Does Amazon pay taxes? (location, how much + more)
Taxes are just a part of life, whether you like paying them or not.
Personal taxes are one thing, but business taxes are a whole different story, with the companies you know and love paying thousands, if not millions, of dollars in taxes.
If you’ve ever shopped on Amazon, you’re probably familiar with the e-commerce retailer’s popularity.
But how big is this business, and does Amazon pay taxes? I wondered if Amazon paid taxes too, so I started digging and here’s what I found!
Does Amazon pay taxes?
Amazon has long avoided paying federal taxes due to a corporate tax loophole. Amazon has $386 billion in annual revenue and a federal income tax rate of 9.4%, compared with a statutory corporate tax rate of 21%. In many cases, Amazon uses tax credits, stock options, and tax credits to reduce tax payments.
If you’re still curious about how and where Amazon pays its taxes, read on for full details on Amazon’s tax status.
Why doesn’t Amazon pay taxes?
While Amazon technically pays taxes, it doesn’t pay taxes on a billion-dollar company like you might think.
Much like Walmart and other large corporations, Amazon’s massive revenue and expenses put it in a prime position to benefit from corporate tax loopholes.
Amazon has maintained its relatively low tax status by using tax breaks for stock options and other tax credits.
The e-commerce leader has paid the lowest federal income tax for years, at 9.4% in recent fiscal years, well below the 21% required by the statutory corporate tax law.
Extensive tax credits and reliefs have been key to Amazon’s success when it comes to reining in the company’s tax obligations.
Additionally, Amazon is allowed to pay low tax rates because it receives incentives and deductions for research, investment, and employee compensation.
Another way Amazon is cutting taxes is by investing in environmentally friendly technology.
Amazon is committed to sustainable packaging and has eliminated more than 1 million tons of product packaging since 2015.
Additionally, the company has pledged to have 100,000 electric delivery vans in the next 20 years. It’s these practices that help Amazon qualify for hefty tax breaks and credits.
Where does Amazon pay taxes?
While Amazon owes most of its taxes in the U.S., where the company is headquartered, it also pays taxes in countries like Canada, Mexico and the U.K.
Income tax requirements vary by country, but Amazon is also able to receive tax breaks in its international locations due to its substantial investment activity.
Amazon has faced criticism in the past for paying taxes in every country it operates in.
Amazon has come under considerable criticism for its tax campaign because many politicians have pointed out that the e-commerce giant pays a low tax rate.
Not only that, but over the years, Amazon has actually received tax rebates from the US government, not the other way around like many companies.
Amazon, however, went on to push back against that criticism, saying the company complied with its tax requirements and received the tax break fairly and equitably. A
After all, in 2019 alone, Amazon spent $42.7 billion on R&D technology investments.
How Much Tax Does Amazon Pay?
In 2020, Amazon paid federal income taxes for the first time in four years.
When Amazon filed its 2019 tax filings with the U.S. Securities and Exchange Commission (SEC), it showed $162 million in taxes owed.
That’s a dramatic shift from 2017 and 2018, when Amazon paid $0 in U.S. federal income tax.
In fact, the U.S. government gave Amazon a $137 million tax rebate in 2017, followed by a $129 million federal tax rebate to Amazon in 2018.
The Tax Cuts and Jobs Act of 2017 lowered the statutory corporate tax rate, helping Amazon avoid taxes on its billions of dollars in investments.
After paying federal taxes in 2020, Amazon will have to pay even bigger taxes in 2021. Amazon’s global pre-tax income of $24 billion in 2020 is up 73% from $14 billion in 2021.
Amazon’s sales rose 38% in the pandemic year, generating $20 billion in U.S. revenue in 2020.
If Amazon paid the statutory corporate tax rate of 21 percent, its total federal income tax bill would be $4.1 billion.
However, Amazon’s reported tax bill of $1.8 billion was less than half of the standard tax rate, meaning the company avoided paying $2.3 billion in taxes.
Does Amazon have tax breaks in the US?
Amazon’s low federal income tax rate is largely due to generous tax breaks offered by the U.S. government.
How much tax relief Amazon gets depends on the company’s income and investing activities that year, though over the past few years Amazon has paid less than half the standard corporate tax rate.
Between 2018 and 2020, Amazon received $7.2 billion in tax subsidies and paid an effective federal income tax of 4.3%.
Remember, the US government provides tax breaks for stock options, and as a public company, Amazon saved $1.8 billion through those tax breaks.
An additional $639 million was saved thanks to a series of tax credits and, most importantly, continued investment in developing new locations, adding jobs and working on sustainability.
Is Amazon the only company getting a tax break?
Amazon’s tax campaign, or lack thereof, has drawn praise from politicians and consumers alike.
A prime example comes from Senator Bernie Sanders, who tweeted in 2019 that Amazon Prime members pay more for a $119 annual subscription than Amazon paid for the federal government in 2017 or 2018. Income tax is even more.
While Amazon is one of the best-known and most-watched companies when it comes to tax breaks, it’s certainly not the only one.
General Motors, Southwest Airlines, and Goldman Sachs are just a few large companies that have reported similar benefits, such as federal net income taxes.
If you look into many of the largest corporations in the US, they enjoy tax breaks and huge deductions just like Amazon.
To learn more about Amazon, you can also check out our articles on how much money Amazon makes daily, weekly, and monthly, which credit bureau Amazon uses, and the Amazon tax exemption program.
As No. 2 on the 2021 Fortune 500 list, Amazon is a multibillion-dollar company that benefits from massive tax breaks and incentives. Although Amazon earned $20 billion in net income in 2020, it only paid $1.8 billion in federal income taxes.
If Amazon paid the full statutory corporate tax rate of 21%, it would owe $4.1 billion, so Amazon effectively avoided $2.3 billion in taxes last year.
Like other large companies, Amazon has used tax breaks, primarily for investment and employment purposes.
As Amazon has rapidly expanded over the past decade to become the second-largest employer in the U.S. with about 1 million employees, Amazon has received tax breaks for its long-term commitment to employment, research, development and sustainable growth.