Amazon told investors it paid a federal income tax rate of 1.2% last year — that's about 13 percentage points lower than the average American's tax rate paid in 2019. Even more striking: That was a three-year high for Amazon.
Last year was the first time the ecommerce company reported paying taxes since 2016, according to recent financial statements filed with the Securities and Exchange Commission. Despite making billions in profits, Amazon showed federal tax refunds in 2017 and 2018. All told, the company reported $30.1 billion in profits in the U.S. over the past three years. It also reported paying a negative $104 million to the IRS — translation: Amazon received a nine-figure refund on its sizable earnings.
Amazon isn't alone, of course. Hundreds of U.S. companies now pay tax rates that are lower than those many Americans pay. A study late last year from the liberal Institute on Taxation and Economic Policy found that Fortune 500 companies pay an average tax rate of 11.3%.
The Republican tax cuts passed in late 2017 tax lowered the nominal corporate income rate to 21%, from a high of 35%. But tax credits and other breaks allow companies to pay lower rates than that.
Still, Amazon's 1.2% is low even for corporate America. The company defended its tax record in a blog post last week, saying it had $1 billion in "federal tax income expense" in 2019. Amazon also said that it paid $2.4 billion in other federal taxes, including employment taxes, and $1.6 billion in state and local taxes. It collected $9 billion in sales taxes on merchandise sold on its website, although most of that is money collected from customers and not paid out by Amazon itself.
Amazon also notes that tax credits for spending on research and development are main source of its tax breaks. Last year, the companyto open a new corporate office in New York City after the plan was criticized for handing out generous tax exemptions in exchange for the internet giant relocating jobs to the Big Apple.
"We follow all applicable federal and state tax laws," Amazon wrote in the blog post. Amazon did not respond to a request for comment from CBS MoneyWatch.
It's not clear what Amazon means by federal tax income "expense." That could mean that it paid $1 billion to Uncle Sam last year. Companies, like individuals, are not required to disclose their tax returns. Businesses also must file financial statements. But those filings follow a different set of accounting rules than what is required by the IRS. As a result, corporate tax expenses often differ from what the companies actually end up paying.
Senator Elizabeth Warren has proposed forcing companies to pay a tax based on their publicly reported profits, and not just what they report privately to the IRS.
Amazon's financial filings included an expense of $1.1 billion for federal U.S. taxes last year. But the filing also shows that the company only paid $162 million of that last year. What's more, it does not say what year those tax payments are for. The rest of its tax expense was labeled as deferred, and the company did not say when they would be paid.