Japan Alerts Amazon to Life's Two Certainties

Amazon’s days of booking sales from its business in Japan back to the United States may be coming to an end. The Tokyo Regional Taxation Bureau has demanded back taxes of $119 million from Amazon’s Japanese affiliates, Amazon Japan and Amazon Japan Logistics.

Typically, U.S. companies that do business in Japan without offices in the country aren’t required to pay taxes to the Japanese government. And Amazon (AMZN) has long counted itself among them, claiming purchases made through Amazon Japan are technically transacted in the states. Yet the company does have some retail infrastructure in the country through which it handles merchandise distribution, logistics and whatnot. And, according to the Bureau, that means Amazon has “permanent establishment” in Japan and should be taxed in the country under the U.S.-Japan tax treaty.

Another nasty tax headache for Amazon.com, which also faces calls for tax payments back in the U.S. and in Britain, France, and Germany as well. From the company’s annual report:

We Could be Subject to Additional Income Tax Liabilities
We are subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in evaluating our worldwide provision for income taxes. During the ordinary course of business, there are many transactions for which the ultimate tax determination is uncertain. For example, our effective tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates, by changes in the valuation of our deferred tax assets and liabilities, or by changes in the relevant tax, accounting and other laws, regulations, principles and interpretations. We are subject to audit in various jurisdictions, and such jurisdictions may assess additional income tax against us. Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from our historical income tax provisions and accruals. The results of an audit or litigation could have a material effect on our operating results or cash flows in the period or periods for which that determination is made.

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Comments

[rrtzmd:]

...this article serves some purpose beyond what has ALREADY BEEN publicized via MULTIPLE news channels as well as via MULTIPLE websites???????...don't waste readers' time with useless crap like this....

Jul 07 02:41 PM

[Larry House:]

Somehow I had missed this, so it was news to me. Thanks, John.

Jul 07 03:21 PM

[Joseph L. S...:]

Mr. Paczkowski, this is not your first article, so I imagine you already know that 99.9% of the SA readers who choose to read the topics on which you post will be both interested and interesting; interested in your perspective and interesting in their discussion points.

There are also a small sad number of nattering nabobs of negativism (NNNs) whose spiteful comments have earned them downbeat comment rankings from the community. These fringe types hide behind their anonymity and just like to see their words in print, knowing that only on the Internet can their words appear as if they had some value. Their comment rankings reflect the value others place on them.

As I said to one of these recently: “If you don’t like it, don’t read it.” But still he returns. That’s OK. Every time one such NNN comments, it adds to your ranking on SA. The more they sputter and stammer, the more it helps you build readership that is honestly interested in Socratic discourse…

I agree with Larry House. If I haven’t seen it, it’s new to me. If I have, I can simply read your next posting instead. Thanks for being willing to contribute and suffer the slings and arrows of outrageous four-flushers.

Best regards,
JS

Jul 08 05:17 PM