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Background

I saw this article saying that Amazon paid $0 in corporate income tax last year. Is this true or just phrased to sound like they are getting away with paying nothing?

Here's the article: Amazon’s $0 corporate income tax bill last year, explained

Claims from article

Chart:Tax Chart Confused on why they say "Federal Tax" in the graph, but corporate income tax throughout the article

Quote:

Yet during this surge into profitability — the company’s earnings doubled between 2017 and 2018 — Amazon’s tax bill has actually gone down. The company paid $0 in corporate income tax last year, according to an analysis from the Institute on Taxation and Economic Policy, an astonishing figure that generated dozens of news stories last week.

DJClayworth
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    Is the graph saying that the company paid negative tax in 2017 and 2018? – Andrew Grimm Mar 05 '19 at 01:56
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    @AndrewGrimm yeah I saw in another article "To top it off, Amazon actually reported a $129 million 2018 federal income tax rebate—making its tax rate -1%."(http://fortune.com/2019/02/14/amazon-doesnt-pay-federal-taxes-2019) – Noah Cristino Mar 05 '19 at 02:08
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    An alternative way of phrasing the question might be "Did Amazon pay any tax that they were not required to last year?". – Vince O'Sullivan Mar 05 '19 at 19:30
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    There were similar statements made recently about Netflix paying 0 *percent* tax. [Analyses on Hacker News here](https://news.ycombinator.com/item?id=19096593) and [here](https://news.ycombinator.com/item?id=19096963). It turned out that it was 1%. – JdeBP Mar 06 '19 at 12:38
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    @VinceO'Sullivan that would be an entirely different claim (and one that would be much harder to verify) – De Novo Mar 07 '19 at 00:21
  • it's worth noting that by using the stock compensation tax deduction, amazon has converted an arguably regressive corporate tax into a progressive personal income tax. especially since the people who care about this kind of sensationalist headline probably prefer progressive taxes. – james turner Mar 07 '19 at 17:33
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    "taxes" in the title; "corporate income tax" in the question body; "federal tax" (meaning US federal tax) in the cited source: these are not the same thing. They will also be paying employment taxes, taxes on their premises, state taxes, other taxes in other countries, etc etc. – Michael Kay Mar 10 '19 at 09:45
  • Rapidly growing firms that have invested a lot to grow make large losses in their early years. Those losses generate buffers against future tax liabilities. So it is not clear that tax paid in a single year is particularly notable until the accumulated losses and credits for investment have been exhausted. – matt_black Aug 21 '20 at 09:02

1 Answers1

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When Bernie Sanders claimed Amazon didn't pay federal income taxes in 2017, Snopes wrote a helpful article:

In regards to U.S. federal income taxes, the claim that Amazon paid none in 2017 is almost certainly factual. While Amazon’s tax filings are not public, their SEC filing for the year 2017 illustrates that the company used the tax code expertly (and legally) to their advantage, so well that the company anticipated a $137 million tax refund from the federal government (numbers are in millions of dollars):

Amazon did pay taxes to individual U.S. states ($211 million) and to international jurisdictions ($724 million), but their federal income tax burden was (less than) zero. The filings indicate that two factors provided the lion share of Amazon’s reduced federal tax liability: $220 million worth of tax credits, and $917 million in tax-deductible executive pay derived from the sale of stocks

(Politifact also wrote about this, coming to the same conclusion: it's likely true.)

The form they're referring to is the 10-K. Looking at the 2018 filing, it has the same sections, so the same explanation applies. Under "Current Taxes: U.S. Federal" for 2018 it says "$(129)" (parenthesis indicate a negative number and this number is still in millions). In other words, much like last year, they expected to get a federal net tax refund, which is why the line in the graph is negative for those years.

Again, this is referring to federal income taxes. There's no evidence that they didn't pay other types of taxes; as you can see in the charts, the columns for "U.S. State" and "International" taxes all show positive numbers.

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Laurel
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    Comments are not for extended discussion; this conversation has been [moved to chat](https://chat.stackexchange.com/rooms/90704/discussion-on-answer-by-laurel-did-amazon-pay-0-in-taxes-last-year). – Oddthinking Mar 07 '19 at 01:15
  • This may be beyond the scope of the question, but a very brief discussion of why this can be might improve this (already good) answer. A decent explainer is [here](https://www.vox.com/2019/2/20/18231742/amazon-federal-taxes-zero-corporate-income). Essentially, a company can deduct executive pay in the form of stock from their revenue, thus reducing their taxable income. Since a company can issue new stock rather than go through stock buy backs, they can reduce their tax burden (to zero or beyond) more or less for free. (Of course, issuing new stock is not without consequence also). – duckmayr Mar 07 '19 at 11:49
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    @duckmayr "for free" Isn't it basically paying the executives from the investors' pockets rather than from the company's? – sgf Mar 07 '19 at 12:04
  • @sgf Yeah, hence the last sentence of my comment there; I don't mean "consequence free" or "with no economic impact on anyone." I mean specifically without directly costing the company – duckmayr Mar 07 '19 at 12:06
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    @duckmayr Yes, I was just thinking that it might be misleading to some people. After all, if my company pays you from my pockets, **I** certainly don't consider that free :) And there can be a lot of resentment when people hear of companies doing something for free, which might be misdirected in this specific case. – sgf Mar 07 '19 at 12:11
  • @sgf Fair enough – duckmayr Mar 07 '19 at 12:13
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    @sgf "paying the executives from the investors' pockets rather than from the company's" I don't believe the way you are dividing the investors from the company here is sensible. The investors own the company. As an investor, I would want the company to use what ever approach is the most efficient from a tax perspective so that the value of what I own is maximized. It's not necessarily the best thing for the investors (although Amazon employees are largely [compensated with stock](https://www.google.com/search?q=amazon+max+salary)) so you would expect them to want to enhance stock value. – JimmyJames Mar 07 '19 at 19:29
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    @JimmyJames Wait, let me get this straight. As an investor, you want the company to utilize a dilutionary approach that devalues your stock, so that they can pay less taxes, (meaning that you end up personally paying more to make up for it,) which ends up costing you money twice over... because *it makes you wealthier?!?* That does not compute. – Mason Wheeler Mar 07 '19 at 20:48
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    @MasonWheeler As an investor in a stock, I want the value of my investment to go up. When the company whose stock I own pays taxes, that subtracts from the ['retained earnings'](https://www.investopedia.com/terms/r/retainedearnings.asp) of the company which I own part of and devalues my stock. Diluting the shares also devalues my stock. But which has a bigger impact? If the dilution is small relative to the overall market capitalization, the resulting loss in value might not even be detectable and it turns out [cash](https://en.wikipedia.org/wiki/Cash_is_king) is a really good thing to have. – JimmyJames Mar 07 '19 at 21:00