Maneuvering to get around taxes isn’t unique to Amazon — note Apple’s own practice of keeping billions of dollars of profits offshore. The Fortune story makes it clear, though, that Amazon’s greatest advantage in the fight over collecting sales taxes has been its ability to adapt quickly to changes in the law — even if it’s simultaneously fighting those changes aggressively. When things don’t go its way, Elkind notes, “Amazon has shrewdly and successfully maneuvered to turn each development, good or bad, to its own advantage.” Part of this strategy simply means “going to extreme lengths — demanding, wheedling, suing, threatening, and negotiating — to avoid collecting for as long as possible, in as many states as possible.”

When Amazon is forced into collecting sales tax, though, it has been able to turn that into an advantage by “maneuvering to combine its needs (more warehouses) with its wants (preserving tax-free shopping for as long as possible).”

For instance, forced into collecting sales tax in South Carolina in 2010, Amazon “offered a compromise: It would start capturing sales tax in January 2016—almost five years later.” The South Carolina House rejected the compromise, and Amazon said it would leave the state and its “half-built warehouse.” Paul Misener, Amazon’s VP of global public policy, stated at a press conference, “The 1,200 jobs and nearly $100 million in capital investment that were coming to the state — aren’t.”

The House changed its mind three weeks later and Amazon will not collect sales tax in South Carolina until 2016. More recently, the retailer enacted a similar strategy in Texas, but there it was also able to secure a write-off of its own state tax bill. In addition, it will benefit from a “rebate” on the sales taxes collected in the suburbs where its warehouses are located. “This bonanza,” Elkind notes, “would run well into the millions.”

By 2016, Amazon will actually be collecting taxes from 17 states, representing about half the U.S. population, and it’s agreed to collect sales taxes in every state where it has a warehouse. And the Marketplace Fairness Act, which would force large online merchants to collect sales tax on behalf of other states, recently passed the Senate. Amazon, which has long said it supports a federal solution for online taxes, supports the Marketplace Fairness Act.

Amazon also argues that its insistence on a federal solution is a matter of principle. Misener testified in Congress last year that “far from an e-commerce loophole, the constitutional limitation on states’ authority to collect sales tax is at the core of our nation’s founding principles.” He told Fortune, “We feel very good about our position because it’s a constitutional right.”

The full Fortune article is only available online to paying subscribers, meaning you may have to pick up a print copy. It’s well worth a read over the long weekend.

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The tablets were already available in the U.K., Germany, France, Italy, Spain and Japan (as well as the U.S., of course). While a 4G LTE version of the Kindle Fire HD 8.9″ is available in the U.S., only Wi-Fi versions are available internationally.

“Kindle Fire HD is the #1 best-selling item in the world for Amazon since its launch, and we’re thrilled to make it available to even more customers around the globe today,” Dave Limp, VP Kindle, said in a statement.

In the U.S., the 8.9-inch Kindle Fire HD, which is Amazon’s answer to the iPad, got a big price cut in March. The 4G LTE, 32 GB version, which had been $499, was cut to $399. The Wi-Fi-only version of the same tablet got a price cut of $30 — to $269 for the 16 GB version and $299 for the 32 GB version. Internationally, prices will vary based on operating costs.

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Zite outlined the changes in a blog post. CEO Mark Johnson has been pretty vocal about how he doesn’t think Zite should be like Google Reader, and told me the new features Zite has added to its iOS app are those that “enhance the user experience both for Google Reader users and the reading population in general.” Articles will now “gray out” after they’ve been read, users will be able to save sources as favorites and Zite’s algorithm will pay more attention to obscure content:

“One of the biggest problems with Google Reader is that RSS feeds which publish many stories per day tend to dominate your feed, so the obscure blog you found a few years ago that publishes every three months can be drowned out in the noise. Zite’s algorithm will more aggressively highlight rare content, so feel free to ‘like’ publishers that you enjoy, no matter how popular or rare.”

An Android update is coming soon.

