Bad news for Amazon over the weekend. The Tokyo Regional Taxation Bureau slapped Amazon’s affiliated unit “Amazon.com International Sales” with a $119 million tax bill. Japanese newspaper Asahi Shimbun reported yesterday [JP], the subsidiary is accused of failing to report income in Japan between 2003 and 2005.
Japanese tax authorities started making these allegations as early as 2007 but now seem ready to pull out the hammer. The way Amazon operated so far is that every time Japanese customers buy something from Amazon’s Japanese website, they legally make contracts of purchase with Amazon offices in the US. The problem for the Japanese taxation bureau: These sales were booked and taxed in the US, even though Amazon operates two companies in Japan, Amazon Japan and Amazon Japan Logistics. (Click here for more background on Amazon’s position in Japan.)
Reportedly, income of several hundred of millions of dollars wasn’t taxed in Japan under the U.S.-Japan tax treaty, as demanded by local tax authorities now. Amazon is currently in talks with authorities to invalidate the accusations.
Amazon has a history of getting in trouble for the way they deal with taxes. In its 2008 annual report [PDF] released in April this year, Amazon.com disclosed that even more trouble may be on the horizon, especially in Japan (page 73):
We are under examination, or may be subject to examination, in the following major jurisdictions for the years specified: Kentucky for 2004 through 2008, France for 2005 through 2008, Germany for 2003 through 2008, Luxembourg for 2003 through 2008, and the United Kingdom for 2003 through 2008.
In addition, in 2007, Japanese tax authorities assessed income tax, including penalties and interest, of approximately $119 million against one of our U.S. subsidiaries for the years 2003 through 2005. We believe that these claims are without merit and are disputing the assessment. Further proceedings on the assessment will be stayed during negotiations between U.S. and Japanese authorities over the double taxation issues the assessment raises, and we have provided bank guarantees to suspend enforcement of the assessment. We also may be subject to income tax examination by Japanese tax authorities for 2006 through 2008.
(emphasis supplied)
But even the $119 million tax bill in Japan isn’t peanuts, even for Amazon (provided they really end up having to pay it): Their operating income, for example, stood at $842 million last year for the Amazon group as a whole, with the Japanese subsidiary estimated to having contributed 10% of that number. We’ll stay tuned.
Maybe Amazon should collect sales tax in California, too?
Lab 126, the Amazon.com company that is responsible for the Kindle, located in Cupertino, California.
The Kindle was designed in California, by Californians. Sold to Californians. Used in California. To buy books, some of which were written in California, by other Californians.
Yet, no tax is paid by Californians, for Amazon.com purchases.
http://www.lab126.com/
Amazon seems to be playing fast and loose with the term “subsidiary” in California, as elsewhere…
What about A9 based in Palo Alto, CA? Also an Amazon company. http://www.a9.com/-/company/
Subsidiary != Amazon itself being located in Cali. A subsididary is a separate company.
Amazon should pay Cali taxes b/c it has minimum contacts with Cali, specifically, that it chooses to do business with Californians through an interactive website that is more than a merely passive catalog. Amazon’s been relying on the use-tax cases for too long; if this goes to SCOTUS, it’s likely that they will find against Amazon.
I wonder if, in the end, they’ll think that all their schemes to try avoid tax (not illegal) are worth it. Look at all the countries they’re under investigation in! The cost of paying it back & any legal fees/fines, I wonder if it ends up costing them more money than it would have to just pay the taxes you need.
Clearly when they were looking for accountants to minimize their tax base, they got pretty bad ones.
Surprised Amazon didn’t also mention Texas:
May 13, 2008 6:29 AM PDT
“Texas to force Amazon into sales tax collection?”
http://www.dall...on.378aef9.html
http://news.cne...-9942692-7.html
Bad economy but great tax income
nice try
ehh Amazon will find a way around it. This just coming up because the economy is shit right now and the local governments could use a boost of over 100 million dollars.
http://ziggytek.com/
I blame the government, not Amazon. Spending too much damn money. It’s time for some fiscal (and tax) restraint.
If you’re reading this, you owe me a 10% tax on your income for last week.
You’re not going to pay it? Just because I can’t collect and am not pointing a gun at your head?
@ Tax Man: my understanding of the law regarding sales tax was that if you sold merchandise in a brick & mortar location in California, you were subject to CA sales tax. However if the business, no matter where it’s HQ’d – be it Cupertino or Camden – has no physical retail presence in the state then CA has no claim on sales tax because the purchase was not conducted “in” CA, it was conducted via the Interwebs.
No whether or not CA tries to do away with that law, considering the Carolinas and several other states are trying to say that web affiliates are somehow equivalent to a retail presence, will be a different matter.
CA has to close the gap somehow…
Clearly when they were looking for accountants to minimize their tax base, they got bad ones
Not good news for AMZN. Everybody has their hand out now for tax collections these days…
JP has lots of Money .Don’t care about Taxes .
I don’t believe this!!!!