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No Amazon HQ2 for Houston

Never really expected that we’d be a top contender, to be honest.

Amazon ruled out Houston as a candidate for its $5 billion second headquarters on Thursday, delivering a blow to local leaders who had hoped to lure the Seattle tech giant to a four-mile stretch between downtown and the Texas Medical Center.

The largest U.S. online retailer whittled down more than 200 proposals from North America cities to just 20, eliminating Houston but keeping the city’s longtime rivals Austin and Dallas on its short list.

Amazon’s decision marks a setback for local leaders including the Greater Houston Partnership, which led an effort last fall to pitch the city as an attractive market for the company to set down stakes.

“I believe this is a wake-up call for Houston,” GHP CEO Bob Harvey said in a statement. “While there has been growing momentum in the innovation space over the last couple of years, this is a clear indication that we have much more work to do as a region to grow our digital economy.”

Houston Mayor Sylvester Turner called Amazon’s decision ” disappointing and heartbreaking.:

But, he added, “It serves as a wake-up call that we must move at a much quicker pace. The city is well positioned, but it’s also is an indication that there is a lot of work that still needs to be done.”


In his statement Thursday, Harvey said Houston should focus on developing the Innovation Corridor and its technology sector further. He also said Houston should move forward with the proposed Houston Data Science Institute, a data center recently announced by the University of Houston.

“While we are the number one market in the country for STEM talent, we need to bolster our pipeline of digital tech talent that is relevant to tomorrow’s digital economy,” Harvey said. “This means working with our higher education partners across the region to develop and invest in programs that will produce the talent we need to succeed.”

But economists warned that Houston would rank low on Amazon’s wish list in the nationwide bidding war for a campus that could bring 50,000 jobs, saying the city lacked a robust public transportation system. Only 2 percent of the local population takes public transportation to work, according to Census data.

See here and here for some background. On the one hand, it’s always a bummer to miss out. On the other hand, I wasn’t excited at the thought of giving zillions of dollars in incentives and tax breaks to a behemoth like Amazon as deal-sweeteners. There’s too much of that going on already. Doing things like developing the Innovation Corridor and building a Data Science Institute, that’s fine and worthwhile as investments. And let’s be sure not to overlook the feedback about our public transportation infrastructure. Imagine where we could have been if we’d had a Congressional delegation that was unanimous in its support of of more robust transit system. We’ll have an opportunity to support that at the ballot box this November. If we’re serious about wanting to be more competitive with the cities we lost out to, we need to put our money where our mouths are. The Trib, Texas Monthly (which is very skeptical of the chase to lure in Amazon), Swamplot, and the Dallas Observer have more.

What Houston is showing to Amazon

Meet the Innovation Corridor.

Houston leaders hope to entice Amazon with a spot somewhere within the four-mile stretch of the Metro rail line that runs from downtown to the Texas Medical Center, an area they’re calling the Innovation Corridor – and the city’s best shot at winning the Seattle tech giant’s $5 billion second headquarters.

The rail line cuts through a part of Houston that includes some of the city’s largest companies and most prominent health care institutions, as well as Rice University, Hermann Park, the Museum District, Houston Community College, NRG Park and the collection of bars, restaurants and apartment complexes in trendy Midtown, according to a document outlining Houston’s confidential proposal.

City officials won’t say exactly where they want Amazon to plant a campus that could grow to more than 8 million square feet and house 50,000 high-paying jobs. But they have proposed multiple sites within the corridor, a slice of Houston that connects the city’s intellectual and cultural assets in the heart of its ethnically diverse population and bustling business hub.

“What’s remarkable is how concentrated all of this is in a four-mile-long area,” said Bob Harvey, president and CEO of the Greater Houston Partnership, the group behind Houston’s bid for Amazon. “Innovation Corridor seems to fit. It’s just like, wow, this is what Amazon is looking for.”


Local leaders have given Amazon its choice of undisclosed sites within the so-called Innovation Corridor, which, according to the document drafted by the Greater Houston Partnership, offers close access to two international airports, three interstates, 3 million workers, plus key game changers in business and an unparalleled array of amenities.

The document’s 32 bullet points highlighted the nearly 100,000 people who work in technology-related fields as well as the region’s low taxes, low cost of living, reasonable housing prices and eclectic neighborhoods and restaurants.

In particular, the document highlighted the city’s racial and ethnic diversity, which, Harvey argued, should appeal to a company that wants to attract millennial workers to a tech industry that has come under fire for its ethnic uniformity, particularly in Silicon Valley.

“As Amazon seeks to diversify its ranks at the executive, manager and professional levels, there is no better place to locate than in Houston,” city leaders said.

I still don’t think Houston’s efforts are going to amount to anything, but hey, it’s worth a shot. Given what Amazon has talked about for their new location, this is probably the best part of town to meet the requirements. Maybe we’ll learn something from the experience for the future.

Amazon and Houston

Does our city have a shot at landing Amazon’s HQ2? Eh, maybe.

Bringing Amazon to Houston almost certainly will be a heavy lift. The pursuit of the company that revolutionized the retail industry has highlighted both the potential and shortcomings of the local technology sector, made up of scattered groups of engineers in the energy, medical and space industries, which account for many of the city’s major innovations, but have yet to break out of their silos to create the kind of culture and buzz that animate tech centers such as Silicon Valley, Austin or Amazon’s hometown of Seattle.

But economic development officials say that regardless of outcome, the bid may well become the catalyst for the kind of innovation ecosystem that pushes the region and its economy into new directions to underpin its long-term prosperity.

“Amazon is a foil for thinking about where you’re trying to take a city,” said Bob Harvey, president and CEO of the Greater Houston Partnership, which is leading a team of developers, academics, Texas Medical Center executives and real estate brokers juggling a high-stakes bidding war and Hurricane Harvey recovery efforts.


Houston likely has a tough sell ahead of it. The local startup scene has grown in recent years, but has so far failed to attract the sort of venture capital activity concentrated in Austin and other tech-focused cities. Skeptics point to the city’s consistent failure to develop projects that would substantially expand its technological base and attract major firms such as Microsoft, Google or Dell, all of which have operations in Austin.

Most recently, the University of Texas system’s ambitious plan to transform roughly 300 acres of land near the Medical Center into a cutting-edge data science center failed in the face of intense opposition from University of Houston leaders and state lawmakers. Proponents of the deal blamed political sparring for scuttling a deal that could elevated the city’s chance of developing a more robust technology sector.

“That type of nonsense has to stop,” said Houston developer David Wolff, chairman and president of Wolff Companies. “You have to have the institutions working together.”

But local leaders argue that the city’s growing number of software engineers and computer programmers could complement Amazon’s ambitions as it expands its data science capabilities outside of retail and entertainment. In addition, city officials in recent years have made a push to elevate local startups and draw venture capital investors. Station Houston, a downtown startup incubator and co-working space, has attracted more than 260 member companies since it opened this spring.

The city’s most prominent universities have bolstered their technology programs in recent years to include data science and analytics. The University of Houston-Downtown offers a master’s degree in data analytics, and Rice University has partnered with IBM to develop robotics.

“We are still evolving, and we can grow and design a city with the help of an Amazon to help customize our city to their particular needs, which many other cities cannot do,” Mayor Sylvester Turner said in an interview. “We are just now beginning to focus on startups, technology, innovation in a very integrated sense.”

Just between you and me, I don’t think Houston’s odds are very good here, and I won’t be terribly grieved if we are not the chosen city. I think we’d have to give them a pretty substantive bribe incentive package to come here, and I have a hard time with that. (Turns out I’m not the only one who isn’t bullish on our fair city’s chances.) If we’re going to have a broader discussion about making the city more amenable to startups, or to address the infrastructure and transit demands Amazon is making, I’m all in. But let’s leave it at that. Swamplot has more.

