Taxes are an inevitable part of life, and they affect both individuals and businesses. While many of us are familiar with Amazon as a top e-commerce retailer, it raises the question of whether the company pays taxes. If you’re curious about Amazon’s tax status, keep reading for the full details.
Despite its enormous revenue of 386 billion U.S. dollars, Amazon has a long history of avoiding federal taxes using corporate tax loopholes. The company’s federal income tax rate was only 9.4 percent, compared to the 21 percent statutory corporate tax rate. Amazon often utilizes tax credits, stock options, and other deductions to pay less tax.
If you want to learn more about how and where Amazon pays taxes, read on for the full scoop on this topic.
Why Does Amazon Pay No Taxes?
Amazon’s tax practices have been a topic of controversy, with some questioning if the company pays its fair share of taxes.
While Amazon does pay taxes, its effective tax rate is lower than what many would expect for a company of its size and revenue.
Through various tax breaks and credits, Amazon has been able to keep its federal income tax rate at a much lower rate than the statutory corporate tax rate of 21 percent.
One way Amazon benefits from tax credits is by investing in environmentally-friendly technology, such as sustainable packaging and electric delivery vehicles.
Amazon also receives incentives and deductions for research, investment, and employee compensation.
Despite criticisms, Amazon’s tax practices are legal, and the company continues to enjoy significant tax benefits as it grows and expands its operations.
If you want to know more about Amazon and its practices, you can check out our related posts on Amazon trade-in program, Amazon fire stick, and Amazon return policy.
Where Does Amazon Pay Taxes?
Amazon pays taxes in the United States as well as in other countries where the company has a presence, such as Canada, Mexico, and the United Kingdom.
International tax requirements differ, but Amazon is also able to claim tax deductions in its various locations due to its significant investment activities.
Despite these efforts, Amazon has faced criticism from politicians who question the company’s low tax rate compared to its massive revenue.
One reason for this criticism is that, in the past, Amazon has received tax refunds from the US government instead of having to pay taxes like most other corporations.
However, Amazon argues that it meets its tax obligations and receives tax incentives fairly due to the significant investments the company makes in research and development technologies, including a whopping $42.7 billion in 2019 alone.
How Much Does Amazon Pay In Taxes?
Amazon’s tax payments have been a topic of discussion for several years. In 2017 and 2018, the company did not pay any federal income tax, and even received tax refunds from the U.S. Government. However, in 2020, Amazon had to pay $162 million in federal income taxes, marking the first time in four years that the company had to pay taxes.
This shift in tax payments is attributed to the 2017 Tax Cuts and Jobs Act, which lowered the statutory corporate tax rate, allowing Amazon to avoid taxes with its billion-dollar investments. However, after paying its federal tax bill in 2020, Amazon had an even larger tax payment due in 2021. The company recorded a worldwide pretax income of $24 billion in 2020, which is a 73 percent increase from its $14 billion earnings in 2021.
Despite generating $20 billion in U.S. income for 2020, Amazon’s reported tax payment of $1.8 billion is less than half of the standard tax rate of 21 percent, which means the company avoided paying $2.3 billion in taxes. Amazon pays taxes in other countries where it operates, including Canada, Mexico, and the U.K. However, the company has received criticism for its tax activity and low tax rate, with politicians flagging the issue. Amazon defends its tax payments, stating that it meets its tax requirements and receives tax cuts fairly due to its heavy investment activities, including its $42.7 billion investment in research and development technology in 2019.
Is Amazon The Only Company That Gets Tax Breaks?
Amazon has faced criticism over its tax activity, with politicians and consumers alike questioning the company’s minimal tax payments. Senator Bernie Sanders, for example, tweeted in 2019 that Amazon Prime members pay more for their $119 annual subscription than Amazon paid in federal income taxes in 2017 or 2018. However, Amazon is not alone in benefiting from tax breaks and deductions.
Other major companies such as General Motors, Southwest Airlines, and Goldman Sachs have reported similar tax benefits. In fact, many of the biggest companies in the U.S. have been able to take advantage of tax breaks and deductions just like Amazon. If you want to know more about Amazon, check out our articles on how much Amazon makes a day, week & month, which credit bureau Amazon uses, and the Amazon tax exemption program.
Also Read: What Is An Amazon Fire Stick In 2023?
In summary, Amazon is a massive company that, like many other large corporations, takes advantage of tax breaks and incentives. Despite earning $20 billion in 2020, Amazon only paid $1.8 billion in federal income tax, thanks to tax deductions and credits. If Amazon paid the full 21 percent corporate tax rate, the company would have owed $4.1 billion in taxes. However, Amazon is committed to long-term investments, research, development, sustainability, and job creation, all of which make it eligible for tax benefits. As a result, Amazon continues to enjoy significant tax savings, despite criticism from politicians and consumers.
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