Amazon

Amazon Will Pay a Whopping $0 in Federal Taxes on $11.2 Billion Profits

16 February 2019

From Fortune:

Those wondering how many zeros Amazon, which is valued at nearly $800 billion, has to pay in federal taxes might be surprised to learn that its check to the IRS will read exactly $0.00.

According to a report published by the Institute on Taxation and Economic (ITEP) policy Wednesday, the e-tail/retail/tech/entertainment/everything giant won’t have to pay a cent in federal taxes for the second year in a row.

This tax-free break comes even though Amazon almost doubled its U.S. profits from $5.6 billion to $11.2 billion between 2017 and 2018.

To top it off, Amazon actually reported a $129 million 2018 federal income tax rebate—making its tax rate -1%.

. . . .

ITEP notes that its non-existent federal tax payment is a result of the Trump Administration’s corporation-friendly tax cuts. The think tank writes that the 2017 Tax Cuts and Jobs Act not only decreased corporate tax rates from 35% to 21%, but it also didn’t close “a slew of tax loopholes that allow profitable companies to routinely avoid paying federal and state income taxes on almost half of their profits.”

Link to the rest at Fortune

PG apologizes for the annoying auto-play video with an accompanying audio track in the OP.

PG also notes that Amazon doesn’t write the federal or state tax codes and PG hasn’t seen any reports that Amazon has violated any of those laws.

As far as tax “loopholes” are concerned, one person’s loophole is another person’s reasonable provision for calculating a fair tax rate.

One of the most commonly-used deductions for individual taxpayers is the mortgage interest deduction. If an individual or couple purchased a home and borrowed money to help fund that purpose, the interest they pay on that loan is deductible from their gross income.

The rationale for this loophole is a belief by the elected representatives of the people that a great many benefits arise when citizens are able to purchase and own their homes. Community stability and the encouragement of civic virtues due to lower rates of transience within a community, encouragement for couples to have children, the benefits to those children (and future taxpayers) that arise from being able to grow up in a single home and attend neighborhood schools as compared to moving to a new location every one-two years due to rent increases on a rented residence, etc., etc., etc.

While there are counter-arguments, PG suggests the home mortgage deduction is highly-valued by a large majority of the adult population of the United States.

When dinosaurs walked the earth, PG took a couple of income tax law classes in law school and several of his classmates earned their Masters of Law in Taxation after completing regular law school.

The complexity and weirdness of the US tax laws cannot be overstated. There are tax attorneys in the United States who earn a good living for their entire careers by specializing in the application and avoidance of taxes imposed under a couple of provisions in the tax law that most people have never heard of and would have difficulty in understanding without extensive prior tutoring in the nearly impenetrable language and concepts and conflicting interpretations of such underlying those laws.

Each of the 50 states have their own individual tax laws and the potential number of unintended interactions between state and federal tax laws probably cannot be calculated.

Speaking only of the US tax laws, there are disagreements about how long they are. In 2015, the Tax Foundation said the Federal Tax Laws and Regulations total more than ten million words.

This figure includes the federal internal revenue code (2,412,000 words long) and federal tax regulations (7,655,000 words long). It does not include the substantial body of tax-related case law that is often vital to understanding the tax code.

The length of the federal tax code and regulations has grown steadily over the past sixty years. In 1955, the two documents were 1.4 million words in length. Since then, they have grown at a pace of about 144,500 words a year. Today, the federal tax code is roughly six times as long as it was in 1955, while federal tax regulations are about 2.5 times as long.

. . . .

Americans spend 6.1 billion hours and $233.8 billon complying with the tax code. Due to increasing tax complexity, over 90 percent of taxpayers now hire professional tax preparers or use tax preparation software.

Why is the federal tax code so complex? In part, it’s because politicians have used the tax code to administer dozens of areas of federal policy – from healthcare to energy to education. In part, it’s because defining income and determining tax liability are inherently difficult tasks. And, in part, it’s because politicians have not made any serious effort to simplify the federal tax code for at least thirty years, instead adding on new provisions on top of one another.