Amazon PrimeNow restaurant delivery debuts in Houston

More good news for people who like having other people bring them their food.


Announced via release, Amazon PrimeNow will offer one-hour delivery for Prime members from dozens of restaurants across the city. Which means that you’ll not actually have to visit the restaurants to enjoy food from The Hay Merchant, El Tiempo Cantina, Hugs & Donuts, and more.

Unlike other delivery services, whose fees range from $2 to $7 per delivery, PrimeNow deliveries will be free for those that have paid the $100 for Amazon Prime perks. Notably, Amazon will not mark up menu items’ prices, which other services are unabashedly guilty of.

PrimeNow delivery is officially available in Houston as of today. To see if it’s in your area, you’ll have to download the PrimeNow app and look for a “Restaurants” option.

As noted in the story, Amazon joins UberEats and some other services in the dinner delivery business. I personally prefer to dine in, mostly because I like my food hot from the kitchen; the only to-go/delivery food we get with any regularity is pizza. I know that a lot of people do like this sort of thing, and I’m sure this will be something they really like. If you’re one of those people, you now have one more reason to not leave the house.

Amazon and Bernie

You have to admire the ingenuity.

Sen. Bernie Sanders

It turns out you can’t buy everything on after all.

The online retail giant is quashing an effort by a Texas teenager to use the company’s website to funnel cash into his newly formed pro-Bernie Sanders super PAC.

The Bern2016 super PAC was officially launched [last] week by 15-year-old Sebastian Burnham of Austin — a high school senior who cannot yet vote for his preferred candidate but is legally allowed to create a super PAC to advocate on Sanders’ behalf.

Super PACs can raise unlimited sums of money to advocate for or against federal politicians, although they cannot coordinate their spending with candidates. Conversely, the candidates themselves have virtually no control over these independent efforts.

Burnham, an active blogger who plans to study political science in college, says he wants to focus on raising money from grassroots givers — as Sanders himself has — and he thought he had developed a novel plan to do so.

Until recently, Burnham’s group stated on its website — — that pro-Sanders shoppers could use a specialized link to donate to the super PAC “for free.”

The idea was to have a percentage of every purchase made by users who were referred there by Bern2016 benefit the super PAC.

But isn’t on board.

“It has come to our attention that you are not in compliance with the Associates Program Operating Agreement,” wrote in an email to Burnham after questions from the Center for Public Integrity. “If you are not in compliance within five business days, we will be forced to terminate the Operating Agreement, close your Associates account and withhold advertising fees.”

In an emailed statement, spokesman Tom Cook said the company takes “the appropriate action” when it becomes “aware that an organization or company has violated the operating agreement.”

Burnham called the company’s decision a “setback” for his super PAC, adding that he had removed the specialized link but would continue searching for other similar programs that could be used.

Gotta admit, this wouldn’t have occurred to me. I honestly don’t know how much one might be able to raise via this mechanism – among other things, I’d think that the universe of avid Sanders supporters contains a non-trivial number of people who are repelled by Amazon’s labor practices – but if you get past the questionable legality and the apparent resistance by Amazon, it’s pretty ingenious. Too bad we won’t get a chance to see how it might have worked in practice.

Revisiting the Texas-Amazon sales tax deal

The Statesman looks back and concludes it was a pretty good deal all around.


In 2012, the state rolled the dice on a controversial deal with e-commerce giant

To end a two-year battle, Texas said it would drop a $269 million sales tax bill due from the Seattle-based company in exchange for an incentive deal, among other agreements.

Amazon said it would begin collecting sales taxes within 60 days and create 2,500 jobs in Texas and invest $200 million in the state by 2014.

Now, as the company says it’s exceeded those benchmarks, state officials and economists say the agreement was the right call for Texas.

“I believe Texas benefited from the deal with Amazon. The agreement meant Amazon began collecting and remitting taxes to the state, which the comptroller’s office felt were legally due,” Texas Comptroller Glenn Hegar told the American-Statesman. “The agreement also allowed Amazon to start building warehouses and to greatly expand their physical presence in the state, which was largely beneficial to the economy.”

This summer, the Internet retailer told state officials it reached more than 3,500 employees in Texas and made more than $300 million in capital investment in Texas by the end of 2014, according to documents filed with the comptroller’s office.

Amazon also paid an undisclosed amount to settle the matter in 2012.

With the deal, Texas ended a two-year fight seeking the company’s uncollected sales taxes, and Amazon began collecting on July 1, 2012 — potentially adding millions of dollars in new revenue to state coffers in coming years. Now, current figures seem to prove that out.

An American-Statesman analysis of data from the comptroller’s office shows the state’s sales tax collections have risen by hundreds of millions of dollars since began issuing the levy on Texas residents.

Since July 2012, sales tax revenue in Amazon’s sector has gone up more than $325 million, comptroller data shows. While state law prohibits the comptroller’s office from releasing sales tax collections by individual companies, it’s clear a significant portion of that increase is a result of Amazon’s Texas sales.

Although Hegar wasn’t the comptroller at the time of the 2012 deal, he says the state has benefited from Amazon’s presence.

“We welcome and appreciate Amazon like we do all the retailers in our state,” Hegar said in weighing the company’s role in Texas today. “We encourage and benefit from the economic activity generated by both their physical activities in the state through capital investment and job creation, and also greatly appreciate their following the law by collecting and remitting taxes from our citizens when selling taxable items.”

See here, here, and here for some background. I supported this deal back then, and I’m glad to see it has basically worked as intended. The rationale from two decades ago for making online sales tax-free has long since been rendered irrelevant, and the effect of that policy has become increasingly expensive for state and local governments. It just made sense for Amazon and other online retailers to start charging sales taxes. A few years later, this isn’t even controversial any more. Like I said, a good outcome and I’m glad to see it.

Uber uber alles

Very interesting.

Uber rolled out a new service in Manhattan [last] Tuesday that foreshadows the five-year-old company’s plans to become much more than a platform for e-hailing taxi and town car rides. Now, with UberRUSH, the company is piloting a bike and ped-courier service designed to move stuff, rather than people.

For at least $15 a trip, Uber wants to dispatch couriers to ferry everything from legal papers to fashion pieces around Manhattan below 110th Street (for now).

The new service signals the company’s expansion beyond local transportation and into the much larger world of urban logistics. And it’s a savvy play for several reasons: The same back-end technology that Uber has built to track drivers and connect them to riders can easily be used to order and follow deliveries. All that changes is the cargo on board and the mode of transportation, a detail around which the company is becoming increasingly agnostic.

These bigger ambitions bolster Uber’s claim that it is not, by definition, simply another kind of cab company. Most importantly, though, Uber foresees — as Amazon and eBay do, too — that the next growth opportunity in a shifting economy isn’t facilitating digital marketplaces: It’s moving physical stuff. It’s figuring out urban logistics in a world where crowded cities will only become more so, where e-commerce is actually making congestion worse, where the rise of “sharing” has created a need for coordinating the mass joint use of cars, tools, tasks and dinner.


Logistics are the logical companion industry to the sharing economy. As the latter grows, so will need for the former. Logistics also represent the unresolved territory of the digital age. The Internet has solved all kinds of other problems: It’s enabled us to communicate faster, to pay bills more easily, to shop for products that can’t be found in local stores, to open businesses that couldn’t cover the rent on a brick-and-mortar storefront. But for all those interactions that take place in the ether, we still need to move stuff in the real world. Your Airbnb keys can’t be e-mailed. You can rent a drill bit on SnapGoods, but an online platform can’t physically deliver it to you.

I don’t have anything to add to this. Frankly, the whole thing was just an excuse to use that headline. Nonetheless, this is very interesting, and if it’s successful we’ll see when it or something like it comes to Houston. TechCrunch has more.

