Amazon Bargains Its Way Out of Paying Taxes

Amazon.com (Nasdaq: AMZN  ) has scored a minor victory in its war on taxes.

The company was able to win a temporary reprieve from collecting California state sales tax until September 2012 in exchange for agreeing to create at least 10,000 full-time jobs and hire 25,000 seasonal employees within the state's borders by 2015. This compares with the original offer to create 7,000 full-time jobs in exchange for a reprieve until 2014. The state will miss out on an estimated $200 million in tax revenue over the next year.

The September 2012 deadline would be in effect in the absence of any federal law to govern the issue. Amazon Vice President Paul Misener said, "The sales tax issue must be resolved in Congress. It's the appropriate way and the only way California will be able to collect all of the sales tax owed by customers."

California Gov. Jerry Brown signed the compromised legislation into law last Friday with Amazon's blessings. The deal even won support from the California Retailers Association, which has been Amazon's biggest opponent throughout the tax battle, contending that Amazon has an unfair advantage over brick-and-mortar retailers in the organization, such as Wal-Mart (NYSE: WMT  ) .

Thousands of Amazon affiliates took major hits in revenue -- some lost more than half of their income -- when Amazon cut ties to dodge the duty. With the concessions, many of the affiliates will be able to get back into business.

It will be good for Amazon to put this episode behind it. Expensive and prolonged legal battles typically only drain everyone involved. As a frequent Amazon shopper, I'm glad the company sticks up for me when it comes to paying the taxman, but it's never been a deciding factor for why I avoid big-box retailers like Best Buy (NYSE: BBY  ) like an overpriced plague.

As an Amazon shareholder, I think there are more important areas for the company to focus its resources, like its growing video-streaming offering and imminent Android tablet launch.

Fool contributor Evan Niu owns shares of Amazon.com, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Best Buy and Wal-Mart Stores. Motley Fool newsletter services have recommended buying shares of Wal-Mart Stores and Amazon.com and creating a diagonal call position in Wal-Mart Stores. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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