeffrey. “Billions in tax breaks offered to Amazon for second headquarters.” Reuters, 19 Oct. 2017,

Melugin, Jessica. “How Amazon wins if internet sales tax goes into effect.” CNBC, 3 April 2018,

Nellis, Stephen. “Apple says it will decide new campus site without an auction.” Reuters, 18 Jan. 2018,

Qiu, Linda. “Does Amazon Pay Taxes? Contrary to Trump Tweet, Yes.” The New York Times, 16 Aug. 2017,

Schouten, Carl. “Amazon’s $1 billion in tax breaks: Does it pay off for cities?” CBS News, 5 Feb. 2018,

Tobias, Manuela. “Bernie Sanders says Amazon paid no federal income tax in 2017. He’s right.” Politifact, 3 May 2018,


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