My father, the book critic

My dad emailed me the other day to inform me that he had written his first book review on Amazon, and to ask me if I might mention this on my blog. What’s even the point of having a blog if you can’t mention stuff like that on it, I ask you? So if you’d like some more opinionated writing on the Internet by someone named Charles Kuffner, head over to Amazon and see what my dad’s been up to.

Amazon has a strange idea of what constitutes “erotica”

In last week’s Texas blog roundup, we saluted Amy Valentine for successfully turning her blog about surviving breast cancer into a book about surviving breast cancer. Amy is a friend of mine from my class at Trinity University, and I’ve been following her blog since its inception, partly because I’ve cared about what’s happening with her, and partly because she’s dealt with this awful situation with great humor and courage. It turns out that the joke is on her, as her book – a Kindle download – has been classified by Amazon as something it is not.

Breast cancer is not erotic

Amazon’s Kindle has categorized my digital breast cancer memoir as Erotica. The funniest part is that I notified Amazon of the error. After all, there is nothing erotic about breast cancer. Yet, Amazon refused to recategorize my book! They pointed out the book’s “adult content” and told me it would never be placed in a “general public listing.” I felt like I was a 12-year-old girl getting a scolding from her Sunday School teacher. I know my book’s title, Killer Boobs, can be a bit risque and the cover art, which was in the stock photos that Amazon provided, is of a naked woman’s torso, but when partnered with the overall book topic, it all works. After all, my breasts did try to kill me. And the skinny model’s torso on the cover looks more like a cancer patient in my eyes than a sexy playboy model. I don’t know who I feel most sorry for: folks hoping for Erotic literature who mistakenly buy my book, or my 77-year-old mother’s friends who purchase the digital book and then find out that other buyers purchased “Bondage Babes” and “Whips, Chains, and Lipstick.” Amazon Kindle editors will really be upset when I publish my memoir’s sequel on my harrowing and sometimes funny trip through breast cancer world: “Cleavage to Die For.”

I joked to Amy on her Facebook page that the title and art would work equally well for a Mickey Spillane novel, but there is a bit of serious business underneath all the boob jokes. Every book has a potential audience, and no book can find its audience if it’s off in the wrong section of the bookstore, whether virtual or not. If you are sent a link to Amy’s book, and see that the webpage its on contains recommendations like the ones listed above or the books that were recommended for me, you’re probably not going to have an accurate picture of what it is you’re looking at. I don’t know what Amazon’s algorithms are, but surely they ought to have some capacity for taking a writer’s word for the fact that her book is about chemo and healing and not whips and handcuffs when she tries to tell them that. A book about breasts is not necessarily a book about sex.

Amazon fulfills its end of the deal with Texas

Good to see.

Nine months after it struck a deal with the state to bring thousands of jobs and invest millions of dollars in Texas, online retail giant on Wednesday unveiled the first steps toward keeping its end of the bargain.

Amazon said Wednesday it will build three fulfillment centers in Texas, creating about 1,000 jobs. The new facilities will include a 1.2 million square-foot site in Schertz, east of San Antonio; and two sites in the Dallas-Fort Worth area — a 1 million-square-foot center in Coppell and a 1.1 million-square-foot facility in Haslet.

The fulfillment centers in Schertz and Coppell will handle the shipment of “larger items—anything from televisions to bbqs, for example,” Amazon said. The Haslet center will ship smaller items like books, small electronics or DVDs, the company said.

“We look forward to putting more than 1,000 Texans to work at our new fulfillment centers in Schertz, Coppell and Haslet,” Mike Roth, Amazon’s vice president of North American fulfillment, said in a news release. “We appreciate the state and local elected officials who have helped us make this exciting investment in the state of Texas.”

In April of last year, Amazon struck a deal with Texas Comptroller Susan Combs, calling for the online retailer to bring 2,500 jobs and $200 million in capital investment to the state, and to start collecting tax on sales made to people in Texas. Amazon began collecting the sales tax on July 1.

See here, here, and here for the background. Amazon had announced the Schertz location in November. Barring anything unusual this ought to be the end of the story in Texas, but it remains the case that Amazon and other online retailers should be paying sales taxes on Internet transactions regardless of what deals have been worked out in what states. It also remains the case that the current Congress is never going to fix that, so this is the workaround for now.

Amazon comes to Schertz

Hello, Schertz!

After about six months of negotiations, this city, the Schertz Economic Development Corp. and Guadalupe County have approved about $7.6 million in direct tax incentives to land a $166 million distribution warehouse for

The 1.26 million-square-foot warehouse, called a fulfillment center, will become the largest facility in Schertz and Guadalupe County, Schertz EDC executive director David Gwin said. It’s expected that the project will create 350 new jobs that will generate about $11 million in annual payroll.

What jobs would pay was not disclosed, but Gwin said that the wage would exceed the minimum standards set by law.


According to the Amazon Fulfillment website, jobs at Amazon’s fulfillment centers pay about 30 percent more than traditional retail jobs.

As part of a deal with the state comptroller’s office to resolve the e-commerce giant’s past tax liabilities with the state, Amazon pledged to create 2,500 jobs and make $200 million in capital investment in the state. Amazon has been rapidly opening more fulfillment centers around the nation and Canada to increase its same-day delivery capabilities.

Schertz is just north of San Antonio, and used to pair with Selma as two of the biggest speed traps in the state. This is clearly a better way to generate revenue for the town. Hope it works out well for them.

Amazon wine

You may soon be able to order wine from, depending on where you live. Inc. AMZN -0.88% is planning an online marketplace for wine sales directly to consumers, said executives for several California wineries, marking the Seattle Web giant’s second foray into the business in three years.

Amazon hosted a workshop [last week] at a resort in Napa, Calif., and invited members of the Napa Valley Vintners association, said Terry Hall, a spokesman for the group. He said about 100 wineries attended the event.

At the event, Amazon said the marketplace would begin in the coming weeks and the online retailer will charge wineries a 15% commission of the sale price, as well as a monthly fee of about $40, according to people familiar with the workshop.


In 2009, Amazon pulled back from an effort to sell and ship wine after its partner, New Vine Logistics, suspended operations amid financial troubles. This latest effort would spare Amazon the cost and difficulty of shipping fragile and heavy wine bottles by passing that responsibility on to the vineyards themselves.

Wine sales online are challenging due to a patchwork of state-by-state rules that limit which companies can sell alcoholic beverages. And shippers must ensure that recipients signing for packages are at least 21-years-old, the legal limit.

The question you may be asking now is “Will I be able to order wine through Amazon to be shipped to Texas?” And the answer is…I’m not sure. Last year, the TABC cracked down on out of state resellers who were shipping to Texas without a state sales tax permit. The TABC addresses the question of direct shipping of wine to Texas consumers, and one of the things they say is “Under current state law, wholesalers / distributors are not authorized to ship wine directly to consumers in Texas”. However, out of state wineries may ship to Texas if they obtain a direct shipper’s permit, pay sales and excise taxes, and ship to a TABC permitted carrier. So I guess the question is whether Amazon would be considered a wholesaler/distributor in this scenario, or if the fact that the wineries themselves are doing the shipping opens a loophole for this to be permitted. I sense a legislative opportunity here, or failing that, future litigation. Anyone want to be a test case?

Once more with the margins tax and the Supreme Court

Here we go again.

The Texas Supreme Court could blow a hole in the state’s budget if it finds the business tax unconstitutional, as pressed Tuesday in a lawsuit led by food giant Nestlé USA.

“The Legislature can’t violate the constitution to promote even a legitimate interest,” said attorney Peter A. Nolan, arguing on Nestlé’s behalf that the tax violates a state constitutional requirement that taxes be equal and uniform.

If the Supreme Court throws out the law, the scope of the court’s decision will determine whether the state needs to quickly find another way to come up with some $4.5 billion annually or more.

