Join        Login             Stock Quote

Amazon: Let's Play Diversion

 May 01, 2012 08:47 AM

(By Karl Denninger) This is going to get good.

As everyone is by now aware Amazon had "blowout" earnings, sending the stock up $30, or 15% to $226.85.  As one of the "high-flying darlings" of the world today they're a great stock to own right here and now, right?

Not so fast.

Buried in the rah-rah was the fact that the company agreed to collect and remit Texas sales tax, as they have facilities (warehouses) in Texas.  Amazon has been quietly reaching these deals of late, and will be collecting and remitting tax in 12 states, making up ~40% of the population, by 2016. 

The problem Amazon has is part of the "law of large numbers."  Long-standing law says you need "nexus" to be forced to collect and remit sales taxes.  "Nexus" is defined as some sort of business presence or connection to the state in question; without it there is no jurisdiction and therefore no ability of the state to impose a legal duty to do something.

[Related -Level Watching and Swing Trade Planning for Amazon (AMZN)]

Amazon has for years set up subsidiaries and played other games to allow them to locate warehouses around the country while not collecting sales tax.  They have to do this to control shipping costs, as shipping is distance-sensitive -- as volume goes up there comes a point where it is far less expensive to put a warehouse in a given place than ship product the extra 500 miles. Amazon's tax-dodging strategy is a dubious practice that has come under attack by various jurisdictions (in my opinion with good cause) as this is not so simple as hiring someone to deliver something (e.g.

Next Page >>12


Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageAutomating Ourselves To Unemployment

In this current era of central planning, malincentives abound. We raced to frack as fast we could for the read on...

article imageFed: Waiting For June… Or Godot?

The Federal Reserve left interest rates unchanged yesterday, as widely expected. But the possibility of a read on...

article imageThe Single Best Place To Invest Your Money For Retirement

It was never supposed to be this daunting. At least that's what we were read on...

article imageNegative Blowback From Negative Interest Rates

The Federal Reserve is widely expected to leave interest rates unchanged today. But perhaps standing pat read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.