The federal tax laws are so lengthy that there are disputes about how long it actually is. Again, from The Tax Foundation in 2014:

Andrew Grossman, the legislation counsel for the Joint Committee on Taxation that helps write tax laws, attacked us in Slate yesterday for saying that the tax code runs 70,000 pages, countering that it’s “only” 2,600 pages.

. . . .

There’s the literal statutes that Congress has passed (Title 26 of the U.S. Code). The Government Printing Office sells it spread over two volumes, and according to them, book oneis 1,404 pages and book two is 1,248 pages, for a total of 2,652 pages. At perhaps 450 words per page, that puts the tax code at well over 1 million words. (By way of comparison, the King James Bible has 788,280 words; War and Peace runs 560,000 words; and the Harry Potter series is just over 1 million words.)

. . . .

However, a tax practitioner who relies just on the tax statutes will go to jail, because so much of federal tax law is in IRS regulations, revenue rulings, and other clarifications. Congress will set down a policy and leave it to the IRS to write all the rules to implement it. These regulations aren’t short: the National Taxpayer Advocate did a Microsoft Word word count of the tax statutes and IRS regulations in 2012, and came up with roughly 4 million words. Again at roughly 450 words per page, that comes out to around 9,000 pages. The National Taxpayer Advocate also noted that the tax code changed 4,680 times from 2001 to 2012, an average of once per day.

. . . .

But, a lawyer who relies just on cases and regulations isn’t a very good lawyer, because most court decisions are made on the basis of previously decided cases. The respected legal publisher Commerce Clearing House (CCH) puts out such a compilation, the Standard Federal Tax Reporterof 70,000 pages, with notations after each statute containing relevant cases and other information. CCH itself considers this volume to be representative of “the tax code,” since an expert needs to know all 70,000 pages to understand the tax code in full.

So, has Amazon paid its “fair share” of income taxes? PG is highly confident that Amazon has used well-qualified tax experts to prepare its tax returns and calculate its tax liabilities.

For a long time, Amazon had no taxable profits at all. Indeed, it had losses. One of the concepts contained in various parts of the federal income tax laws is a “tax loss carry-forward”. Investopedia describes this as follows:

A tax loss carryforward is a provision that allows a taxpayer to carry over a tax loss to future years to offset a profit. The tax loss carryforward can be claimed by an individual or a business in order to reduce any future tax payments.

Amazon operated at a loss for the first several years of its existence and very thin profits for a lengthy period of time thereafter. To the best of PG’s knowledge, Amazon received no material payments from the US government to help it survive during those years.

Absent the benefits of loss carryforwards during the first years of lean profits, it’s possible that Jeff Bezos would have given up on the possibility that Amazon was ever going to be worth the very hard work he was putting into the company and closed it down so he could spend time working in another more financially-rewarding business.

Amazon currently reports it has 613,300 employees. PG suspects Amazon pays far better wages than McDonald’s does and each of those employees pays individual federal income taxes. From the standpoint of federal government tax revenues, is it a good thing for a company to employ over half a million people who each pay taxes? Would the country be better off if Amazon paid some corporate income taxes, but only employed 50,000 people?

PG will also note that, for its US employees, the company pays a huge amount of money into Social Security and Medicare as its employer’s share of those taxes, which are based upon the wages of its employees.

Romance Bestsellers and Hot New Releases

14 February 2019

Kindle Romance Bestsellers

Here are Amazon’s Hot New Romance Releases Print/Kindle Combined), Updated Hourly:

Romance

Amazon Cancels HQ2 Plans in New York City

14 February 2019

From The Wall Street Journal:

Amazon.com Inc. is abandoning its plans to build a new headquarters in New York City after the company faced stiff resistance from some local politicians who objected to giving one of the world’s most valuable companies billions of dollars in tax incentives.

