Amazon will pass along the costs of a new French digital tax to its third-party sellers beginning on October 1, the company told US trade officials Monday.
The new policy applies to Amazon (AMZN) sellers based in France, as well as US-based sellers shipping to French customers, said Peter Hiltz, Amazon (AMZN)’s director of international tax policy and planning, at a hearing held by the US Trade Representative in Washington.
“We cannot absorb this expense if we are to continue making investments in infrastructure,” said Hiltz.
Amazon’s announcement came as a slew of tech giants including Facebook (FB), Google (GOOG), Microsoft (MSFT) and Twitter (TWTR) decried the French government’s new tax policy, arguing to US officials that the 3% levy unfairly targets American companies and could encourage other countries to do the same.
The Trump administration is in the midst of an investigation into the policy, which passed last month and requires digital services to pay back taxes retroactively owed from January onward.
The French digital services tax, which covers digital advertising as well as the sale of personal data, does not apply to traditional advertising channels such as radio, television or print, highlighting how narrowly the French government has targeted the policy to affect Silicon Valley, the companies said.
“This tax is imposed on providers of a service even if they have no physical presence in France at all,” said Gary Sprague, an attorney representing Airbnb, Microsoft, Salesforce, Twitter and others.
Calling it a “sharp departure from long-established rules,” Nicholas Bramble, a trade attorney at Google, said the policy could create new barriers to trade and hinder economic growth.
“The DST is likely to harm a wide range of American and other global businesses that use digital ads to reach French consumers,” he said. Companies said the policy, in an unusual step, taxes corporate revenues, not net profits — potentially exposing the companies to an “additional layer” of tax liability.
Facebook said it could be extremely complicated to try to calculate what proportion of its revenues come from French customers or users. For example, said Alan Lee, Facebook’s head of global tax policy, a US-based user of a VPN service that routes her Facebook traffic through France could expose Facebook to wrongful tax liability.
France’s tax could set an unwelcome precedent for American tech companies that have come under intense scrutiny from policymakers across Europe. A number of European countries are considering a digital services tax. Spain, for example, is also considering a similar policy.
If both countries implemented a digital services tax, said Hiltz, the added tax could be substantial.
“If you have a French customer and a Spanish seller on the US website, then both of those countries would [be subject to] the 3% tax,” said Hiltz.