Amazon says it will close its Irving distribution center April 12th, rather than pay state sales taxes. Amazon is also canceling plans for additional operations in Texas that would have hired as many as 1,000 new workers and bring tens of millions of investment dollars into the state.
Texas contends that a physical presence in the state means you owe sales tax. Texas has portrayed itself as a business friendly state. Is this a strike against that image? Betsy Gelb is professor of Marketing and Entrepreneurship at Bauer College of Business at the University of Houston.
"I would think not. The image of Texas as business friendly is so well-ingrained by tax policies over the years, and just by comparing, for example, the fact that we have no income tax to what other states have—this is just going to be a blip."
Congress enacted the Internet Tax Freedom Act in 1998, effectively banning sales taxes on internet sales except for companies with operations in a particular state or city, which requires sales tax on purchases by citizens in that jurisdiction. But a single online purchase can involve activities in several different states.
"Well, that's right, but I can understand easily why the government of the state of Texas would say 'you have s distribution center here, you're doing business in Texas.'"
Amazon has cut ties with Rhode Island, North Carolina, New York and Hawaii over the issue.