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This is what you need to know if you are running an e-commerce startup: Do companies pay taxes?

Amazon did not pay federal income taxes in 2017 and 2018

While the company does not pay federal income taxes in the United States, it reported “tax payments” for US $ 1.2 billion last year and 957 million in 2017. Since the figures are not broken down geographically, it is difficult to know which government received that money.

What are we checking?

Congresswoman Alexandria Ocasio Cortez, tweeted  about press reports about an investigation by the Institute of Taxation and Economic Policy (ITEP) that showed that Amazon did not pay income taxes in the United States for two years

“Why do corporations that do not contribute anything to the coffers should be in a position to take billions of dollars from people?” Ocasio asked on Twitter.

An article in Fortune magazine (2) indicated that Amazon did not pay federal income taxes in 2017 and 2018 even though their domestic earnings doubled to more than $ 11 billion in that period.

Ocasio said on Twitter that this meant “0 dollars” for schools, firefighters, infrastructure, research and medical care.

What do we know?

Amazon reported last month that it should not pay federal income taxes in the United States for 2017 and 2018, and that, in fact, it should receive reimbursements from the federal government for those years.

And its pre-tax income in the United States rose 100% to US $ 11.2 billion, the company said in its official documents (3). Their tax burden was lower due to deductions for compensation based on stocks and assets that are depreciating.

As a result of the 2017 tax cuts, which reduced US corporate tax rates to 21% from a previous 35%, Amazon also calculated that it would receive a profit of US $ 789 million.

But that does not mean that you have not paid any taxes.

Amazon is paying $ 0 in taxes on $ 11 + billion in profit. $ 0 for schools.

$ 0 for firefighters.

$ 0 for infrastructure.

$ 0 for research and healthcare. Why should corporations that contribute nothing to the pot in a position to take billions from the public? https://t.co/IdsuKaVOTU – Alexandria Ocasio-Cortez (@AOC) February 14, 2019

By 2018, he reported that he owed US $ 322 million in taxes to the US state governments and another US $ 563 million in the rest of the world.

Under a separate accounting category, Amazon reported “cash taxes paid,” or the amount of funds actually paid in taxes, of US $ 1.2 billion last year and US $ 957 million in 2017. But these figures are not broken down geographically, so it is not possible to know which government received the cash.

What can be concluded?

The central claims of ITEP (4) are backed by Amazon’s own reports. However, more context may be necessary to understand the situation.

The company pays some taxes but has generated controversy in the United States and throughout the Atlantic to find ways to reduce its general tax burden, which is common among many companies.

For state taxes, Amazon’s tax burden is around 2.9%, according to Matt Gardner, an ITEP member who prepared the Amazon report.

“That’s certainly bigger than zero,” he said.

And Sabuhi Sardarli, a professor of finance at Kansas State University who has investigated corporate tax evasion, said Amazon has set aside funds for possible higher tax payments in the future.

“In other words, focusing on Amazon’s recent tax burden may not show the full picture,” he said.

Amazon said it had invested more than US $ 160 billion in the United States since 2011, building a complex distribution network, as well as a cloud computing infrastructure.

“Amazon pays all the taxes we have to pay in the United States and in all the countries where we operate, including the payment of US $ 2 thousand 600 million in corporate taxes and US $ 3 thousand 400 million in tax expenditures in the last three years,” said one spokesman.

“The corporate tax is based on profits, not on revenues, and our earnings are still modest, given that it is a highly competitive, low margin business and our strong investment continues”.

Published inE-commerce

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