‘How Amazon Pays $0 Tax’
Last week I got an INSANE amount of comments around the question I answered “How do I go from $100,000 to $500,000 in my business…
A large part of my answer was explaining ‘A Feedback Loop.’
I’ll further explain the concept using Amazon and my my new hero Jeff Bezos.(He created a $2T Company!)
If I have a room of 100 people and I ask ‘what is your number one expense?’… 80 hands go up for mortgages and housing.
Not even close to their highest expense.
Your number one expense… my number one expense and everyone we knows number one expense is the same…
TAXES.
Not by a little but by a COUNTRY MILE.
A smart place to educate yourself.
In 2019 Amazon paid $0 income tax on over $13 Billion dollars of revenue.
If that’s not mind-boggling enough…. they also received a $129 Million dollar tax rebate (refund) from the government.
So, how do they do it…?
A Feedback Loop.
You only pay tax on profit.
Amazon avoids income tax by feeding revenue back into their business… In 2019 they had an operating loss of $627 Million.
How?
- Research and Development… $22.6 Billion was fed back into the company as they continue to CREATE new products and
services.
- Property, Plant, and Equipment… they’ve fed back over $60 Billion back in over the last few years.
- Stock-Based Compensation… rather than pay in cash they pay their staff bonuses in shares / stock options and can therefore write off the shares as a business
expense.
*The higher the Amazon stock price goes the more they can write off as an expense!!
Last year Amazon saved over $1 Billion in tax with the above Feedback Loop where they fed operations rather than their pockets.
Think of the above and then the example of a guy that goes from $100,000 to $200,000 with his business…
Then buys a boat.
Wonders why he’s not getting anywhere.
In a nutshell… Amazon reinvest all their profits back into the company to help it grow. Therefore, pay no tax.
Your business is your child… feed it.
You heard it here first.
