Name: Insights: How Amazon Turns $11 Billion In Profits into Zero Federal Taxes
Uploaded: 2020-02-11
Duration: 3 min 3 s
Description: Amazon is unlikely to pay federal income tax for 2018. Here's how. (February 2019)

 Amazon nearly doubled its US profits in 2018 to more than $11 billion. Guess how much of that it paid 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 taxes. But Amazon's tax bill for 2018 raises the question, how? A couple of important things to note. One, we don't know for sure how much Amazon is going to pay in its 2018 income taxes. You'll need the tax returns to actually know that. And all this information comes from the company's public SEC filings. It's also important to note 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 in 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. Here 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 their stock options, Amazon then is able to deduct that from its federal income tax bill. This year, nearly $1.1 billion. And then there's $565 million in deferred income taxes. Now, Amazon's SEC filings are short on specifics but presumably, these are income taxes that the company will have to pay at some point but not this year. The company also claimed $419 million in tax credits this year, and this is where tax reform comes into play. Under the 2017 Tax Reform Law, Amazon is able to immediately expense 100% of its capital investments in things like equipment, whether it's machinery in its fulfillment 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 burden this year. That includes up to $1.4 billion in federal income tax credits that have carried over from years past. This is really primarily to research and development. There's also up to $627 million in net loss carryovers. These are net losses from years past that 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 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 assuage critics who are irked that the company received a $129 million income tax refund from the US government this year instead of paying a single cent in federal taxes. 

Insights: How Amazon Turns $11 Billion In Profits into Zero Federal Taxes

Uncategorized

Amazon is unlikely to pay federal income tax for 2018.

Amazon Turns $11 Billion In Profits into Zero Federal Taxes

Amazon is unlikely to pay federal income tax for 2018. Here's how. (February 2019)

Amazon nearly doubled its US profits. 2018 more than $11 billion. Guess how much that it paid in federal income tax zero. In fact, it received a federal income tax refund. That's according to the Institute on Taxation and Economic Policy, Washington D. C. Based think tank, which knows that companies like Amazon have for years found ways to pay little to no taxes on Amazon. Taxable for 2018 raises the question. How a couple of important things to note one. We don't know for sure how much Amazon independent 2018 income taxes you need. The tax returns actually know that, and all this information comes from the company's public SEC filings. It's important to note that Amazon didn't pay state and international taxes, and whatever methods using to reduce its income tax burden are legal. So as we know, last year, Amazon reported more than $11 billion in US Also, last year was the first year that new tax laws came into effect mean 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 just like most of US company seldom, if ever, and that paying the full amount that they're on the hook for here. At least three ways by which Amazon was likely able to reduce income tax burden for 2018 the biggest item appears to be related to stock based employee compensation. That's nearly $1.1 billion the Amazon was able to deduct from federal income taxes to the stock options that it provides 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 activated stock options and was on then is able to deduct that from federal income tax bill here nearly $1.1 billion. And then there's $565 million in deferred income taxes. Now, Amazon filings are short on specifics, presumably during contacted, the company will have to pay at some point, but not this year. The company also claimed $419 million in tax cuts here, and this is where tax reform comes into play under the 2017 tax reform law and was able to immediately expense 100% of its capital investments and things like equipment, whether it's machinery in its fulfillment centers or its Web servers that helped contribute to lower taxes. And then there are a whole array of items that were not sure of but which we can assume, that Amazon is using to reduce income tax burden. This year, that includes upto $1.4 billion in federal income tax credits have carried over from years past. These relate primarily the research and development is also up. $627 million in net loss carry over. You know that losses from years past, the company is now able to claim to help reduce income tax burden. Amazon, of course, would point to its positive impact on the U. S economy. That includes 250,000 people employed across the U. S 100 doings of dollars spent in growing. It's business well as billions of dollars in tax that it has really paid across the country and around the world. Still, that one, which critics who are hurting the company received a $129 million income tax refund from the U. S government is here. Instead of paying a single cent federal tax