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Originally published February 10, 2011 at 5:23 PM | Page modified February 11, 2011 at 6:49 AM

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Amazon closing Texas distribution center amid tax dispute

Online retail giant Amazon.com is closing a suburban Dallas distribution center and scrapping plans to expand Texas operations after a dispute with the state over millions of dollars in sales taxes, an executive informed employees Thursday in an e-mail.

The Associated Press

AUSTIN, Texas — Online retail giant Amazon.com is closing a suburban Dallas distribution center and scrapping plans to expand Texas operations after a dispute with the state over millions of dollars in sales taxes, an executive informed employees Thursday in an e-mail obtained by The Associated Press.

Dave Clark, Amazon's vice president of operations, writes in the e-mail that the center will close April 12 due to Texas' "unfavorable regulatory climate." Amazon spokeswoman Mary Osako would not say Thursday how many employees work at the Irving distribution center.

Texas contends Amazon is responsible for sales taxes not collected on online sales in the state. The comptroller's office last year demanded $269 million in uncollected sales taxes from the company. The case is now pending before the State Office of Administrative Hearings.

"We regret losing any business in Texas, but our position hasn't changed: If you have a presence in the state of Texas you are required to pay sales tax, just like any other business that has a presence in Texas," said Allen Spelce, a spokesman for Texas Comptroller Susan Combs.

Spelce said Texas loses an estimated $600 million in Internet sales taxes every year.

Amazon has been the target of numerous lawsuits filed by states seeking sales taxes on online purchases made from within their borders.

Clark said in his e-mail that the company also is scrapping plans "to build additional facilities and expand in Texas, bringing more than 1,000 new jobs and tens of millions of investment dollars to the state." Texas employees who are willing to relocate will be offered positions in other states, Clark said.

"We've had ongoing communications over the years encouraging Amazon to expand their business in Texas, and we recently encouraged them to stay in the state," said Katherine Cesinger, spokeswoman for Gov. Rick Perry. "We are always mindful of the tax burden on families and businesses in our state, and it is important that Texas clarify the laws regarding this issue to further strengthen the reliability of our tax system and to protect Texas jobs."

The Irving distribution center, known as a fulfillment center, opened in 2005. During Amazon's fourth-quarter earnings conference call last month, CFO Tom Szkutak said the company had 52 fulfillment centers after adding 13 in 2010.

The Alliance for Main Street Fairness, a lobbying group for small businesses working to eliminate Internet sales-tax loopholes, criticized Amazon's decision to close the Irving center.

"Texas retailers collect and remit sales taxes every day — whether the sale happens in a store or online,"said Danny Diaz, a spokesman for the group. "Amazon.com was asked to play by the same rules, and has responded by eliminating hundreds of Texas jobs. Amazon could have chosen to collect the sales tax as Texas retailers do, but instead they opted to protect their special sales-tax loophole to the detriment of hardworking families."

Associated Press reporter

Danny Robbins contributed

to this report from Dallas.

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