The company said in a blog post Thursday that its commitment to a new headquarters required supportive elected officials and collaboration.

“While polls show that 70% of New Yorkers support our plans and investment, a number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward with the project we and many others envisioned in Long Island City,” the company said.

The decision to abandon its new headquarters in Long Island City marks a stunning reversal. Amazon spent a year conducting a public search for a second headquarters, in which hundreds of locations vied for a shot at a promised 50,000 jobs and $5 billion in investment.

. . . .

Amazon said it won’t reopen its headquarters search. It will continue to add jobs at its other headquarters location in Northern Virginia, as well as offices in Nashville and other tech hubs around the country, the company said.

Link to the rest at The Wall Street Journal

Jeff Bezos chose Medium for possibly the most important blog post of his life

10 February 2019

From Mashable:

When Amazon CEO Jeff Bezos dropped a bombshell blog post saying the National Enquirerwas attempting to blackmail him with nude photos, it immediately set the internet ablaze.

The lengthy post is full of scandalous details: not only does the National Enquirer have Bezos’ nudes (which are described in excruciatingly vivid detail), but the company allegedly used said photos to blackmail him into ending a Washington Post investigation into the tabloid. On Friday, AMI issued a statement claiming it had “acted lawfully” in pursuing the story and would investigate Bezos’ allegations.

Bezos’ post also notes the connections between Enquirer-publisher David Pecker, Donald Trump, and the Saudi government.

It’s enough to make anyone’s head explode.

But nearly as surprising is the fact that Bezos, a billionaire who owns The Washington Post, opted to self-publish on Medium.

. . . .

Though Medium has hosted a number of famous authors, including Hillary Clinton and Barack Obama, it’s not exactly the place you’d expect the richest man in the world to air his blackmail-fueled dirty laundry.

Billionaire tech moguls tend to favor the op-ed pages of prestigious papers or their own websites, where they can ramble on as long as they like, without the nuisance of an outside editor. Yet Bezos turned to the free platform whose goal is to “fix” the media industry.

. . . .

The fallout from Bezos’ decision to make his Enquirer emails public is potentially huge. Legal experts are already speculating it could trigger a new round of investigations into parent company AMI. And while we don’t know what the consequences of Bezos’ disclosures will be yet, the fact is, whatever ends up happening: it all started on Medium.

Link to the rest at Mashable

What Happens When Billionaires Battle Gossipmongers?

9 February 2019

From The Washington Post:

Both men have gobs of money.

They didn’t make it the old-fashioned way, with steel and brick, but instead with big, disruptive, life-changing ideas.

After they got rich, after they’d achieved a titan status imaginable only in the digital age, that’s when the tabloids came for them.

And that’s when they went to war.

Theirs is a tale of two billionaires — Jeffrey P. Bezos of Amazon.com fame and Peter Thiel, who birthed PayPal. So different in style and temperament, the two men have each found their sex lives splashed in public against their wills in separate tabloid “gotchas.” But they have tangled with the merchants of salacity in completely opposite ways.

Bezos, who also owns The Washington Post, blasted his disdain into the maw of the Internet, essentially delivering the equivalent of a lawyer’s opening statement with the entire planet sitting in the jury box. Thiel operated in sotto voce fashion, secretly maneuvering to exact revenge and not surfacing until he had triumphed.

Bezos is locked in a conflict with the National Enquirer, which last month published intimate text messages he’d sent to Lauren Sanchez, with whom he was having an extramarital affair, and photos of them together. In a Medium post Thursday, Bezos accused the supermarket tabloid, which is owned by American Media Inc., of blackmail and extortion for threatening to publish additional intimate photographs if he and his representatives did not agree to stop their investigation of the how the material was obtained. Bezos suggested that the tabloid, whose parent company is run by a friend of President Trump, had political motives to run stories about his affair. Trump has frequently attacked Bezos over his ownership of The Post.

