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Amazon does not really pay taxes? Here's the complicated answer



Democratic presidential candidates took advantage of reports

Amazon.com
Inc.

did not pay 2018 federal taxes because they insisted on changes in the tax system.

A closer look at the Internet giant's tax disclosure over a few years has produced a more complex picture: Amazon has paid incomes somewhere, albeit at a low rate, probably thanks to deductions and incentives related to investment, research and employee compensation. Earlier this week, former Vice President Joe Biden paid attention to company tax payments during an Iowa campaign, saying he had to pay at least some taxes. He published on Thursday: "No company that derives billions of dollars in profits should not pay a lower tax rate than firefighters and teachers."

Amazon sent back: "We pay every penny we owe. Congress has drafted tax laws to encourage companies to re-invest in the US economy. We have. … I suppose VP Biden's appeal is without a tax code, not Amazon.

Sen. Elizabeth Warren (D., Mass.) Cites Amazon by offering a new corporate tax that would cost the company nearly $ 700 million in 201

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Here are some questions and answers about the company's tax situation. really do not pay taxes for 2018.

We can not know. Amazon's tax returns are private, and its financial statements reveal costs for shareholders rather than policy makers: This includes tax accounting policies that differ from tax refund calculations.

Amazon earned $ 11 billion and had a tax account with negative 129

Why Amazon Did Not Pay Taxes

By one measure – comparing US earnings and current US income taxes on US income taxes $ 20 million in 2018, basically receiving a net benefit from the tax system.

But this provision is not the same as the lower limit of Amazon's tax return for 2018. Instead, this provision is an accounting measure for the company's short-term tax expense. This is an estimate of tax bills for 2018 plus settling past disputes, changes in past forecasts, and updates that reflect new regulations and laws. Amazon's overall effective tax rate for 2018 is 11%, including this current provision, but also the addition of foreign, state and deferred taxes. "I will admit that [the current provision] is not what we really want to know, but also the closest thing we'll ever see," said Matt Gardner, Senior Research Fellow at the Institute of Taxation and Economic Policy , the left-wing group whose report on Amazon and other companies has attracted the attention of Democrats.

Amazon Receives $ 129 Million Reimbursement?

Not required. There are indications that Amazon has paid little or no federal income tax for 2018. Its federal net operating loss – accumulated losses that offset future taxable income – has risen to $ 627 million at the end of 2018 from $ 226 million, STD The transfer of federal tax credit – accumulated credits that offset future taxes – increased to $ 1.4 billion from $ 855 million, largely due to R & D credits.

These are signs that Amazon has accumulated losses and tax credits faster than generating revenue and tax liabilities. The law allows for smooth tax payments across the business cycle and lifetime of the company.

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

So it means Amazon has not spent any money on income taxes in 2018. No.

No. Although Amazon's "current provision" for 2018 is negative for federal taxes, Amazon said it has made income tax payments totaling $ 1.2 billion this year, more than combined from 2011 to 2016 . The company does not disclose how this payment has been split between tax years or jurisdictions, such as the US, states, and foreign countries. So $ 1.2 billion can include California's 2016 income tax or UK payments for 2017

What is the right way to determine what Amazon actually pays?

There is no right way and every year is a snapshot. Longer views can help. From 2012 to 2018, Amazon reported $ 25.4 billion US earnings and current federal tax regulations of $ 1.9 billion. This is a tax rate of 8% – low, but not zero or negative. Since 2002, Amazon has earned $ 27.7 billion in global early tax revenue and has paid $ 3.6 billion of global tax revenue, a 13% tax rate.

This is still a fairly low rate. Why is that?

Let's start with investments. From 2011, Amazon said it has spent over $ 160 billion on investments since 2011, including a distribution network, cloud computing centers and wind and solar farms.

When a company buys a depreciable property – as a warehouse – it treats costs differently for tax and financial purposes.

For the financial statements, the Company recognizes costs over the useful life of the asset without deducting current earnings. For tax purposes, companies can now immediately deduct the full amount of capital spending by reducing taxable income in advance and thus taxing.

What else reduces Amazon's tax rate? expense for the purposes of the financial statement, based on estimated value. Tax relief is not defined until compensation benefits and employees can take it and pay personal income taxes. If a company is awarding $ 20 worth of limited shares, it writes 20 dollars of spending and assumes that it will receive a tax deduction of $ 20. But if the stock price rises and it gets $ 35, then the company gets bigger than the expected tax deduction.

What are the consequences of politics?

Democrats use Amazon to claim that companies have to pay more. Senator Warren has a plan to tax profitable companies on their earnings from financial statements, in addition to the current system. Although Amazon is tangled with the cross-border tax maneuver service, politicians do not blame the company for doing anything illegal – it just provides an example of what they claim to be changing in tax law. But the current corporate tax system has been designed by Congress to encourage investment and research and let companies realize the benefits of early losses when they become profitable. The change that may undermine these goals.

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


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