Amazon.com 2006 Annual Report Download - page 25

• fluctuations in the stock market in general and market prices for Internet-related companies in
particular;
• changes in financial estimates by us or securities analysts and recommendations by securities analysts;
• changes in our capital structure, including issuance of additional debt or equity to the public;
• changes in the valuation methodology of, or performance by, other e-commerce companies; and
• transactions in our common stock by major investors and certain analyst reports, news, and speculation.
Volatility in our stock price could adversely affect our business and financing opportunities and 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. Existing and future laws and regulations may impede the growth of the
Internet or 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,
libel, and personal privacy apply to the Internet and e-commerce. Jurisdictions may regulate
consumer-to-consumer online markets, including certain aspects of Amazon Marketplace. Unfavorable
regulations and laws could 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 or other taxes on 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, and we are obligated to collect
sales tax in accordance with that company’s instructions. We may enter into additional agreements requiring
similar tax collection obligations. Our fulfillment center and customer service center networks, and any future
expansion of them, 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
e-commerce companies. 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, U.S. Supreme Court decisions 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 initiatives that could limit or supersede the Supreme Court’s position regarding
sales and use taxes on Internet sales. If any of these initiatives were successful, 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.
We Could be Subject to Additional Income Tax Liabilities
We are subject to income taxes in both the United States and numerous foreign jurisdictions. Significant
judgment is required in evaluating our worldwide provision for income taxes. During the ordinary course of
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