Zite’s also added seven new publishers to its publisher program, bringing the total number of publishers it works with to 24. The new publishers are GigaOM, Atlantic Media (with The Atlantic and Quartz), Business Insider, Fast Company, Salon, Say Media (Remodelista and ReadWrite) and Serious Eats, and they join existing publishers like CNN (Zite’s parent company), the Huffington Post, and the Chicago Tribune. Zite publisher partners share their “best-of” content in their own sections of Zite’s app, and can run their own ads against their content.

“We are also starting to look at ways to monetize publisher content,” Johnson said. That’s something Zite’s competitors are already doing: The New York Times makes content available to paying subscribers through Flipboard, and the Wall Street Journal has a similar arrangement with Pulse.

Here’s a video of Johnson speaking about the future of content personalization at paidContent 2013:

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The news comes just a couple of weeks before Apple is set to face the DOJ in court. In the trial, beginning June 3, the DOJ will argue that Apple conspired with book publishers to fix ebook prices. Apple argues that it offers agency pricing to all retailers in iTunes and that the launch of iBookstore created competition in the marketplace.

Under the proposed settlement, announced Wednesday morning, Penguin would pay $75 million to consumers represented by 33 states’ attorneys general and by Hagens Berman, the Seattle-based law firm that filed the class action suit against Apple and publishers in 2011. The settlement still has to be approved by the courts, in a hearing set to take place later this summer.

Penguin’s settlement with the consumers and states is the largest that any publisher has agreed to. HarperCollins, Hachette and Simon & Schuster settled together for a combined $69 million, while Macmillan agreed to a $20 million payout.

The settlement also clears the way for the Penguin-Random House merger to move forward in the second half of this year. Penguin’s parent company Pearson said in a statement, “In anticipation of reaching this agreement, Pearson had made a $40m provision for settlement in its 2012 accounts. An incremental charge will be expensed in Pearson’s 2013 statutory accounts as part of the accounting for the Penguin Random House joint-venture.

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That doesn’t stop readers from writing their own spinoffs anyway: The largest fan fiction site, FanFiction.net, hosts millions of free stories. And in works like these — and the passionate readers who create them — Amazon sees the potential for profit.

On Wednesday, Amazon Publishing announced Kindle Worlds, “the first commercial publishing platform that will enable any writer to create fan fiction based on a range of original stories and characters and earn royalties for doing so.” The company is making this work by securing licenses from existing entertainment properties and by paying royalties to both the original author and the fan fiction author.

So far, Kindle Worlds has licenses for three Alloy Entertainment properties: Gossip Girl, Pretty Little Liars and Vampire Diaries. Writers can publish “authorized stories” inspired by these properties and sell them in the Kindle Store; Amazon says it will add more licenses soon, in areas like “books, games, TV, movies and music.”

The fan fiction authors get a royalty of 35 percent for works of at least 10,000 words, and a royalty of 20 percent on works between 5,000 and 10,000 words. Amazon is also paying royalties to the original authors of the properties, but would not disclose that royalty rate.

Kindle Worlds is not a self-publishing platform like KDP. First of all, any works published through Kindle Worlds are published by Amazon Publishing — they’re not self-published, so the author doesn’t retain print or digital rights and doesn’t set the work’s price. The website notes that “Amazon Publishing will acquire all rights to your new stories, including global publication rights, for the term of copyright.” Second, Kindle Worlds won’t publish all of the works submitted to it; it will only accept some (though the company says it aims to accept as many as possible, as long as they adhere to content guidelines). Finally, “Amazon Publishing will set the price for Kindle Worlds stories. Most will be priced from $0.99 through $3.99.”

Kindle Worlds will officially launch in June with “over 50 commissioned works” from authors like Barbara Freethy, John Everson and Colleen Thompson. At that time, readers can also start submitting works to Kindle Worlds.

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The winning startup will be announced at Book Expo America on May 31 and will receive $10,000 and the chance to pitch its product to William Morris Endeavor co-CEO Ari Emanuel.