“Should they rule for the plaintiff, they could throw out the tax in its entirety. They could require the state to provide four years of refunds, which is the statute of limitations period,” said Dale Craymer, president of the business-based Texas Taxpayers and Research Association. The business tax “is about 10 percent of all the taxes the state collects. It’s a sizable part of the budget,” Craymer said.

The court could, however, give the state some leeway to come up with a remedy, he said. It must rule in the case by Oct. 23, according to court staff.

See here, here, and here for some background. The Statesman gives November 9 as a rule-by date. Regardless, there will be a decision this year. The Lege was likely to tweak the margins tax anyway; they may wind up having to do a lot more than that. The Trib explains the legalities involved.

Dale Craymer, president of Texas Taxpayers and Research Association, says the suit boils down to questions over equal treatment.

Craymer explains the franchise tax charges one-half of 1 percent to wholesalers but a full 1 percent to businesses engaged in manufacturing. Nestle, a national manufacturer and wholesaler, does not manufacture anything in Texas, but is still subject to the 1 percent rate.

The company claims the distinction violates equal protection provision in the Texas and U.S. constitutions.

Texas designates Nestle and the other companies in the suit as “unitary entities,” or companies that have various components but operate as one organization. Unitary entities are subject to the 1 percent tax rate under current franchise tax rules that were revised in 2006.

Texas has had a version of the franchise tax since the 19th century. Sometimes called the margins tax, it’s a tax on doing business in Texas. Craymer says the dollars it brings in “generally pale in comparison to property and sales tax” on businesses.

Lawyers for the Texas Attorney General’s Office wrote in a brief to the court that Nestle’s equal-protection challenges hinge on an erroneous premise that the franchise tax was solely meant to cover the value of doing business in Texas and that the value should be assessed as if it were property. But, they wrote, the Legislature has wide latitude to create tax classifications.

My first impression when I read that was that Nestle’s argument sounds a lot like the one Amazon had made to argue that they weren’t subject to the sales tax in Texas because they didn’t have a “physical presence” in the state, just a distribution center. They eventually lost that fight as we know, but I couldn’t say what might happen here. Between this and the school finance lawsuits, the Supreme Court will have a big say over what Texas’ budget looks like in the coming years.

We better hope Amazon sticks to its deal with Texas

Remember that deal Amazon made with the state to start charging sales tax here and to commit to creating 2,500 jobs in return for having back taxes forgiven? Apparently, there’s not much in the deal to make them regret it if they don’t hold up their end of the bargain. Inc. didn’t risk much when it agreed in April to create 2,500 jobs and invest $200 million in new distribution centers in Texas if the state forgave $269 million in back sales taxes.

If the online giant should fail to follow through on that promise, it has agreed to pay $1 million to the state — and Comptroller Susan Combs could not reopen her claims for back taxes before July 1, according to documents released Wednesday to the American-Statesman under the Texas Public Records Act.

Under the agreement, and its affiliates began collecting sales taxes from their Texas customers July 1.


Austin tax lawyer Buck Wood contends Combs is not legally authorized to make such a settlement and said she has created a double standard: a “too big to pay” class of taxpayers who get preferential treatment.

On Wednesday, after reading the agreement, Wood — a former deputy comptroller and also general counsel under the late Comptroller Bob Bullock — said Texas is not adequately protected if Amazon fails to keep up its end of the deal.

“I have a $269 million tax liability. I pay $1 million. That’s nothing,” Wood said. “If (Combs) can do this, she can do anything.”

Wood said Amazon got its tax bill forgiven just by agreeing to do what it wants to do anyway — build distribution centers in Texas. He dismissed the economic development aspects of the agreement as “window dressing.”

R.J. DeSilva, a spokesman for the comptroller’s office, defended the agreement.

“The company is collecting the sales taxes quicker than any other state,” he said. “That’s a huge part of it.”

As for the $1 million fee, DeSilva said, “The penalty is what it is, but there is a commitment by the company to invest in the state.”

Wood raised the issue of legality in May, but until/unless someone files suit it’s an academic concern. I share Wood’s concerns, and I have to shake my head at the level of deference being shown Amazon, but at the same time I appreciate that we got this done, without the courts or the Lege or Rick Perry getting involved and mucking it up. The goal was to get Amazon to pay sales tax, which is good for the state and good for the traditional retailers and given Amazon’s same-day delivery innovation may be god for them as well. At some level, the rest is gravy.

Amazon starts collecting sales tax today

We are in a new era.

Beginning Sunday, Texans will see state and local sales taxes show up on their taxable Amazon purchases — the result of a deal with the state comptroller’s office that resolved the e-commerce giant’s past tax liabilities with the state in exchange for the sales tax collections, the creation of 2,500 jobs and a pledge of $200 million in capital investment in the state.

For customers, little will change other than prices. Amazon’s order summary already includes a line that reads “Estimated tax to be collected.” Come Sunday, that line often will be followed by something other than $0.00. The company’s systems will automatically calculate and add the proper state and local levies.

“Amazon customers in Texas will see the appropriate sales taxes applied to their order when they proceed to check out,” a company spokesman wrote in an email.

With the change, customers will actually have to pay the taxes they owe on their purchases through Technically, these online buys were always subject to state and local sales and use taxes, although few people actually remitted those levies and the state rarely pursued them.

Now Amazon will collect them and, like other retailers around the state, turn them over to the comptroller’s office by the 20th of the following month.


The company will begin collecting sales tax for most of the other states in 2013 or 2014.

“Certainly of the states that managed to pressure Amazon into collecting their taxes, Texas is really the second big state, after New York,” said Michael Mazerov, senior fellow of the State Fiscal Project at the Center on Budget and Policy Priorities in Washington.

“But it’s just another step in the process,” Mazerov said. “A number of states have managed to pressure the company into collecting their sales tax. Eventually, Amazon will be collecting in a very large number of states.”

In fact, the company has thrown its support behind a federal bill — called the Marketplace Fairness Act — that would open the door for sales and use tax collections in every state. Brick-and-mortar retailers and a host of retail associations have pushed for such a law to help “level the playing field” with online retailers, most of which don’t yet collect sales taxes on purchases.

“Our hope is that eventually all online retailers will be collecting” sales taxes, said Stephanie Gibson, vice president for government affairs at the Texas Retailers Association. “We want to keep that money in our state because it supports our children and grandchildren.”

See here for some background. This is how it should be. There’s no reason to make a distinction between online sales and in-store sales. States and cities need the revenue, which supports things that online retailers need, too – streets, schools, utilities, and so on. There’s still the chance of a legal challenge to the deal Amazon struck with the state, but so far so good. This is and will be a good thing for Texas, and ultimately for the other states as well.

Is the Amazon deal with the state legal?

The Statesman raises a great question about the settlement deal between Amazon and the state of Texas that will get the online retailer to start collecting sales taxes in Texas while forgiving back taxes the state says it owes.

But is it legal?

Austin lawyer Buck Wood, a tax attorney and a former deputy comptroller and general counsel under the late Comptroller Bob Bullock, says no.

“While this may seem to be a reasonable resolution in people’s minds,” Wood said, “it’s not worth the paper it’s written on. She just can’t do it.”

Wood argued that the state’s constitution bars “forgiving” tax debts and that the settlement raised the specter of creating a “too big to pay” class of taxpayers who get preferential treatment.

He said it sets a bad precedent in a growing Internet economy when Combs has estimated that Texas loses $600 million a year on untaxed online sales.


[Wood] cited two articles in the constitution that, in essence, say the Legislature cannot forgive tax debts or delegate that authority.

Wood said the language, dating to the state’s early history, attempted to prevent officials from forgiving the debts of taxpayers with political influence.

There is one exception.