Thiel’s battle took place against Gawker, the sassy and sometimes raunchy website that earned his eternal enmity by outing him as gay in 2007. He got back at the site in 2016 when he surreptitiously funded a successful lawsuit by Terry Bollea, better known as the wrestler Hulk Hogan, over the site’s 2012 publication of a tape depicting Bollea having sex. Gawker went out of business after a jury awarded $140 million in damages.

“They are two fundamentally different approaches to similar problems,” said Ryan Holiday, author of “Conspiracy: Peter Thiel, Hulk Hogan, Gawker, and the Anatomy of Intrigue.”

When Thiel’s involvement in the Bollea case was revealed, Bezos was less than enthusiastic about his fellow tech titan’s actions. At a conference in June 2016, Bezos was asked about the Thiel-Gawker slugfest. He responded with an old saying: “Seek revenge and you should dig two graves, one for yourself.”

“Is that really how you want to spend your time?” Bezos went on to say. “As a public figure, the best defense to speech that you don’t like is to develop a thick skin.”

Those remarks came to mind for Bezos watchers after his posting on Medium, a self-publishing website.

. . . .

In the first paragraph of Bezos’s post, he frames his decision to publicize letters he had received from the National Enquirer as evidence of wrongdoing — a step beyond berating the tabloid for publishing details of his private life.

“Rather than capitulate to extortion and blackmail, I’ve decided to publish exactly what they sent me, despite the personal cost and embarrassment they threaten,” Bezos wrote.

The saga is drenched in a hailstorm of theories and counter-theories. Bezos’s team, headed by famed security consultant Gavin de Becker, has cast a suspicious eye on Michael Sanchez regarding the leak of the texts and photos. Sanchez is the brother of Bezos’s girlfriend, former TV host Lauren Sanchez. Michael Sanchez is a Trump supporter, and his potential involvement is part of a theory that the leak is a political hit.

. . . .

Both Sanchez and de Becker have, at times, explored the possibility that the text messages were obtained by a foreign government or a business competitor, according to interviews and a Post review of emails and text messages. Sanchez has even posited that Israel’s Mossad, British intelligence or the U.S. National Security Agency might be involved. (De Becker ultimately concluded that hacking was not involved.)

Link to the rest at The Washington Post

PG hopes he is wrong, but, more than once, he has had the feeling that, a few years down the road, we may look back on this series of events as a turning point for Amazon.

From the beginnings of Amazon, Bezos has put his distinctive personal stamp on the company in the same way that Steve Jobs and Bill Gates built very large companies which seemed to be reflections of their very different personalities.

Jobs, of course, was forced to give up his management position due to cancer while Gates retired from Microsoft in an orderly fashion, but neither company has been the same since the person with the dominant vision that drove its tremendous growth departed.

For PG, Microsoft has become the most boring large tech company in the world. Windows continues. MS Office continues. Like a power utility company, each relies primarily upon its quasi-monopoly position to keep the dollars rolling in.

New Microsoft products seem to be lame derivatives of products originated elsewhere. Microsoft Surface is an iPad wannabe. Why does Edge even exist? MS is into producing products and services that are derivative of its own ancient good ideas or the ideas of others.

On the other hand, Apple is much less boring because post-Jobs management has made the mistake of believing it can continue to raise prices without doing anything really new. Now it’s in the process of cutting prices on its iPhones and iPads to stem a significant decline in sales and the new ideas in mobile phones are all coming out of China.

So what do we make of Bezos and Amazon?

Has Bezos lost his mind? He’s supposed to be reliably brilliant.

The year is 2019 and intelligent people don’t take nude selfies and text them to other people. That’s a mistake that any intelligent sixteen-year-old who wants to get into a good college will not make.

Additionally, intelligent people haven’t gotten into big fights with The National Enquirer for decades. Bezos already bought The Washington Post. He should have purchased The National Enquirer and fired everybody he didn’t like.

