Amazon’s tax avoidance has the company sheltering profits

The online retail giant has been sheltering most of its profits from the United State's tax system.

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Taking advantage of state sales tax loopholes isn’t the only strategy Amazon uses to their benefit, the online retail giant has been sheltering most of its profits from the United State’s tax system.

Amazon paid zero dollars in federal income taxes on the company’s reported $5.6 billion in U.S. profits in 2017. In its latest financial filing, Amazon’s financial statement “suggests that various tax credits and tax breaks for executive stock options are responsible for zeroing out the company’s tax this year,” according to the Institute on Taxation and Economic Policy (ITEP).

But the tax avoidance didn’t start in 2017. Amazon has been sheltering most of its profits over a five year period, according to the ITEP. The company, which reported U.S. profits of $8.2 billion dollars during those five years, paid a federal income tax rate of 11.4 percent and pocketed more than two-thirds of its profits in that same five year period.

And with the new tax law that went into effect on Jan. 1, Amazon will benefit from a one-time tax break and a “grandfather clause” that will bring any deferred taxes down to a rate of 21 percent from its previous 35 percent, according to ITEP. This 40 percent discounted tax rate and the one-time corporate tax cut will save Amazon $789 billion dollars in U.S. taxes this year.

While Amazon continues to avoid federal corporate taxes, its sales tax dodging has put many brick-and-mortar retailers out of business. But many state officials are pushing to become the new home of Amazon’s headquarters, which could mean even more tax incentives for the giant online retailer.

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