As Amazon eludes state tax men, Borders shutters six Colorado stores
Borders Group will close six book stores and layoff 158 employees in Colorado this month. The news comes in the wake of a court order preventing online bookselling juggernaut Amazon.com from paying any sales tax in the state and a month after Amazon reported raking in eye-popping record profits.
“In light of the ongoing impact of the difficult economy of the past few years and the rapidly changing retailing environment for books and related products, it is essential that Borders restructure itself to reposition its business to be viable and successful over the long term,” the company explains at the website it has set up on the store closings.
Borders Group spokesman Donald Cutler told the Colorado Independent that the company is closing stores in Aurora, Boulder, Dillon, Grand Junction, Greeley and Littleton as part of a Chapter 11 reorganization through which it hopes to “reemerge as a vibrant retailer” in the market dominated by Amazon. Borders is closing 200 stores coast to coast, trimming its total number of outlets to 659.
“We decided which stores to close based on a combination of conditions and cost structures unique to those stores,” Cutler said. He declined to comment on Amazon and the fact that it pays no taxes in the state.
The “rapidly changing retailing environment for books and related products” Borders mentions at its website is shorthand for the rise of internet retail generally and of Amazon in particular.
Amazon sales hit $34.20 billion in 2010, a 39.5 percent increase from the year before. Financial analysts estimate that Amazon sales account for more than 10 percent of all online retail sales in North America. The company likely takes in hundreds of millions in annual sales to Colorado residents.
Yet, faced last year with the prospect that after more than a decade of doing business in Colorado it would have to begin to pay sales taxes, Amazon fired its negligibly paid online “affiliate employees” in the state. Those “employees” were essentially website owners who linked to Amazon to sell merchandise. Firing the affiliates was part of a nationwide legal strategy through which Amazon cuts physical ties to states in order to dilute arguments that Amazon should charge customers who live in those states sales taxes, just as all other retailers conducting business have to do.
House Bill 10-1193 would have required online retailers like Amazon to notify customers that they’re obligated to pay sales tax to the state.
Denver U.S. District Judge Robert Blackburn issued an injunction against the Colorado Department of Revenue in January that halted any coming tax collection. Amazon lost a similar court case in North Carolina. It also recently shuttered a distribution center in Texas rather than pay taxes there. Texas officials estimated Amazon owed $269 million in unpaid sales taxes.
The Seattle Times decried Amazon’s tax-dodging policies in a strong short editorial Wednesday, arguing that the company has grown “too big to be excused from its obligations.”