Amazon.com's Shocking Move to Avoid Taxes

        In a move that shocked industry experts and left them scrambling to determine how market forecasts will be affected, Amazon.com has ended its affiliate advertising program in the state of Minnesota. The move comes after the E-Fairness legislation was signed into law by Governor Mark Dayton on May 23. The legislation, which goes into effect on July 1, required that any company that had an associate business located in the state would be required to collect and pay state sales taxes on goods purchased by consumers residing in Minnesota. The move to end relationships with small Minnesota businesses left industry experts stunned.

        “This absolutely came out of left field. I don’t know anyone who saw this as a possibility,” John Fitzsimmons, a senior associate with Howard & Parke Investments, said of Amazon’s move to cut its affiliate program in Minnesota. “In the 20 years that I’ve been observing the market, and watching new taxes enacted at the state and federal, this is the first time I’ve ever seen anything quite like this. It…it is just mind-boggling that a multi-billion dollar company would willingly attempt to reduce the taxes it pays. This isn’t the kind of thing they teach in business school.” [sic]

        Dr. Leonard Havlich, Professor Emeritus at the Columbia University School of Business, agrees, “The traditional way of doing things has always been to accept whatever taxes are enacted and to adjust prices based on that. Historically, consumers have been very accepting of cost increases, because they understand that the costs are going towards important government programs. But what Amazon is trying to do is something really radical. It’s almost as if they’re trying to rewrite the book on how business’ approach paying taxes.”

        Although they agree that Amazon’s move was unpredictable, the two men disagree on the long-term implications of the move. “I think this very well could be the beginning of a whole new era of business,” Fitzsimmons said, “Companies often copy strategies that have been successful for competitors. If Amazon has any sort of success with this tactic, I think it’s very possible that we will soon see any number of large corporations moving to tax-friendly locations and playing with the tax code to reduce what they pay.”

        Dr. Havlich doesn’t agree with this doomsday prediction, “I find it hard to believe that any of the big companies will buy into this approach. Historically, business has always been supportive of the government and they have viewed taxes as an essential way of improving the purchasing power of citizens.” Havlich questions the sustainability of this tactic as well, “In the long run Amazon’s profits will be hit hard by its refusal to pay these taxes. They would need to begin employing accountants and lawyers just to stay ahead of the constantly evolving tax code, and no company would devote that kind of manpower to this. Could you really imagine a world where an Apple or a G.E. had a full staff, of 10 or 15 people, whose jobs were just finding ways to pay less in taxes?”