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Amazon sues Texas

Game on.

Four months after Texas officials told Amazon.com Inc. that it owes $269 million in uncollected sales taxes, the online retail giant has filed a lawsuit demanding that the comptroller’s office release the audit information it used in arriving at that amount.

The lawsuit, filed Jan. 14 in Travis County District Court, argues that the documents must be made public under the Texas Public Information Act and seeks a court order forcing their release. The suit also seeks recovery of attorneys’ fees and other legal costs.

Amazon and three of its subsidiaries — Amazon.com LLC, Amazon.com.kydc and Amazon Corporate LLC — say they sent letters in September and October to the comptroller’s office requesting “information related to the audit and the assessment.”

Amazon asked the comptroller’s office to explain its basis for the $269 million assessment, but “auditors were not forthcoming with an explanation,” the lawsuit claims.

The comptroller’s office has refused to provide the information, saying it was protected by attorney-client privilege because “the entire file relating to the audit was ‘prepared by and attorney,’ and thus … protected from disclosure,” according to the lawsuit.

A Dec. 16 opinion issued by the Texas attorney general’s office agreed with the comptroller’s office that the documents were protected, according to the lawsuit.

See here, here, and here for some background. Gotta say, I think the state’s refusal to provide documentation is lame, despite the AG’s opinion. I’ll be very interested to see what the courts have to say. More broadly, I hope this focuses a little attention on this issue, which really needs a real resolution. I see no justification for Amazon and other online retailers being exempted from sales taxes. It’s really time for Congress to step in and settle things, though of course the current bunch will never do that. Sooner or later, though, it’s got to be done, and the longer it takes the greater the burden will be on the state and local governments that are losing this needed revenue.

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4 Comments

  1. Ross says:

    I’ll side with Amazon o the issue of knowing the basis for the assessment. It’s ludicrous that the State tries to say “Pay me a bunch of money. No, I’m not telling you why”.

    I’ve thought for a number of years that mail order sales ought to be subject to a Federal 5% sales tax that’s applied to transactions not subject to state sales taxes, with the proceeds sent to the states of the recipients of the orders.

  2. anonymous says:

    There must be more to the story. Taxpayers get copies of their audit, and have access to the audit plan through open records. If anything is sampled or estimated, the taxpayer is notified in writing during the audit with an explanation of the method. Standard operating procedure. Has to be more to the story. You don’t have to sue to get a copy of your own audit.

  3. mary t. says:

    The state is probably throwing out a wild guess and it’s so far off that Amazon is calling them on it. I think the 5% federal tax Ross suggests is extremely reasonable. A tax on interstate internet commerce wouldn’t deter online purchases by the vast majority of people.

  4. […] presume this would also settle the ongoing litigation between Amazon and the state. This has been a long time coming, and I don’t really have […]