Wood and the comptroller’s office cited the same law that allows the comptroller to settle tax disputes, but they disagree on how broadly it can be applied.

The law says the comptroller may settle a claim for a tax, penalty or interest if the “total costs of collection” would exceed the amount due.

Wood said that if the $269 million tax bill is accurate, there is no way the cost of litigation and collection would approach that figure.


[Skip] Smith, a retired tax lawyer who has represented clients in disputes with the state, said the comptroller’s authority to settle cases is not as broad or explicit as, say, the Internal Revenue Service’s.

“They don’t really have a provision that gives them the right to settle based on the hazards of litigation,” he said.

Still, Smith said, “The comptroller, day to day, is settling these cases.”

He said the Legislature “hit Amazon between the eyes” when it changed the law last year. But he said it also gave Amazon another legal argument: Did the Legislature add the new language just to clarify the law or because Amazon wasn’t covered by the existing statute?

“It’s arguable,” Smith said.

Smith said the fact that the Irving site was owned by an Amazon subsidiary clouds the issue.

“If it’s a subsidiary’s warehouse, it becomes grayer,” he said. “I think this issue is not totally settled.”

Steve Bickerstaff, an Austin lawyer with a background in constitutional law, takes a different tack.

“It is never in the interest of the state to pursue a claim if the State of Texas is going to lose and there is a good alternative,” Bickerstaff said.

He said the constitutional prohibition against forgiving tax debts is not absolute.

I suspect that if we got a dozen lawyers together to discuss this, we’d get at least a baker’s dozen opinions. There are only two opinions that will matter. One is that of Attorney General Greg Abbott, who will undoubtedly be asked to provide it. The other is that of the State Supreme Court, once the seemingly inevitable litigation is filed. I wouldn’t even begin to guess what they might say. There is no such litigation yet, and who knows when there may be. I suppose if no one files a lawsuit then the matter will have been decided by forfeit. I don’t see that happening, however. Bottom line, we won’t know for sure for several years whether this is a precedent-setter, a one-off, or a false start.

Amazon settles up with Texas

Good. will start collecting sales taxes from Texas customers this summer and agreed to make capital investments of $200 million and create 2,500 jobs in the state over the next four years, Comptroller Susan Combs announced this morning. In return, the state will drop its efforts to collect back sales taxes from the company.

The online retailing giant hasn’t been collecting sales taxes from customers in Texas (and in many other states), citing a provision in the law that exempts companies without a physical presence in the state from taking part. The comptroller filed a $269 million tax lien against the company, pointing to a warehouse operation in Irving and saying it should have been collecting and remitting taxes from December 2005 to December 2009.

That’s been in dispute for more than a year.

And just like that it no longer is. Seems like a fair settlement, as long as Amazon holds true to its hiring promise. I agree with Comptroller Combs and Amazon that this issue needs to be dealt with by Congress, and have been saying so all along. We’ll need a better Congress first, of course, but be that as it may, this is theirs to fix. For now, kudos to both parties for getting this done. A statement from Combs’ office can be found here.

Our long Amazonian nightmare may finally be over

Negotiations are in progress to get Amazon to pay something like its fair share. is negotiating with the state to start paying Texas sales taxes on online sales and to create some jobs in the state, reviving talks that fell apart at the end of last year’s legislative session, sources involved in the conversations said today.

A deal would apparently end the state’s attempts to force the company to collect sales taxes. Comptroller Susan Combs accused the company of ducking $269 million in sales taxes it should have paid from December 2005 to December 2009. The company threatened to close a warehouse operation in Irving that it said employed about 120 people.

The comptroller’s office had no immediate comment about the talks.

“There are meetings going on, but I can’t tell you much else about it,” said state Rep. John Otto, R-Dayton. He’s been involved in the online sales tax issue at the legislative level, but said he isn’t directly involved in current negotiations.

This week, the company reached agreement in a similar dispute in Nevada and is reportedly negotiating sales tax agreements with other states. No hard estimates are available on what such an agreement would bring into the Texas treasury. In its lawsuit, the state put the annual number at about $70 million. In Nevada, where the sales tax ranges up to 8.1 percent, officials expect the Amazon deal to bring $16 million annually into state coffers.


“As long as they’ll start collecting sales taxes this fiscal year or within the next four or five months, that’s really what’s important,” Otto said. “We’ve got to level this playing field.”

I 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 anything to add other than I agree with what Rep. Otto says. See here for prior blogging on the subject.

Amazon cuts a deal with California

Interesting. cut a tentative deal with legislative leaders Wednesday night that would allow it to postpone collecting sales taxes from Californians for another year.

The company in turn would drop its battle to overturn the state’s new law that required it and many other out-of-state online retailers to collect the taxes.

Under the deal, Amazon would delay collecting taxes until September 2012, Assemblyman Charles Calderon (D-Whittier) said. The new law had mandated that Internet retailers start collecting state taxes in July if they had offices, workers or other connections in California.

Amazon had refused to collect the taxes and poured $5 million into collecting signatures for a ballot referendum challenging the law.

If Congress acts by next summer to settle the contentious issue of how online retailers should be taxed, that decision would override Amazon’s deal with California.

“It’s a safe harbor for up to a year,” Calderon said of the agreement he helped strike. “If they can’t get Congress to act by next July, then they will start to collect the tax in September 2012. If by chance they get Congress to act, then that would trump the state law.”

See here and here for some background. I think the odds of this Congress taking any action are pretty small, but you never know. You know that I believe this will ultimately require a federal fix, I just want it to be a non-radicalized Congress that does it. Be that as it may, I consider this a step in the right direction. I wonder if it will have any effect on the battle between Amazon and Texas over sales tax collections. (Side note: Comptroller Susan Combs says Rick Perry was “uninformed” about the Amazon issue in Texas. Awesome!) Kevin Drum has more.

Amazon to push for ballot initiative in California

I believe we are entering “last refuge of the scoundrel” territory here.

Amazon said [last] Monday that it would back a California ballot initiative that would roll back a new state law that forces more online retailers to collect sales tax.

Amazon’s decision to support the proposed referendum pits the world’s biggest online retailer against the state government, which is looking for ways to raise additional revenue to cover budget shortfalls.

The California legislature last month passed a law, now in effect, requiring online retailers to collect sales tax just like merchants physically located in the state. The law was intended to close a loophole that let online retailers sell their wares but not collect and pay sales tax to the state.

Two weeks ago, Amazon, hoping it could comply with the new law and still avoid collecting taxes, severed ties with thousands of California businesses whose Web sites linked to products on its site. California officials say that move does not free it of this year’s tax obligation, estimated at $83 million.

“At a time when businesses are leaving California, it is important to enact policies that attract and encourage business, not drive it away,” said Paul Misener, Amazon’s vice president of public policy. He also called Amazon’s antisales tax position “a referendum on jobs and investment in California.”

Actually, it’s a straightforward statement of naked self-interest. Not that there’s anything wrong with that, but let’s not try to cloak it in anything noble. Amazon wants to maintain a competitive advantage it was given many years ago. I see no reason why anyone should feel inclined to abet them with that, especially at the cost of the public’s interest, but stranger things have happened.

Supporters of the proposed initiative must now gather around 505,000 signatures to qualify it for the ballot, according to the secretary of state. A vote could occur during the next statewide election in February 2012.

“Where does Amazon plan to collect these signatures — in front of bricks and mortar retailers that collect sales tax everyday?” asked [spokesman for Gov. Jerry Brown Evan] Westrup.

Kind of amusing to imagine, isn’t it?

Amazon versus California

It’s getting real in the Golden State.

Saying it won’t force California customers to pay sales tax on their Internet purchases, is severing ties with 10,000 small businesses and individuals here who funnel shoppers to the online bazaar through their websites.

