Name: Fortune Explains: Amazon's Federal Income Taxes
Uploaded: 2019-02-28
Duration: 3 min
Description: Amazon is unlikely to pay federal income tax for 2018. Here's how.

Amazon nearly doubled its US profits in 2018 to more than $ 11 billion. Guess how much it had to pay in federal income taxes? Zero. In fact, it received a federal income tax refund. That's according to The Institute on Taxation and Economic Policy, a Washington DC based think tank, which notes that companies like Amazon have for years found ways to pay little to no tax. Amazon's tax bill of 2018 raises the question: how? A couple of important things to know, one is that we dont know for sure how much Amazon is going to pay out it's 2018 18 income taxes. You'll need the tax returns to actually know that, and all this information comes from the company's public SEC filings. So it's important to know that Amazon did pay state and international taxes. And whatever methods it's using to reduce its income tax burden are legal. So as we know, last year Amazon reported more than $ 11 billion [ MUSIC ] there's some US profits. Also, last year was the first year that new tax laws came into effect, meaning that the corporate tax rate was cut from 35 % to 21 %. So in theory, the amount that Amazon should have paid in federal income tax is somewhere around 2. 3 billion dollars. Just like most of us, companies seldom, if ever, end up paying the full amount that they're on the hook for. There are at least three ways By which Amazon was likely able to reduce its income tax burden for 2018. The biggest item appears to be related to stock- based employee compensation. That's nearly $ 1. 1 billion that Amazon was able to deduct from its federal income taxes related to the stock options that it provides its employees. Like a lot of companies these days, Amazon pays its employees at least a portion of their salaries in stock instead of traditional compensation. When employees activate those stock options, Amazon then is able to deduct that From federal income tax bill. This year there are only $ 1. 1 billion. And there is $ 565 million in deferred income taxes. Now, Amazon had CC filling are short on specifics, but presumably these are the income taxes that the company will have to pay at some point, but not this year. The company loss have claimed $ 419 million in tax credits this year. And this is where tax reform comes into play. Under the 2017 tax reform law, Amazon was able to immediately expense 100 % of its capital investments, and things like equipment. Whether it's machinery in its fullfilment centers, or its web servers. That has helped contribute to its lower tax bill. And then there are a whole array of items that we're not sure of, but which we can assume that Amazon is using. To reduce its income tax plan this year. That includes up to $ 1. 4 billion in federal income tax credits that 've carry over from the years past. Is the right parameter in the social development. Is also up to $ 627 million In net loss carry overs. These are net losses from years past, the company is now able to claim to help reduce its income tax burden. Amazon, of course, would point to its positive impact on The US economy. That includes 250, 000 people employed across The US, hundreds of billions of dollars that it's spent in growing its business, as well as billions of dollars in taxes that it has admittedly paid. Across the country and around the world. Still that won't have switched critics who are irked that the company received $ 129 million income tax refund from the US government this year, instead of paying a single cent in federal taxes. [ MUSIC ] [ BLANK_AUDIO ]

Fortune Explains: Amazon's Federal Income Taxes

Finance

Amazon is unlikely to pay federal income tax for 2018. Here's how.