That's not quite true. Washington state (where Seattle is) has no state income tax. The sales tax rate, however, is a whopping 9.5%. As a mail order/online retailer, Amazon only had to charge sales tax on in-state purchases. Washington state's low population made it more favourable relative to California with a much less worse tax structure, and Texas and Florida which also have no state income tax and the population centers necessary to support a growing business. Of course, I'm sure Microsoft's established engineering talent pool helped too.