George S. May Business Blog

Hey Amazon, Japan’s on the phone and they want their money. All $119 million of it.

Japan announced that Amazon.com International Sales did not disclose income between 2003 and 2005. The allegations were originally made in 2007 and mentioned in Amazon’s 2008 annual report, but now, the Tokyo Regional Taxation Bureau seems to have gotten serious about making Amazon pay.

In short, here is how the whole mishap, well, mis-happened.

When a purchase is made through the Amazon Japan Web site, Amazon treats it as a sale made in the U.S. and so does not report it as an income in Japan. But Japanese authorities say Amazon has a physical presence in Japan through Amazon Japan and Amazon Japan Logistics, and hence is eligible to be taxed.

Actually, Amazon is in trouble in the U.S for similar reasons. The company recently suspended its Associates Program in Rhode Island, North Carolina and Hawaii after it was asked to collect and pay taxes on commissions earned by its associates in those states.

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