When he spent a lot of his time in court, PG had to talk more than one client out of suing someone because the collateral damage to the client’s reputation would far exceed any monetary benefit the client would derive. On such occasions, he would sometimes quote George Bernard Shaw.

I learned long ago, never to wrestle with a pig. You get dirty, and besides, the pig likes it.

~ George Bernard Shaw

Stolen Artwork Is All over Amazon

8 February 2019

From BuzzFeed News:

When artist Susie Ghahremani first came across a seller impersonating her on Amazon, she stayed up until 6 a.m., clicking through hundreds of the seller’s listings and reporting over two dozen URLs featuring counterfeit products. The rip-offs of her designs on Amazon were blatant: One listing used Ghahremani’s photo of a necklace she’d made, which featured her owl illustration in its pendant. The seller also claimed “Artwork by me, Susie Ghahremani” in the description. Still, Amazon denied Ghahremani’s takedown requests four times and only relented after her tweet chastising the company went viral.

The issue of stolen artwork on Amazon is widespread and well-known, but the company hasn’t addressed the infringement in a meaningful way. Fighting unauthorized use of artists’ original work on the site remains a constant battle. Though Amazon has a Brand Registry that allows Apple and other businesses to upload their trademarks and combat counterfeiting, independent creators who spoke to BuzzFeed News say the program doesn’t work for them — but they believe it should. Works of art are considered copyrighted goods and are not trademarks, like a brand name or logo, so artists don’t qualify for the “proactive brand protection” Amazon’s Brand Registry provides.

. . . .

Artists, photographers, and designers must instead resort to removal requests. They claim Amazon is slow to heed takedown notices and sometimes rejects them, even when listings clearly feature stolen photographs and artwork. They say that it often forces them to file complaints over and over again and that the site does not ban flagrant repeat offenders from its marketplace. And even when the company does remove infringing listings, the same stolen artwork often crops up again elsewhere on the site. On top of that, while the law requires Amazon to remove infringement, it does not hold the company responsible when artists sue the e-commerce giant for hosting stolen artwork and providing logistics for sellers who offer it.

“It would be ridiculous for us to try to combat this. We’re a small business,” Bryan Ambacher, the owner of Etsy shop CosmicFirefly, whose handmade jewelry is often copied and sold on Amazon, told BuzzFeed News. “We don’t retain an attorney. We make $150,000 a year in sales. And Amazon’s gotten so big that it’s like whack-a-mole. It makes me think you can’t beat Goliath,” he said.

. . . .

Amazon is required by US laws, including the Digital Millennium Copyright Act, to heed takedown requests from art copyright holders. “Amazon absolutely has to comply if they receive notice, under the DMCA,” said Joel Rothman, an intellectual property lawyer specializing in infringement cases.

But according to independent artists, Amazon typically doesn’t fulfill their first requests, and it sometimes offers inconsistent explanations as to why it doesn’t have to.

Ghahremani was dumbfounded in December 2018 when Amazon repeatedly refused to remove the listing of an owl necklace she reported. The artwork and product photo was hers, but the listing wasn’t.

“It shouldn’t have been a big deal. You’re not suing, you’re not making unreasonable demands — just that it gets removed — and Amazon won’t even respect that,” said Ghahremani.

Link to the rest at BuzzFeed News

Amazon Dives into Self-Driving Cars with a Bet on Aurora

7 February 2019

From Wired:

Amazon Wednesday made perhaps its most significant move yet into the self-driving car space, announcing an investment in autonomous tech developer Aurora. For a company with one of the largest logistics operations on the planet, it’s about time.

“Autonomous technology has the potential to help make the jobs of our employees and partners safer and more productive, whether it’s in a fulfillment center or on the road, and we’re excited about the possibilities,” an Amazon spokesperson said in a statement. Amazon and Aurora declined to disclose the terms of the investment.

. . . .

