Amazon.com says it will close its distribution center in Irving, Texas, because the state is demanding the Internet retailer pay $269 million in sales taxes.
Amazon also is canceling plans to expand distribution operations in Texas because of what an executive calls the state's "unfavorable regulatory climate."
The dispute between Texas and the world's largest Internet retailer highlights the conflict between rapidly growing e-commerce, with its support from logistics and distribution operations, and the impact Internet sales have on the basics of tax collecting.
Many states have granted large tax breaks to lure service industries such as logistics and warehouse operators, but online ordering by Texas residents is costing the state some $600 million in lost sales taxes, state officials told the Fort Worth Star-Telegram.
Consumers are supposed to pay sales taxes on Internet purchases, but online retailers often do not collect the tax at the time of purchase and states have no real mechanism to enforce the collection, particularly if the Internet retailer has no physical presence in the state.
The distribution center Amazon operates outside Dallas is one of 52 in the company's global network. Amazon added 13 warehouses last year and recently said it planned to add more in 2011 to meet growing demand.
The company said in December that it plans to build two distribution centers this year in southeast Tennessee that will cover more than 1 million square feet each.