Here are the finalists:

• BookCity: A way to find books set in your travel destination [photo illustrating this post]
• Captiv: Makes book recommendations based on your Twitter activity
• Coverlist: A solution that focuses on browsing book jackets
• Evoke:  A way to discover young adult literature through characters and browse books by emotion: “Readers may determine if they wish to be inspired, challenged, amused, or informed during their next read based on content generated by an audience-in-common” [photo on right]
• KooBrowser: Makes book recommendations based on your web browsing habits [photo on left]
• LibraryAtlas: A book discovery solution based on geolocation

I attended the demos on Sunday. A few thoughts:

• It’s hard to come up with a book discovery idea that is not similar to Goodreads in some way, though the finalists above did a good job. Many of the teams built ideas on Goodreads data or pulled other information from it.
• Book-recommendation algorithms were big (and, you’ll notice, didn’t make the cut above). A lot of teams described their idea as “Pandora for books” or “Netflix for books,” but they just meant that the software serves content recommendations, not that it actually streams content.
• Of the above, I thought that KooBrowser seemed most useful and like something I’d actually use. The idea is that, if you’re reading an article online, you could pull up a list of book recommendations based on the content of that article. The success of KooBrowser depends on how good the recommendations are, of course. But this idea seems to fit well into users’ actual everyday activity without being annoying. (I’m still not sold on the idea of receiving book recommendations pushed to my phone when I’m out and about.)

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Flickr is getting three big updates. All users will get 1 terabyte of photo storage for free. The site’s interface is also being redesigned to focus on full-resolution photos — both in photo browsing and in search — rather than words and links. Users will be able to share the full-resolution photos by email, Facebook, Twitter, Pinterest and Tumblr. And, in addition to the iOS app Flickr launched last December, Yahoo is launching an Android app.

Flickr Pro, which had allowed users to pay for more storage space, is going away. “There’s no such thing as Flickr Pro today because [with so many people taking photographs] there’s really no such thing as professional photographers anymore,” Mayer said (though she acknowledged that there are “different skill levels”). There are still a couple of paid options: Users can pay $49.99 a year for an ad-free interface, and can add a second terabyte of data for $499.99 per year. It’s unclear what will happen with existing Flickr Pro memberships that users have already paid for.

On an investor call on Monday morning, Mayer had noted that there are “obvious synergies between Flickr and Tumblr,” but that it’s too early to say what those opportunities will be.

The choice of location for the press conference — a hotel in Times Square — became clear as Mayer announced that Yahoo has taken out a lease for office space at 229 West 43rd Street — the old New York Times building — and will be moving all 500 of its New York-based employees there. Tumblr’s employees, however, will stay downtown at their Union Square office.

New York City mayor Michael Bloomberg took the stage to say the move reflects “what a big player New York has become in the tech industry,” with Yahoo becoming “one of the largest tech presences in the city.” He noted that Tumblr is a “New York-grown company” and that NYC was the first city government to have its own Tumblr.

“Twenty years ago, if you looked out the window, there were plenty of yahoos in Times Square,” he said. “Now the Yahoos here will make an honest living … and help us grow and make our economy stronger.”

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“Part of our strategy here is to let Tumblr be Tumblr,” Mayer said. In fact, Tumblr CEO David Karp wasn’t on the morning’s call: He was at an all-team meeting. (“Instead of calling his all-company meetings ‘all-hands,’ he calls them ‘all-team,’”Mayer noted. “I think in the future we’ll call meetings at Yahoo ‘all-team’ meetings.”)

“When you look at the best and most-successful billion-dollar acquisitions in the tech space — eBay and Paypal, Google and YouTube — there’s a meme that emerges,” Mayer said. “The best acquisitions…allow the two brands and the two products and services to evolve somewhat separately.”

Yahoo has “well over” 700 million users, Mayer said, while Tumblr has 300 million — but these audiences overlap so little that the companies can count their combined user base at over a billion.

The difference in user demographics, Mayer acknowledged, means there’s “a type of user that will always prefer Tumblr and may never come to Yahoo” — and that’s fine. Yahoo can “provide search seamlessly in the background” for Tumblr, but it could be existing and future Yahoo users that benefit most from the Tumblr acquisition: “As we pull Tumblr content into our news feeds and our media experiences, it will cause the core Yahoo properties to become that much more interesting and that much richer,” leading more users to the site even if they are from “very different [demographic] profiles from people coming to Tumblr.”

