Democratic presidential candidates have seized on reports that Amazon paid no 2018 federal taxes. Here's the complex truth of the company's tax situation.
Boxes are stacked high in an Amazon fulfillment center in Baltimore. The company’s tax bill has become a political topic. Photo: clodagh kilcoyne/Reuters By Richard Rubin June 14, 2019 5:30 a.m. ET Democratic presidential candidates have seized on reports that Amazon.com Inc. paid no 2018 federal taxes as they press for changes in the tax system.
Amazon tweeted back: “We pay every penny we owe. Congress designed tax laws to encourage companies to reinvest in the American economy. We have. ... Assume VP Biden’s complaint is w/ the tax code, not Amazon.” But the current provision isn’t the same as the bottom line of Amazon’s 2018 tax return. Instead, the current provision is an accounting measure of the company’s near-term tax cost. It is an estimate of the 2018 tax bill plus settlements of past disputes, changes to past projections and updates to reflect new regulations and laws. Amazon’s total effective tax rate for 2018 was 11%, including that current provision but also adding in foreign, state and deferred taxes.
Those are signals that Amazon accumulated losses and tax credits faster than it generated income and tax liability. The law lets carryforwards smooth tax payments across business cycles and a company’s lifespan. What’s the right way to determine what Amazon actually pays? There’s no right way, and each year is a snapshot. Longer views can help. From 2012 through 2018, Amazon reported $25.4 billion in pretax U.S. income and current federal tax provisions totaling $1.9 billion. That is an 8% tax rate—low, but not zero or negative. Looking back further, since 2002, Amazon has earned $27.7 billion in global pretax profits and paid $3.6 billion in global cash income taxes, a 13% tax rate.
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