In this interesting article from New York Times, it explains how internet companies like Amazon.com avoid paying sales tax since it is not physically located in that state. This gives it a significant advantage over traditional brick and mortar stores.
Another interesting trick that Amazon uses is creating subsidiaries that are treated separately for tax matters, a legal technique called "entity isolation". The subsidiary that developed the Kindle is in California, but because it doesn't sell the Kindle directly to customers, Amazon's legal position is that it isn't required to collect sales taxes in California.
Click here for a similar case study on walmart.com
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