Tumblr users should get ready for more ads

Tumblr will remain a separate site, but that doesn’t mean its users won’t notice a few changes — particularly on the advertising front. “There’s a number of different places where we think we can monetize in a way that’s meaningful and really additive to the user experience,” Mayer said. Tumblr is already including a few ads in its dashboard, but ”we would like to look at that and understand how we can introduce ads — a very light ad load where the impact is really created because the ads fit the user’s expectation and follow the form and function of the dashboard.”

In addition, Mayer said that Yahoo might allow individual Tumblr users to enable ads on their blogs, “but that would always be done with the blogger’s permission.”

So what about Tumblr CEO Karp’s well-known dislike of advertising? “David talks wistfully about the ads that he saw as a child, that would make him want to go see a movie or own a particular type of car,” Mayer said. “He says the current state of internet advertising doesn’t aspire to be as good as the content itself. We think that should change…we’re aligned in those ideals. When you hear us talk about native ads, where the ads are every bit as good as the content, and maybe even make the content better — that’s what we are aiming for. We want the ads themselves to create that aspirational feel that, for example, television ads or movie ads do.”

So, uh, what about Flickr?

In 2005, Yahoo acquired photo-sharing service Flickr. That acquisition, long before Mayer’s time, is widely viewed as a big failure — one that ruined the Flickr experience because Yahoo tried to integrate it, then largely abandoned it.

On Monday afternoon, though, Yahoo is expected to announce updates to Flickr. Could we see a resurgence in that platform, as part of Yahoo’s new “don’t-screw-it-up” acquisition philosophy? Mayer was cautious: “In terms of how Tumblr evolves, it really depends on the creators,” she said. But when it comes to Flickr, “I think it is noteworthy that a lot of the posts on Tumblr are graphical. There’s some obvious synergies between Flickr and Tumblr, in that regard,” and it’s “probably something we’ll turn our attention to in the future. Flickr could provide great storage for albums or slideshows, things like that. We’ll see.”

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In the release, the companies noted that “Per the agreement and our promise not to screw it up, Tumblr will be independently operated as a separate business. David Karp will remain CEO. The product, service and brand will continue to be defined and developed separately with the same Tumblr irreverence, wit, and commitment to empower creators.”

Yahoo CEO Marissa Mayer also announced the acquisition on her own Tumblr, while Tumblr CEO David Karp wrote about it on Tumblr’s staff blog.

Tumblr has over 300 million monthly unique visitors, according to the release. (comScore had pegged the site’s April traffic at 124 million uniques.) The companies say that half of Tumblr’s users use its mobile app, and reiterated one of the reasons that Yahoo was willing to shell out over a billion dollars for a company whose revenues were less than $15 million last year: “The combination of Tumblr+Yahoo is expected to grow Yahoo’s audience by 50 percent to more than a billion monthly visitors, and to grow traffic by approximately 20 percent.”

“Our team isn’t changing. Our roadmap isn’t changing. And our mission — to empower creators to make their best work and get it in front of the audience they deserve — certainly isn’t changing,” Tumblr CEO David Karp said in a statement. “But we’re elated to have the support of Yahoo and their team who share our dream to make the internet the ultimate creative canvas. Tumblr gets better faster with more resources to draw from.”

“Tumblr is redefining creative expression online,” Yahoo’s Mayer said. “On many levels, Tumblr and Yahoo couldn’t be more different, but, at the same time, they couldn’t be more complementary. Yahoo is the Internet’s original media network. Tumblr is the Internet’s fastest-growing media frenzy. Both companies are homes for brands — established and emerging. And, fundamentally, Tumblr and Yahoo! are both all about users, design, and finding surprise and inspiration amidst the everyday.”

Yahoo and Tumblr are holding a conference call at 9 AM ET and we will be on the call.

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Tumblr founder David Karp, who owns at least 25 percent of the company, has agreed to stay on for at least four years, according to ATD. The WSJ says Tumblr would remain an independent company.

comScore pegged Tumblr’s worldwide traffic at 117 million visitors in April. The site has raised about $125 million in funding, putting its valuation at $800 million. As my colleague Mathew Ingram points out, the company’s revenues were less than $15 million in 2012, though Karp has estimated they will hit $100 million this year.

Yahoo is holding a press event on Monday afternoon in New York, but hasn’t specified what the event will be about. We’ll be there.

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