The defiant action came hours after Gov. Jerry Brown signed legislation that would have required Amazon to start collecting a 7.25% base tax on online purchases Friday because it has affiliates here that are paid commissions for steering shoppers to its website. Previously, only Internet companies with stores or operations in California had to collect the tax.

“This legislation is counterproductive and will not cause our retail business to collect sales tax for the state,” said Paul Misener, Amazon’s vice president of global public policy.

He wouldn’t say whether the company would sue to overturn the law, as it has in New York, where its case is pending. But California officials said they expect Amazon to file suit.

“It’s a huge fight,” said Betty Yee, a member of the state Board of Equalization, the agency that collects sales tax. “We are the biggest customer marketplace for Amazon and other online retailers.”

You know where I stand on this, so I’ll spare you another rehashing of it. See here, here, and here for more on this.

News flash: The Amazon sales tax problem requires a federal solution

How many times do we have to say it?

State governments across the country are laying off teachers, closing public libraries and parks, and reducing health care services, but there is one place they could get $23 billion if they could only agree how to do it: Internet retailers such as

That’s enough to pay for the salaries of more than 46,000 teachers, according to the U.S. Bureau of Labor Statistics. In California, the amount of uncollected taxes from Amazon sales alone is roughly the same amount cut from child welfare services in the current state budget.

But collecting those taxes from major online retailers is difficult.

Internet retailers are required to collect sales tax only when they sell to customers living in a state where they have a physical presence, such as a store or office. When consumers order from out-of-state retailers, they are required under state law to pay the tax. But it’s difficult to enforce and rarely happens.

That means under the current system the seller is absolved of responsibility, buyers save 3 percent to 9 percent because they rarely volunteer to pay the sales tax, and the state loses revenue.

You know why we don’t have this kind of problem with brick-and-mortar retailers? Because they automatically add the sales tax into the amount you owe them, and then it’s their responsibility to remit those taxes to the state. This should be ridiculously easy to accomplish with online retailers: Just apply the applicable sales tax to whatever state the ship-to address is in, and remit to the states as you would if you were an offline retailer. Your e-commerce backend should have no trouble keeping track of how much you owe each state. All that’s missing from this equation is the requirement to do it. As long as it’s up to each individual state, we’ll have these problems. The day that Congress passes a law addressing the 1992 U.S. Supreme Court decision involving catalog sales, Quill Corp. v. North Dakota, those problems vanish and the states and cities that depend on sales taxes will get a boost. This isn’t rocket science.

Senate not inclined to accept Amazon’s bribe

Good for them.

It looks like the Texas Legislature is likely to say no — at least for now — to’s proposal to bring 5,000 jobs to the state in exchange for a temporary break on collecting sales tax.

State Sen. Bob Deuell, R-Greenville, said this morning that the odds were slim the deal with Amazon would survive in the legislative conference committee report that would have attached the language to Senate Bill 1.

SB 1 is the fiscal matters bill being debated in the Legislature’s special session, and is a must-pass measure essential to balancing the state’s 2012-13 budget.

Deuell is a member of the conference committee working to iron out differences between the House and Senate on SB 1.

“I don’t think this offer from Amazon is going to be on the conference report. I don’t see us accepting that offer on the Senate side,” Deuell said. “I’m just speaking for myself, but I think the consensus on the Senate side of the conference committee is not for it.”


Deuell said he doesn’t see a reason the state should allow Amazon to avoid collecting sales tax.

“That’s why we have a sales tax,” Deuell said. “We don’t have an income tax — and I’m not advocating for that – so we have to have (sales) tax. That’s a mainstay of our economy.”


Deuell also said he was skeptical of Amazon’s ability to deliver on its promise of 5,000 jobs and $300 million in capital investments by the end of 2013.

“I don’t see how in the world they can provide 5,000 jobs at distribution centers. Those operate very efficiently, with computers and mechanized things,” Deuell said. “I don’t want to doubt their word and their intentions; I just don’t see how they bring 5,000 jobs to the state.”

See here for the background. I’m glad to see someone besides me express skepticism about the job creation claims. We’ve already seen with the Texas Enterprise Fund that such promises of jobs for kickbacks are written on sand. Why should we take Amazon’s word for it and complicate our tax structure for their benefit? Much simpler to do what we wanted to do in the first place and make them follow the law and pay their fair share.

UPDATE: If we were skeptical of their claim about creating 5,000 jobs, why would be any less skeptical about a claim of creating 6,000 jobs? Or 10,000? Hell, let’s make it ONE MILLION JOBS! When we get to that, let me know.

Amazon offering a bribe to keep its sales tax exemption

Well, what would you call this? is negotiating a deal with Texas officials that would see the online retail giant promise to bring more than 5,000 jobs and $300 million in capital investments to the state over the next three years – if in exchange lawmakers will grant Amazon a 4 1/2-year exemption from collecting tax on online sales, according to documents obtained by the American-Statesman.

The proposed deal would be implemented by attaching it to Senate Bill 1, the wide-ranging fiscal matters bill being debated in the Legislature’s special session. SB 1 is a must-pass measure essential to balancing the state’s 2012-13 budget.

A draft copy of the conference committee report that would add the language to SB 1 was obtained by the American-Statesman. Mark Miner, spokesman for Gov. Rick Perry, confirmed Monday that the governor’s office has seen the draft copy of the proposed legislative language.


The proposal is similar to one Amazon recently struck with South Carolina, where that state’s legislators approved a 4 1/2-year exemption on collecting sales tax in exchange for Amazon creating at least 2,000 jobs and investing at least $125 million through the end of 2013.

One wonders who will be responsible for verifying that the job-creation and capital spending metrics have been met, and how we’ll know that these were genuinely things Amazon would not have done otherwise. Will there be any penalties for them if they fail to reach those goals, or if they just decide not to bother trying? I mean, a subsequent Lege could pass another online taxation bill as this one did, but unless there’s a provision to charge back taxes, what does Amazon have to lose by reneging?

By the way, would this deal mean that other online retailers will be required to pay sales taxes, just not Amazon? Anyone think some of them may try to do their own deal, or maybe sue to be exempted as well? Which makes me wonder what the cost of this may wind up being.

The proposal is the latest twist in Texas’ standoff with the world’s largest online retailer over the collection of online sales tax. The state stepped into the national debate over that issue last September, when Comptroller Susan Combs sent Amazon a notice that it owed $269 million in sales taxes it failed to collect on Texas transactions from 2005 to 2009.


Combs has estimated the state loses $600 million a year from untaxed online sales.

I guess Amazon’s share of that is between $50 and $70 million per year, depending on if we’re talking four or five fiscal years for that $269 million to accrue. Seems like it should be a bigger percentage than that. I think the state would be better off with the $600 million than with perpetuating that race to the bottom, but maybe that’s just me.

Amazon versus the states

The Street takes a look at the national picture of Amazon’s battles with states over collecting sales taxes.

In the past, Amazon has been protected by a 1992 Supreme Court ruling (Quill Corporation v. North Dakota) that prohibits a state from forcing a business to collect sales tax unless it has physical stores in the state.

While tax payers in most states are required to pay the tax directly to the government, few actually do.

But now several states are seeking to get around these restrictions by passing laws that expand the definition of physical presence.

The target has been on those e-commerce sites that work with affiliates. Affiliates are partner sites that earn commissions by advertising or linking to an online retailer’s merchandise.

In response, Amazon has threatened, and in some cases, ended partnerships with affiliates in states looking to revise these rules.

Amazon already collects sales taxes in a few states. A couple of others have codified exemptions for it. Many are working on or have passed legislation like Texas that would require Amazon to pay up. I’ll say again, I don’t know how long it will take, but I firmly believe that federal action to require online retailers to pay local sales taxes is the endgame. I just wonder how much Amazon will spend in the meantime fighting against it.

