Amazon's Federal Income Tax Bill Over Time
Amazon paid $0 in federal income tax in 2012 and again in 2011. In 2014, the company paid $0. In 2015, it paid $0 again. These are not estimates or accounting tricks — they are the actual federal income tax bills Amazon reported to the IRS in those years, despite earning billions in revenue.
Starting in 2016, Amazon began paying federal income tax, but the amounts stayed small relative to its size. In 2016 and 2017, the company paid roughly $100 million per year. In 2018, Amazon paid $0 again. By 2019, the company paid $162 million on revenue of $280 billion — an effective federal tax rate of about 0.1 percent. For comparison, the federal corporate tax rate is 21 percent.
In 2020 and 2021, Amazon's federal tax bills rose to $769 million and $1.5 billion respectively, though these amounts still represented less than 1 percent of the company's pre-tax income. The company's tax filings show it used research and development tax credits, stock-based compensation deductions, and other legal deductions to reduce its taxable income.
Key Takeaways
- Amazon paid zero federal income tax in multiple years (2011, 2012, 2014, 2015, and 2018) despite earning billions in revenue, using legal deductions and credits to reduce taxable income to zero or near-zero.
- When Amazon did pay federal income tax, its effective rate was often below 1 percent, far lower than the 21 percent statutory corporate tax rate.
- The company's low tax bills resulted from deductions for research and development spending, stock-based employee compensation, and depreciation of equipment and facilities.
- Amazon also pays state and local taxes, property taxes, and payroll taxes, which are separate from federal income tax and total billions of dollars annually across all jurisdictions.
- The difference between Amazon's revenue and its taxable income is legal under current tax law, though it has drawn criticism from lawmakers and public interest groups.
Why Amazon's Taxable Income Was So Low
Amazon's federal income tax bills were low because the company's taxable income — the amount the IRS actually taxes — was much smaller than its revenue. Revenue is the total money a company brings in. Taxable income is what remains after subtracting deductions and credits.
Amazon used three main deductions to shrink its taxable income. First, the company claimed large deductions for research and development spending on technology, warehouses, and logistics systems. These deductions are legal under Section 174 of the tax code. Second, Amazon deducted the cost of stock-based compensation — the stock options and restricted stock units it gave to employees instead of (or in addition to) cash wages. Third, the company deducted depreciation on buildings, equipment, and other assets, spreading the cost of those assets over many years.
Amazon also used tax credits, which directly reduce the tax owed rather than reducing taxable income. The most significant was the research and development tax credit, which rewards companies for spending money on innovation. In some years, these credits were large enough to eliminate the company's entire federal tax bill.
State and Local Taxes Amazon Pays
Amazon's federal income tax bill is only one piece of its total tax burden. The company also pays state income taxes, local property taxes, and sales taxes collected from customers.
Amazon's state income tax bills vary by state and have grown as the company expanded its physical presence — warehouses, offices, and data centers — across the country. States like Washington (where Amazon's headquarters is located), California, Texas, and New York collect state income tax from the company. Property taxes on Amazon's real estate holdings run into the hundreds of millions of dollars annually. The company also collects and remits sales tax on purchases made through its platform in states that require it, though this money goes to state governments, not Amazon's own tax bill.
Payroll taxes — Social Security and Medicare taxes withheld from employee paychecks and matched by the employer — represent another significant tax expense. With over 1.5 million employees worldwide, Amazon's payroll tax obligations are substantial, though these figures are not typically broken out in public tax disclosures.
How Amazon's Tax Strategy Compares to Other Large Companies
Amazon is not alone in paying low federal income taxes relative to its size. Other large technology and retail companies have used similar strategies. However, Amazon's zero-tax years were notable for the scale of the company's revenue during those periods.
The difference between Amazon and many other corporations is that Amazon reinvested nearly all of its profits back into the business — building warehouses, developing technology, and expanding operations — rather than paying dividends to shareholders or buying back stock. This reinvestment strategy, combined with aggressive use of legal deductions, meant the company had little taxable income left over to tax.
Other companies in different industries face different tax situations. A bank or insurance company, for example, cannot deduct the same types of expenses Amazon can, so their taxable income is typically higher relative to revenue. A manufacturing company might have different depreciation schedules. The tax code allows different deductions for different types of business activity.
