This year, like every other year, is shaping up to be a triumphant one for Amazon. It is on the cusp of becoming the first trillion dollar company ever. In the coming months it will announce the opening of a second headquarters—and likely bank billions in tax breaks and other incentives from the lucky city it chooses to grace with its presence. The company’s founder and CEO Jeff Bezos will continue to be the richest person in the history of the world. Amazon will continue to grow at a rapid clip, gobbling up e-commerce market share and posting staggering revenues. It will even post profits. And it will pay next to nothing, and possibly nothing at all, in federal taxes.

Earlier this week, Matthew Gardner of the Institute on Taxation and Economic Policy reported that Amazon, which recorded $5.6 billion in profits in 2017, paid zero in federal taxes, thanks to “various tax credits and tax breaks for executive stock options.” That’s remarkable in isolation, but especially remarkable when you consider that Donald Trump’s corporate tax bill hadn’t even gone into effect; Amazon projects it will get an additional $789 million in benefits from the passage of that bill. And it’s even more remarkable given that Amazon was already paying a much lower rate than other companies. The tax bill may have cut the corporate tax rate from 35 to 20 percent, but Amazon had paid only an 11 percent rate over the previous five years, meaning that “the company was able to shelter more than two-thirds of its profits from tax during that five-year period,” Gardner wrote.

Tax avoidance is not new to Amazon. “More so than any company I can think of,” Gardner told me, “Amazon appears to have built their profit maximization strategy around avoiding taxes at various levels.” Amazon has used local, state, and federal tax laws to its benefit, while doing everything in its power to avoid posting profits. (The stock market rewards the company anyway, as it uses its low-profit strategy to decimate competitors and swallow up industries.) It’s reached the point where Amazon, over the past few years, has made an effort to pay some tax—largely, it seems, to avoid bad press.



The fact that it paid a zero percent rate in 2017 comes at an awkward time. As Amazon forces cities and states to offer it tax breaks for its new headquarters, combined with the hundreds of millions of dollars it will rake in next year from the tax bill, the company has become an outlier in the fierce competition to game the system, snatching the crown from Apple to become the country’s most prominent tax grifter. It has done this by being aggressively innovative, but it has reached a new stage in which it has become too successful—too big, if you will—to tax.



Exploiting tax loopholes is one of Amazon’s most important long-term strategies. As Splinter’s Emma Roller noted earlier this week, Bezos initially wanted to build Amazon’s headquarters on a Bay Area Native American reservation in order to receive a generous tax break from California. The deal fell through and Amazon landed in Seattle, but the pursuit of tax breaks continued. For years, Amazon’s exponential growth was fueled by its refusal to collect state taxes on transactions—the company once distributed color-coded maps to staffers indicating which states they could travel to without attracting the attention of tax collectors. Amazon only began collecting sales tax in all 50 states in April of last year, 20 years after it went public.

