Amazon.com: SEC launches inquiry into Texas tax dustup

The Securities and Exchange Commission is conducting an inquiry into Amazon.com’s dispute with the state of Texas over a $269 million tax bill, according to a note in the online retailer’s quarterly SEC filing this morning.

It’s the latest development in a long-running controversy between Amazon and states that contend the company’s fulfillment centers are actually retail operations that should be subject to state sales tax. Amazon disputes that characterization and is going so far as to close its fulfillment center in Irving, Texas, as a result of the state comptrollers’s position on the issue.

“In March 2011, the SEC staff notified us of an inquiry concerning this assessment, and we are cooperating with the staff’s inquiry,” the Seattle e-commerce giant says in its 10Q filing this morning.

An inquiry is less than a formal investigation, in regulatory lingo, but the fact that the SEC is looking into the matter could have broader significance as Amazon fights similar tax battles in other states.

The company’s fulfillment centers are also in the spotlight in a different way following Amazon.com’s big profit miss yesterday. Thomas Szkutak, the company’s chief financial officer, explained on a conference call with analysts that the company is adding centers at a rapid pace to keep up with its growing business, contributing to increased expenses that are cutting into its bottom line.

The company added 13 fulfillment centers last year and has announced nine so far this year, the CFO explained on the call. However, he said, if the current pace continues, the growth could easily exceed the planned nine additions.

In other financial news from Amazon.com, the company’s annual proxy statement is also out this morning, showing compensation for Jeff Bezos and other top executives. Of note: Security costs for Bezos — a subject of much attention when they rose sharply in the past — declined slightly to $1.6 million in 2010, from $1.7 million in 2009.

The company repeated its past explanation of those costs, saying  in the filing that they represent the “approximate aggregate incremental cost to Amazon.com of security arrangements for Mr. Bezos in addition to security arrangements provided at business facilities and for business travel.”

It added, “We believe that all company-incurred security costs are reasonable and necessary and for the company’s benefit.”

Bezos’ base salary remained static at $81,840, and he continued to receive no stock compensation. Here’s the full 2010 Summary Compensation Table, with financial notes, from the filing …

Name And Principal Position Year Salary Stock
Awards(1)
All Other
Compensation
Total
Jeffrey P. Bezos 2010 $ 81,840 $ $ 1,600,000 (2) $ 1,681,840
Chief Executive Officer 2009 81,840 1,700,000 1,781,840
2008 81,840 1,200,000 1,281,840
Thomas J. Szkutak 2010 160,000 6,465,300 3,200 (3) 6,628,500
SVP and Chief Financial Officer 2009 160,000 3,200 163,200
2008 157,500 7,491,000 3,150 7,651,650
Andrew R. Jassy 2010 160,000 6,465,300 3,200 (3) 6,628,500
SVP, Web Services
Diego Piacentini 2010 175,000 6,465,300 55,905 (4) 6,696,205
SVP, International Retail 2009 175,000 55,905 230,905
2008 175,000 7,491,000 55,905 7,721,905
Jeffrey A. Wilke 2010 160,000 7,027,500 3,200 (3) 7,190,700
(1) Stock awards are reported at aggregate grant date fair value in the year granted, as determined under applicable accounting standards. Grant date fair value for restricted stock units is determined based on the number of shares granted multiplied by the average of the high and the low trading price of Amazon.com common stock on the grant date, without regard to the fact that the grants vest over a number of years. See Note 1, “Description of Business and Accounting PoliciesStock-Based Compensation,” in Item 8, “Financial Statements and Supplementary Data,” in our 2010 Annual Report on Form 10-K.
(2) Represents the approximate aggregate incremental cost to Amazon.com of security arrangements for Mr. Bezos in addition to security arrangements provided at business facilities and for business travel. We believe that all company-incurred security costs are reasonable and necessary and for the company’s benefit.
(3) Represents the value of shares of common stock we contributed to the named executive officer’s account in our 401(k) plan.
(4) Represents expatriation benefits, including a cost of living and housing allowance in the amount of $40,829 and tax reimbursement in connection with such benefits in the amount of $15,076. Mr. Piacentini’s 2000 employment offer letter, which provided for an initial annual salary of $175,000 and has no specified term, also provides for certain expatriation benefits, including a cost of living and housing allowance.

Previously: Jeff Bezos to shareholders: Invention is in our DNA