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Home / Business / Does Amazon really pay no taxes? Here's the complicated answer

Does Amazon really pay no taxes? Here's the complicated answer



Democratic presidential candidates have adopted reports that

Amazon.com
Inc.

Do not pay 2018 federal taxes when they push for tax system changes.

A closer look at the Internet giant's tax information over several years paints a more complicated picture: Amazon has paid income tax somewhere, albeit low, probably helped by deductions and incentives related to investment, research, and employee compensation. 19659003] Earlier this week, former vice president Joe Biden noticed the company's tax payments during a campaign stoppage in Iowa this week, saying it should at least pay some fees. He tweeted Thursday: "No company that is making billions of dollars in profits should pay a lower tax rate than firefighters and teachers."

Amazon tweeted back: "We pay every penny we owe. Congress drafted tax laws to encourage companies to reinvest in the US economy. We have… Suppose VP Bids complaint is without tax code, not Amazon." 1

9659003] Sen. Elizabeth Warren (D., Mass.) Quoted Amazon as she proposed a new corporate tax that would cost the company nearly $ 700 million in 2018.

Here are some questions and answers to investigating the company's tax situation.

Did Amazon really pay no fees for 2018?

We can't know. The Amazon tax returns are private, and the financial statements show expenses in form intended for shareholders, not policy makers: It includes accounting measures of taxes that differ from returns.

Why do people say that Amazon did not pay taxes?

By a measurement comparison of the pretax US surplus and the company's "current provision" for the US tax-tax Amazon earned $ 11 billion and had a tax bill of $ 129 million in 2018, and received essentially a net benefit from the tax system.

But the current provision is not the same as the bottom line of the Amazon 2018 return. Instead, the current provision is an accounting measure for the company's near-term tax expense. It is an estimate of the 2018 tax bill plus settlement of previous disputes, changes in previous forecasts and updates to reflect new rules and laws. Amazon's total effective tax rate for 2018 was 11%, including the current provision, but also foreign, state and deferred taxes.

"I will cheerfully acknowledge that [the current provision] is not what we really want to know, but it is also the closest we will see," said Matt Gardner, senior colleagues at the Department of Taxation and Economic Policy, the leftist group whose report if Amazon and other companies drew Democrats attention.

It's also Amazon receiving $ 129 million refund?

Not necessarily. There are indications Amazon paid little or no federal income tax for 2018. Its federal net operating carryback accumulated losses as Offsetting future taxable income growth to $ 627 million at end-2018 from $ 226 million the year before, according to securities deposits, federal tax credit prior accumulated credits offset future taxes increased to $ 1.4 billion from $ 855 million, mainly due to research and Development Credits

There are signs that Amazon has accumulated losses and tax credits is faster than what generated income and tax liability. The law makes it possible to further develop regular tax payments across business cycles and the company's lifetime.

"Because we are in a low-margin industry and invest in innovation and infrastructure, we do not make as much pretax profit as other technology companies, so our taxes are lower," Amazon says in a statement.

So that means Amazon Didn't spend money on income tax in 2018?

No. Although Amazon's current sales number for 2018 was negative for federal taxes, Amazon said it was a $ 1.2 billion revenue tax that year, more than from 2011 to 2016 in combination, the company does not describe how this payment was split between tax years or jurisdictions, such as the United States, states and foreign countries, so, $ 1.2 billion may include California's 2016 income tax or UK payments for 2017.

What's the right way to decide what Amazon actually pays?

It's no right way, and every year is a snapshot. Longer views can help. From 2012 to 2018 report Amazon's $ 25.4 billion in previous US revenue and current federal tax provisions totaling $ 1.9 billion. There is an 8% rate-low, but not zero or negative. Looking back, since 2002, Amazon has achieved $ 27.7 billion in global pretax profits and paid $ 3.6 billion in global cash tax, a 13% tax rate.

It's still a pretty low price. Why is it?

Let's start by investing. Amazon has said it has spent more than $ 160 billion since 2011 on investments, including distribution networks, cloud computing centers and wind and solar parks.

When a company buys depreciable property, such as inventory equipment, it treats the costs differently for tax and financial purposes.

For the accounts, the company records expenses over the life of the asset and does not deduct current profits. For tax purposes, companies can now deduct the full amount less any capital costs, reduce taxable income and thus taxes.

What is it that reduces the Amazon tax rate?

When companies provide employees with limited stock exchange listings, the companies charge for accounting purposes based on estimated value. Tax deductions are not set to compensation vest and employees can take it – and pay personal income tax on it. If a company grants a limited share worth $ 20, it records a $ 20 expense and assumes it will receive a $ 20 tax credit. However, if the stock price rises and it reaches $ 35, the company then takes a tax deduction that is greater than expected.

What are the political consequences?

Democrats use Amazon to argue that companies are paying more. Sen. Warren has a plan to tax profitable companies on their accounting revenue, on top of today's system. While Amazon has teamed up with the Internal Revenue Service over cross-border tax maneuvers, politicians do not accuse the company of doing anything illegal – just offering an example of what they argue to change in the tax law. But today's corporate tax system was designed by Congress to encourage investment and research, and let businesses realize the benefits of early losses when they become profitable. Change that could undermine these goals.

Write to Richard Rubin at richard.rubin@wsj.com


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