NASHVILLE -- A proposed Tennessee Revenue Department rule change that apparently would affect online retailer Amazon is in limbo, a victim of Gov. Bill Haslam's 45-day freeze on pending rules and regulations.
Revenue officials, citing rules that shroud most of their actions behind a wall of secrecy, said they cannot disclose whether the proposed rule would affect Amazon, let alone whether it impacts the company's plans to build 1 million-square-foot distribution centers in Hamilton and Bradley counties and staff them with 1,400 full-time employees.
The would-be rule exempts "any dealer operating as a distribution center" from collecting Tennessee state sales taxes if at least 50 percent of its gross receipts come from shipments on behalf of another vendor "to destinations outside this state."
Amazon currently refuses to collect sales taxes for merchandise it sells in Tennessee and most other states, arguing it has no physical presence that would require it to do so. The rule would continue the exemption for the company's sales of books, music, electronic equipment, computers and other items.
The proposal had been scheduled for a Feb. 25 public hearing before the Revenue Department. Sara Jo Houghland, spokeswoman for the departments, said departmental rules prohibited her from identifying specific companies affected by the change.
"The purpose for the hearing was to get input on a proposal to change a rule which currently acts as a disincentive to multistate distribution centers in Tennessee," she said. "This could affect any regional or national distribution facility doing business or planning to do business in Tennessee."
Shortly after taking office, Haslam announced a 45-day freeze on new regulations as part of his "top to bottom" review of state government operations. The move appears to have snagged the Amazon deal, which had been negotiated in part by then-Hamilton County Mayor Claude Ramsey, who on Jan. 15 became Haslam's deputy and chief of staff.
Haslam said last week during a Chattanooga visit that Amazon shouldn't have to collect sales taxes because of the Hamilton County distribution center.
"I don't think because Amazon decides to build a distribution center here, that should change their tax status," he said.
But some "bricks and mortar" retailers say it is unfair that they must charge their customers the state's 7 percent state sales tax and up to 2.75 percent in local sales taxes when a direct competitor like Amazon does not.
One of the nation's largest mall operators, Chattanooga-based CBL & Associates Properties Inc., isn't happy either.
CBL has 9 million square feet of retail space in Tennessee -- including about 2 million square feet in Chattanooga, where its properties include Hamilton Place. The retailers CBL rents to in Chattanooga must collect 9.25 percent in state and local sales taxes.
"While Amazon is a good company to locate a facility in Chattanooga, their desire for a 9.25 percent sales-tax exemption, compared to all the other retailers in Chattanooga who are required to collect sales taxes, creates an unfair advantage," CBL Vice President Katie Reinsmidt said.
Seattle-based Amazon did not return a phone message.
State Economic and Community Development Department spokesman Mark Drury did not respond to requests for information about the Amazon deal.
State Senate Government Operations Committee Chairman Bo Watson, R-Hixson, said he doesn't know what concessions have been made. He noted that any rules change approved by the Revenue Department would have to later come before his panel.
"I will wait to hear the administration's and [Economic and Community Development officials'] arguments if indeed they pursue this .... through rule," he said. "Much of what's being talked about is speculative."
Amazon is investing $139 million in the distribution centers and is expected to have at least $64 million in payroll. In addition to the 1,400 full-time jobs, Amazon is expected to employ more than 2,000 seasonal workers.
Incentives, including state grants and job-creation credits and local property tax credits are worth more than $30 million total for both the Hamilton County and Bradley County sites.
State incentives include $4 million in Fast Track funds for site preparation and state job-tax credits estimated by the Chattanooga Times Free Press at about $5.6 million. It is not clear how much state job-training money is involved.
Staff writer Dave Flessner contributed to this story.
Andy Sher is a Nashville-based staff writer covering Tennessee state government and politics for the Times Free Press. A Washington correspondent from 1999-2005 for the Times Free Press, Andy previously headed up state Capitol coverage for The Chattanooga Times, worked as a state Capitol reporter for The Nashville Banner and was a contributor to The Tennessee Journal, among other publications. Andy worked for 17 years at The Chattanooga Times covering police, health care, county government, ...