Zero Income Taxes for Amazon in 2017

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Amazon does not have to pay any kind of federal income taxes even after the company income crossed $5.6 billion in 2017. The company's 10-K form reveals that the Seattle-headquartered company will pay only $769 million as taxes. From this amount, foreign taxes come to $724 million. This form offers an excellent overview of the company's financial and business condition. This form is to be submitted to Securities and Exchange Commission (SEC) every year by public companies along with quarterly updates in the form of 10-Q forms. There is yet another form- the current report or 8-K form- which helps shareholders to know the present economic conditions of the company.

Estimating amounts

Since Amazon's tax bill is a private matter, it is impossible to calculate how much money the company avoided paying. However, a rough estimate can be had from the figures available in the public domain. One such data is that Amazon took a deduction of $917 million on the stock options exercised by both former or current employees. The stock options, unlike wages that can be subtracted from the taxable income of the company, do not need the company to engage in cash expenditures. It means when someone cashes in his or her right, Amazon can deduct this from the company's taxable income.

Amazon's low tax bill can also come from the depreciation of capital expenditure. This is as companies are permitted to write off a few expense costs, like those which were incurred while constructing a warehouse, up-front. Such taxes are then shifted to the tax bill in future years. The company has made vague disclosures in the 10-K form. One such glaring example is a table present on page 65. The table lists $220 million tax credit. No indication exists whether these credits can be applied to foreign, federal or state taxes.

All legal

President Donald Trump's new policies have even helped Amazon to evade taxes. The new 2017 US Tax Cuts and Jobs Act brought on by the Trump administration has resulted in a massive $789 million reduction for the company. This comes after the company readjusted the tax estimates which are deferred under the old corporate tax rate amounting to 35 percent to meet the 21 percent rate as the new tax law. All these are completely legal. There is no evidence to suggest that Amazon has engaged in any kind of shady activity so that it can pay a reduced amount of money as tax.

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