Amazon.com 2005 Annual Report Download - page 26

Any of these events may cause our stock price to rise or fall and may adversely affect our business and
financing opportunities.
Future volatility in our stock price could force us to increase our cash compensation to employees or grant
larger stock awards than we have historically, which could hurt our operating results or reduce the percentage
ownership of our existing stockholders, or both.
Government Regulation of the Internet and E-commerce Is Evolving and Unfavorable Changes Could
Harm Our Business
We are subject to general business regulations and laws, as well as regulations and laws specifically
governing the Internet and e-commerce. Such existing and future laws and regulations may impede the growth of
the Internet or other online services. These regulations and laws may cover taxation, privacy, data protection,
pricing, content, copyrights, distribution, electronic contracts and other communications, consumer protection,
the provision of online payment services, unencumbered Internet access to our services, and the characteristics
and quality of products and services. It is not clear how existing laws governing issues such as property
ownership, sales and other taxes, libel, and personal privacy apply to the Internet and e-commerce. Unfavorable
resolution of these issues may harm our business. In addition, many jurisdictions currently regulate “auctions”
and “auctioneers” and may regulate online auction services. Jurisdictions may also regulate other
consumer-to-consumer online markets, including certain aspects of Amazon Marketplace. This could, in turn,
diminish the demand for our products and services and increase our cost of doing business.
Taxation Risks Could Subject Us to Liability for Past Sales and Cause Our Future Sales to Decrease
We do not collect sales taxes or other taxes with respect to shipments of most of our goods into most states
in the U.S. Under some of our commercial agreements, the other company is the seller of record of the applicable
merchandise and we are obligated to collect sales tax in most states in accordance with that company’s
instructions. We may enter into additional strategic alliances requiring similar tax collection obligations. Our
fulfillment center and customer service center networks, and any future expansion of those networks, along with
other aspects of our evolving business, may result in additional sales and other tax obligations. We collect
consumption tax (including value added tax, goods and services tax, and provincial sales tax) as applicable on
goods and services sold by us that are ordered on our international sites. One or more states or foreign countries
may seek to impose sales or other tax collection obligations on out-of-jurisdiction companies that engage in
e-commerce. A successful assertion by one or more states or foreign countries that we should collect sales or
other taxes on the sale of merchandise or services could result in substantial tax liabilities for past sales, decrease
our ability to compete with traditional retailers, and otherwise harm our business.
Currently, decisions of the U.S. Supreme Court restrict the imposition of obligations to collect state and
local sales and use taxes with respect to sales made over the Internet. However, a number of states, as well as the
U.S. Congress, have been considering various initiatives that could limit or supersede the Supreme Court’s
position regarding sales and use taxes on Internet sales. If any of these initiatives addressed the Supreme Court’s
constitutional concerns and resulted in a reversal of its current position, we could be required to collect sales and
use taxes in additional states. The imposition by state and local governments of various taxes upon Internet
commerce could create administrative burdens for us, put us at a competitive disadvantage if they do not impose
similar obligations on all of our online competitors and decrease our future sales.
Our Vendor Relationships Subject Us to a Number of Risks
Although we continue to increase the number of vendors that supply products to us and no vendor accounts
for 10% or more of our inventory purchases, we have significant vendors that are important to our sourcing. We
do not have long-term contracts or arrangements with most of our vendors to guarantee the availability of
merchandise, particular payment terms, or the extension of credit limits. If our current vendors were to stop
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