Tax attorneys for Amazon.com must be working overtime these days…
This week, Amazon.com learned that it faced another affiliate challenge: in Japan. This time, however, rather than its affiliate sales program, the focus is on corporate affiliates for Amazon.com. The two affiliates in question are Amazon Japan and Amazon Japan Logistics, which, exactly as they sound like they would be, are responsible for sales and operations inside Japan.
The Tokyo Regional Taxation Bureau claims that Amazon.com’s US companies have been improperly booking sales income in the US for Japanese sales in order to avoid taxes in Japan. The Bureau has put Amazon on notice that it intends to try and collect back taxes of $119 million as a result of what it perceives as underreporting inside Japan.
Here’s the confusion: US companies that do business in Japan but don’t have a physical presence/branch office inside the country are not required to file Japanese tax returns. Amazon.com claims this is the case. But the tax bureau has determined that Amazon Japan and Amazon Japan Logistics have been acting as branch offices. As a result, Japan is seeking back taxes from the company through December 2005.
Amazon and its affiliates are currently in talks with the authorities: in other words, expect a settlement.