Amazon has previously dabbled in this space. It was a partner on Toyota’s e-Palette concept project. It pitches its Amazon Web Services unit as a tool for autonomous vehicle developers and hosts an autonomous racing league for 1/18th-scale race cars. In 2017, The Wall Street Journal reported the company had formed a small team focused on driverless tech, and CNBC reported last month that it’s working with robo-trucking startup Embark to move some goods on the I-10 freeway. Amazon is developing robots to schlep groceries and food deliveries.

Link to the rest at Wired

PG hasn’t seen a lot of detailed analysis in the business press about the potential for liability coming back to bite the investors in self-driving cars.

In March of last year, an Uber self-driving car was involved in a fatal vehicular accident. The auto hit and killed a woman who was walking with her bicycle and it appeared that the Uber vehicle’s self-driving systems did not respond in any way calculated to avoid hitting the woman.

The Department of Motor Vehicles in California has issued regulations governing self-driving cars in that state and has some sort of process for issuing permits to operate those vehicles on public roadways.

While contemplating this matter, it occurred to PG that a vehicular murder caused by subtle adjustments to a self-driving car’s software/firmware to cause the vehicle to home in on a particular cell phone signal could make a nice book.

Book Shopping on Amazon? Don’t Be Duped Into Buying a Summary

7 February 2019

From The Wall Street Journal:

Summaries of popular books have long been a staple in the publishing business. Now they are often hard to tell apart from the real thing.

Authors and publishers say they are concerned about a recent surge in summaries available on Amazon, some of which have covers that copy or mimic the original’s art and use the author’s name. Some consumers are mistakenly buying those summaries instead of the original works, they say, hurting their sales.

Summaries of top-selling self-help and business titles appear at or near the top of recent searches for the books on Amazon, a Wall Street Journal analysis found. In some cases, the covers of the summary and the original book were very similar—aside from a “summary” label at the top.

. . . .

After the Journal contacted Amazon.com Inc. last week, the company said it would remove the works from its store that violated its rules and subsequently pulled a number of summary titles highlighted by the Journal.

Amazon, much like Alphabet Inc.’s Google and Facebook Inc., has come under pressure to do a better job policing inappropriate activity on its platform. The company has struggled to entirely weed out makers of counterfeit products, as well as sellers who are finding new tricks to outsmart Amazon’s automated product-ranking system. Its sponsored-item advertisements have come under criticism for looking similar to regular listings and appearing in unexpected spots such as people’s baby registries. The book summaries, typically self-published using Amazon’s tools, are the latest challenge.

Publishers say the current offering of summaries—which retail for a fraction of the original’s price—differ from past ones such as CliffsNotes, which often had generic covers that looked nothing like the original, and ranked lower in search results.

The new breed of summary publishers have used Amazon’s powerful advertising platformto their advantage, buying up keywords that ensure their products appear above those of nonpaying sellers—albeit with a “sponsored” tag above the title. Sometimes, the summaries even carry a “best-seller” label.

. . . .

Amazon said in a securities filing last week that it may not be able to prevent sellers “from selling unlawful, counterfeit, pirated, or stolen goods, selling goods in an unlawful or unethical manner, violating the proprietary rights of others, or otherwise violating our policies.”

An Amazon spokesman said the company required that book summaries “be sufficiently differentiated to avoid customer confusion.”

. . . .

Among the titles removed by Amazon last week after the Journal inquired were several summaries of Marie Kondo’s “The Life-Changing Magic of Tidying Up.”

. . . .

Summaries that use the same covers or mimic the covers of the original books may constitute unfair competition under state and federal laws, Mr. Brown added. Distinctive covers have value, he said, and those rights holders are protected. “It is really about causing confusion in the marketplace,” said Mr. Brown.

Link to the rest at The Wall Street Journal

PG admits to being surprised that Amazon’s policing of this type of book has been so lax. Can it really be that difficult to build algorithms that highlight “books” that are designed to free-ride on bestsellers?

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