House passes budget

The main objective of the special session has now been accomplished. But not before one of the House’s biggest homophobes nearly derailed it on Thursday.

Lengthy debate on a key budget bill featured many retreads of contentious topics from the regular session — but it was Rep. Wayne Christian’s revival of his famous “pansexual” amendment around midnight that almost killed the whole thing.

Christian, R-Center, proposed banning state funding of college gender and sexuality centers through an amendment to the Senate Bill 1 fiscal matters bill that contained the school finance plan of $4 billion in cuts to districts statewide and several payment deferrals and tax accelerations adding up to about $3.5 billion in revenue, all essential to balancing the 2012-13 budget.

Democrats tried to persuade him to pull down the amendment in what was one of the most emotional debates of the regular or special sessions.

“You are violating the first amendment rights of these people,” Rep. Senfronia Thompson, D-Houston, said, adding, “If you pass this amendment tonight, you will be buying Texas a lawsuit.”

Rep. Dawnna Dukes, D-Austin, reminded members that James Byrd, the man dragged to death behind a pickup truck in Jasper, Texas, died in Christian’s district. His amendment, she said, was “all about creating hate.”

As Christian described the “naked rear end” he said was shown during a university seminar on anal sex, Rep. Ruth Jones McClendon, D-San Antonio, walked up, grabbed his microphone and said, “this is sickening.”

When their efforts proved unsuccessful, Rep. Trey Martinez Fischer, D-San Antonio, called a point of order, one he apparently had been holding in reserve throughout the day and night, according to the Austin American-Statesman.

After several minutes, during which rumors flew that the Democrats would torpedo the entire bill if the amendment wasn’t withdrawn, an apparently chastened Christian returned to the microphone. He said that he didn’t want to destroy a day’s work and would back down — and that he never intended to sound prejudiced or discriminatory.

“I pray for the day when we actually can discuss things and bring those walls of prejudice down,” he said. He complained that a defense of traditional values was labeled as bigotry by some.

Yes, poor Wayne is the one that’s being discriminated against here. How can anyone be free if he’s not free to hate gay people? We all should be more understanding of Rep. Christian’s alternate lifestyle choice. Postcards, Abby Rapoport, and Juanita have more on that.

All that happened on second reading. SB1 has now passed on third reading as well. Along the way, an attempt to remove the Howard-Farrar amendment, which would direct any surplus revenue from the Rainy Day fund to public education, was rebuffed. It’s not clear what happened with the Amazon sales tax amendment. From here, it’s back to conference committee to work out the remaining differences, but most of the hard work is now done.

Bill in US Senate to make Amazon pay sales taxes

As someone who believes that online retailers like Amazon should collect sales taxes and who believes that federal action will be needed to make that happen, I’m glad to see this.

Senate Majority Whip Dick Durbin (D-Ill.) says he plans to introduce a bill, called the Main Street Fairness Act, mandating that all businesses collect the sales tax in the state where the consumer resides.

Such measures have been proposed and disregarded by Congress for years, but Durbin believes the winds are shifting. “This idea is overdue,” he says. “Online retail sales are now very fulsome and are growing at the expense of local units of government.” Many state budgets are bleeding red, despite some recent revenue upswings around the country, and Internet sales-tax revenue has the gleam of found money. In many states, customers are supposed to declare their online purchases on their income tax forms but rarely do. A University of Tennessee study recently estimated that states will collectively lose $10.1 billion in uncollected online sales-tax revenue this year and $11.3 billion next year.

Amazon executives have long argued that state laws requiring it to collect sales tax violate Supreme Court rulings from 1967 and 1992, which stipulate that only retailers with a physical presence, or “nexus,” in a state need do so. Surprisingly, Jeffrey P. Bezos, Amazon’s founder and chief executive officer, recently told Consumer Reports that he supports federal legislation that rationalizes the patchwork of 30,000 state and local sales-tax jurisdictions around the country, each with its own rules and administrative quirks. Amazon declined to comment on Durbin’s proposed bill.

Amazon’s actions on the state level have spoken much louder than its words in support of a national solution. The company has fought state-by-state collection efforts, deploying both carrot and stick to hit politicians where they feel it most—jobs. In Texas, when the legislature passed a bill that would force online retailers with distribution facilities in the state to collect sales tax, Amazon announced it would close its shipping center outside Dallas, fire hundreds of local workers, and scrap plans to build other facilities in the state. On May 30, Texas Governor Rick Perry vetoed the bill.

As it happens, that provision could be included in one of the fiscal bills that will get passed during the special session. If the statewide smoking ban can get a second chance, anything is possible. Having said that, I think there’s a greater chance that I’ll be named Amazon CEO tomorrow than either Congressional chamber passes Sen. Durbin’s bill. I’m glad to see him introduce it, but we’re a thousand miles minus one step from it happening. Thanks to Dwight for the link.

House defies Perry over Amazon and sales taxes

This is a pleasant surprise.

Breaking with Gov. Rick Perry, the Texas House today refused to kill a provision that aims to tighten the state’s rules on when online retailers like must collect sales taxes.

The vote could force Perry — who has already vetoed similar legislation — into another difficult decision on the politically charged topic, which has seen Perry at odds with other top Texas Republicans, including Comptroller Susan Combs.

Rep. John Otto, R-Dayton, included the online sales tax-related language in Senate Bill 1, the wide-ranging fiscal matters bill being debated in the Legislature’s special session.

Rep. Bill Zedler, R-Arlington, filed an amendment to strip the language from SB 1, but his provision did not survive a spirited debate in the House, where members voted 106-34 to table it.


The fiscal matters bill still has to pass the House, and then likely would have to go back to the Senate for approval. If the online sales tax-related language from Otto survives that process, Perry would have to veto the entire fiscal matters bill to remove it.

I presume that if he did veto it, that would force him to call another special session. Which I also presume he’d rather not have to do, which is why he issued a statement (that you can see at Trail Blazers) calling on the House to not do this. It still has to survive the Senate, but given that Otto’s original bill passed both chambers easily, I think that’s doable. Combine this with the Howard-Farrar Rainy Day Fund amendment, and we can now count two positive things to come out of this session. The Trib has more.

Perry vetos Amazon sales tax bill

Of course he did.

Gov. Rick Perry has vetoed legislation that was aimed at tightening the state’s rules on when online retailers must collect sales taxes on Texas transactions, the bill’s author said this morning.

Perry had earlier criticized Comptroller Susan Combs for moving to collect $269 million from for uncollected sales taxes.

State Rep. John Otto, R-Dayton, said Perry’s office told him the governor had vetoed the measure, House Bill 2403, but did not tell him why.


Otto stressed that his bill did not call for creating a new tax, but rather intended “to put into statute the current rules and practices of the comptroller,” Otto said. “The bill simply defines physical presence, well within the Quill supreme court decision.”

The bill was good public policy that would raise a little bit of much-needed revenue while making the playing field more level for ordinary retailers. Vetoing the legislation was mostly a bit of leftover spite from Perry’s tete-a-tete with Combs. What did you think would happen? The Trib has more.

Senate passes Amazon sales tax bill


The Texas Senate has overwhelmingly passed a measure aimed at tightening the state’s rules on when online businesses must collect sales tax.

Senators voted 30-1 [Friday] to pass House Bill 2403, a measure that originated with Rep. John Otto, R-Dayton. The bill was sponsored in the Senate by Sen. Royce West, D-Dallas.

The bill now goes to Gov. Rick Perry.

With its vote, the Senate joined the House in siding with state Comptroller Susan Combs in her push to force and other online retailers to collect taxes on sales made to Texans.

The company has consistently opposed collecting tax on its online sales, which has angered state governments and traditional retailers. Combs has said Texas loses $600 million a year in uncollected tax revenue on online sales.