The Debate Over Amazon's Tax Payments
Amazon's low federal tax bills sparked debate among lawmakers, economists, and advocacy groups. Some argued that the company was using the tax code as intended — that large deductions for research, development, and capital investment are meant to encourage business growth and innovation. Others contended that the tax code had been written in ways that allowed large, profitable companies to pay little or nothing in federal income tax, and that this outcome was unfair to smaller businesses and individual taxpayers.
In response to public pressure, Congress considered changes to the tax code. In 2021, the Biden administration proposed a 15 percent minimum corporate tax rate, which would require large corporations to pay at least that percentage of their income in federal tax regardless of deductions. This proposal was part of broader tax legislation, though the final rules that passed differed from the original proposal.
Amazon has stated that it follows all applicable tax laws and that its tax strategy is legal. The company has also noted that it pays billions in other taxes and that it invests heavily in the United States, creating jobs and economic activity.
What Amazon's Tax Filings Actually Show
Amazon's tax information comes from two main sources: its annual 10-K filing with the Securities and Exchange Commission (SEC) and its federal income tax returns filed with the IRS. The 10-K is public and available on the SEC website. The tax returns themselves are not public, but Amazon has disclosed key figures in its 10-K filings.
In the 10-K, Amazon reports its "provision for income taxes" — the amount it set aside for federal, state, and international taxes. This figure includes taxes the company actually paid and taxes it expects to pay in the future. The company also reports its "effective tax rate," which is the provision divided by pre-tax income. These disclosures allow investors and the public to see the company's overall tax situation.
A company's 10-K filing shows what the company reports to shareholders, not necessarily what it reports to the IRS. The two can differ because accounting rules (used for the 10-K) and tax rules (used for IRS filings) are not identical. However, the figures are generally consistent, and the 10-K provides the most detailed public picture of Amazon's tax situation.
International Taxes and Offshore Structures
Amazon also operates internationally and has subsidiaries in multiple countries. The company's international tax situation is separate from its U.S. federal income tax bill. Amazon pays corporate income taxes in countries where it earns income, though the rates and rules vary by country.
Some of Amazon's international subsidiaries are located in countries with lower corporate tax rates, such as Luxembourg and Ireland. The company has structured some of its intellectual property and licensing arrangements to shift income to these lower-tax jurisdictions, a practice known as tax planning. This is legal under international tax law, though it has drawn criticism from tax authorities and advocacy groups in higher-tax countries.
The OECD (Organisation for Economic Co-operation and Development) and individual countries have been working to change international tax rules to limit this type of income shifting. In 2021, the OECD agreed on a global minimum tax rate of 15 percent for large multinational corporations, which would affect how Amazon and other companies structure their international operations in the future.
Frequently Asked Questions
Did Amazon really pay zero dollars in federal income tax?
Yes, in 2011, 2012, 2014, 2015, and 2018, Amazon reported a federal income tax bill of zero dollars. This was legal because the company's deductions and tax credits reduced its taxable income to zero or eliminated the tax owed. The company paid other taxes during these years, including state, local, and payroll taxes.
How is it legal for Amazon to pay no federal income tax?
The tax code allows companies to deduct business expenses, including research and development, depreciation, and employee compensation. It also provides tax credits for certain activities. When these deductions and credits are larger than a company's income, the taxable income can be zero. Amazon used these legal provisions to reduce its federal tax bill.
Does Amazon pay any taxes at all?
Yes. Amazon pays state income taxes, property taxes on its real estate, payroll taxes on employee wages, and sales taxes it collects from customers. The company also pays federal income tax in years when its taxable income is positive. The focus on federal income tax sometimes obscures the fact that Amazon pays billions in other taxes annually.
Will Amazon have to pay more taxes in the future?
Changes to the tax code could affect Amazon's future tax bills. The 2021 tax legislation included a 15 percent minimum tax on certain large corporations' book income (the income reported to shareholders), which may increase Amazon's federal tax payments. International tax changes could also affect the company's global tax situation.
Why do people say Amazon's tax situation is unfair?
Critics argue that the tax code allows large, profitable companies to pay little or no federal income tax while smaller businesses and individuals pay higher effective rates. They contend that this outcome undermines the fairness of the tax system. Supporters of Amazon's tax strategy argue that the deductions and credits are intentional parts of the tax code designed to encourage investment and innovation.