Early on, Amazon located its shipping centers in states without sales taxes. It successfully argued that the transaction occurred where the package left its distribution center, not once it was left at the customer’s front door. This tactic saved Amazon customers billions of dollars, and gave Amazon an enormous competitive advantage over brick-and-mortar stores that had to collect sales taxes.
As Amazon evolved, fast delivery became more important, leading the company to rapidly expand its vast distribution network closer to its customers. Recognizing that this would challenge the underpinnings of its sales tax dodging strategy, Amazon began to demand – and most often receive – lucrative tax breaks and other cash subsidies from communities where Amazon opened facilities and created jobs.
Over the years, Amazon has collected nearly $3.3 billion in 200 different tax subsidy deals with state and local governments, according to Good Jobs First’s Subsidy Tracker database. In many cases, that means when an ambulance is dispatched to an Amazon warehouse to tend to a worker overcome by heat, Amazon has left the cost of such services to other taxpayers to pay. Or when Amazon hires an educated worker, it does so knowing that it often contributed little to pay for local government’s investments in schools.
In the three years between 2018 and 2020, Amazon reported $44.7 billion in U.S. pre-tax profits, but paid just $1.9 billion in U.S. corporate income taxes, according to a 2021 analysis by the Institute on Taxation and Economic Policy (ITEP). These paltry payments gave Amazon an effective tax rate of just 4.3 percent, a fraction of the tax rate paid by typical middle income U.S. families, and only a fifth of the 21 percent statutory U.S. corporate income tax rate.