See here for some background. Given Perry’s earlier spat with Combs over this, one wonders if he’ll sign this or veto it. I wouldn’t be surprised by the latter.

Amazon complains to the SEC about Texas trying to collect taxes on it

Poor dears.

Amazon said in a regulatory filing this week that the SEC is looking into its dispute with Texas, which began last year when the Texas comptroller’s office sent Amazon a $269 million assessment for four years of uncollected sales taxes.

“In March 2011, the SEC staff notified us of an inquiry concerning this assessment, and we are cooperating with the staff’s inquiry,” Amazon said in its SEC filing.

The company gave no additional information. An SEC spokeswoman declined to comment on the investigation Friday.


In an earnings conference call this week, Amazon Chief Financial Officer Tom Szkutak sought to downplay the potential impact if more states put an end to tax-free online sales. He said Amazon generates more than half of its revenue in places where it already collects sales or consumption taxes, including markets outside the U.S.

However, in Amazon’s SEC filing, the company wrote that additional tax obligations “could create administrative burdens for us, put us at a competitive disadvantage if they do not impose similar obligations on all of our online competitors, and decrease our future sales.”

Whatever. If the only reason Amazon is viable is because they have this tax advantage over brick and mortar stores, then they’re not really viable at all. Does anyone believe they’ll go down the drain if they have to pay sales taxes? I don’t either. Quit whining, Amazon.

On a related note, Amazon is pulling out of another state over a sales tax dispute.

On the heels of a legislative vote in South Carolina that rejected Amazon’s plea for a sales tax collection exemption, Amazon said it won’t open a distribution center in the state, a project that included a one-million-square-foot building already under construction and 1,249 jobs.

“As a result of today’s unfortunate House vote, we’ve canceled $52 million in procurement contracts and removed all South Carolina fulfillment center job postings from our (Web) site,” said Paul Misener, Amazon vice president for global public policy, according to a report on The State newspaper website.


Amazon’s “our way or the highway” strategy suggests Amazon thinks it will easily find other alternatives to fulfil the company’s needs to open more distribution centers to keep those boxes of goods flowing. Maybe so. But it remains to be seen if this is a sustainable strategy, given the fact that Amazon currently doesn’t collect sales taxes in half the U.S. states.

Amazon this week said it plans to open 11 distribution centers, maybe more, as the company tries to keep up with demand from consumers who have flocked to its website looking for deals on books, music and other merchandise.

But Amazon also has played hardball in states where Amazon does not collect sales taxes from those sales. In March Amazon announced it was closing its affiliate program in Illinois, a day after the governor signed a law requiring Amazon and other online retailers to collect sales taxes on goods sold in the state.

Via Dwight. I’ll say it again, this really needs to be resolved at the federal level, and the sooner the better.

Lege approves separate online sales tax bills

It’s a start.

Taking a stand against Internet retailers like, the Texas House moved Tuesday to tighten the state’s rules on when online businesses must collect sales tax.

By voting 122-23 to pass House Bill 2403 by Rep. John Otto, R-Dayton, lawmakers made their clearest statement to date that they are siding with state Comptroller Susan Combs in her push to force Amazon and other online retailers to collect taxes on sales made to Texans.


Otto’s bill aims to eliminate what he has called loopholes in the law about what constitutes a physical presence.

The bill amends the state tax code to clarify that a “seller or retailer” is required to collect sales tax if:

• The business “maintains, occupies, or uses in this state permanently, temporarily, directly, or indirectly or through a subsidiary or agent by whatever name, an office, distribution center, sales or sample room or place, warehouse, storage place, or any other physical location where business is conducted.”

• The seller is “entrusted with possession of tangible personal property” through an agreement with another business or entity and is authorized to sell, rent or lease the property.

The bill also clarifies that a person or business is considered to be a retailer if they hold a “substantial ownership interest” in any entity that conducts those activities in Texas.

The final version of the bill removes language from the original version that would have designated the use of a website on a server in Texas as an activity that established physical presence.

Here’s HB2403. By my count, four Democrats voted against it. I don’t know if that’s because they agree with the position that Amazon should not be subject to sales tax, or if they wanted a bill that went further, like Rep. Elliott Naishtat’s HB1317. For what it’s worth, Naishtat was listed as a coauthor of HB2403, and voted for it. Otto’s bill doesn’t have a Senate sponsor yet, but Sen. Royce West’s companion bill SB1798 – which doesn’t yet have a House sponsor – was approved on Friday after sitting on the intent calendar for a couple of days, so now it’s just a matter of one of these bills getting voted on by the other chamber. I think one way or another this will get done, but the clock is ticking.

Amazon not gone yet

In case you were wondering.

Amid its fight with the state over collecting tax on online sales, had said it would close its distribution center in Irving this week, resulting in the loss of 119 jobs.

As of Wednesday, however, Amazon was still operating the Irving facility. Also, a hiring firm is interviewing to fill temporary jobs at the center, the Dallas Morning News reported.

Amazon confirmed Wednesday only that operations were winding down at the Irving center, and declined to give additional details. In a letter to the Texas Workforce Commission, the company had listed Wednesday as the center’s projected closure date.

Well, these things do take time, and if you’ve ever worked for a large corporation, you know how the best laid project plans often see their deadlines get pushed back. I wouldn’t read too much into this. Also in case you were wondering, one of the bills that would clarify the state law that says Amazon must pay sales taxes has passed out of committee and should get a full vote in the House. I doubt that will do anything to change their minds, not that this bothers me.

House ponders what to do about Amazon

My guess is that they ultimately won’t do anything this session, but it’s good to see the matter discussed by the Ways and Means Committee. If nothing else, it may lay the groundwork for a future session.

House Bill 1317 by Rep. Elliott Naishtat, D-Austin, and House Bill 2403, by Rep. John Otto, R-Dayton are aimed at finding ways to force Amazon and other retailers to collect taxes on online sales that involve Texas consumers or so-called affiliate marketers in Texas, who make a commission by steering customers to Amazon’s website.

Both bills seek to address what constitutes having a physical presence in the state. Under a 1992 U.S. Supreme Court decision, retailers with a physical presence in a state can be required to collect sales taxes, legal experts say.

The committee heard pleas from retailers who said they increasingly can’t compete with online sellers who don’t collect sales tax.


Naishtat said his bill is “a method by which we, the legislators, can level the playing field between law-abiding Texas retailers who collect and remit sales tax and those out-of-state retailers who do not. Not only will this clarification of law help our troubled Texas retailers, it will also generate revenue for Texas without new taxes or a tax increase.”

A fiscal note released Monday from the Legislative Budget Board projected that Naishtat’s bill would have no significant affect on the state budget, because it anticipates “major online retailers” would cancel their agreements with Texas affiliates.

Otto said his bill would establish a “fair and equitable” system by clarifying what constitutes a physical presence in the State of Texas.

“If this issue is not addressed, then we are inviting new and existing businesses to structure in avoidance of the collection of our sales tax,” Otto said. “To me, this is about making sure our tax laws are applied fairly and equally to all Texas businesses.”

The fiscal note on Otto’s bill projects that the state would collect an additional $6 million in 2012 and $10 million in 2013, rising to $18 million in 2016.

Noticeably absent from the hearing docket was House Bill 2719, a pro-Amazon measure filed by state Rep. Linda Harper-Brown, R-Irving. That bill would amend the state tax code to say that a company can’t be classified as a retailer required to collect sales tax if it, or a subsidiary, operates or uses “only a fulfillment center … or a computer server” in Texas.

I’ll say again, I think the ultimate solution to this is Congressional action. The original justification for exempting online retail from sales taxes has long been obsolete, and is now a real drag on local and state governments. One way to force Congressional action is for a bunch of states to implement their own solutions, thus making the case for a single standard to be applied. I don’t expect Texas to do anything about it now, but I believe it will eventually.