published Wednesday, May 4th, 2011

Two state lawmakers to push for collection of Amazon sales tax

Poll
Should Amazon pull out of the state if forced to collect sales taxes?
  • Yes. 56%
  • No. 44%

343 total votes.

NASHVILLE — Two powerful lawmakers plan to push legislation they say could force Amazon to start collecting sales taxes on items the Internet retailing giant sells to Tennessee consumers.

The legislation has the support of a coalition of traditional “brick-and-mortar” retailers that includes Wal-Mart, Best Buy and Memphis-based AutoZone, which argue Amazon’s refusal to charge customers sales taxes places them at a competitive disadvantage.

Senate Finance Committee Chairman Randy McNally, R-Oak Ridge, said Tuesday his legislation would make clear that two distribution centers Amazon is building in Hamilton and Bradley counties constitute physical presence or “nexus.”

Under U.S. Supreme Court rulings, states cannot compel out-of-state retailers to collect sales taxes from in-state customers unless they have a “nexus.” Amazon argues in various states that it does not have a physical presence and thus does not have to collect sales taxes. What is needed, Amazon says, is a national solution.

McNally said his bill might not “do something regarding Amazon, but what it will do is it will restate and clarify the existing law regarding nexus and also make abundantly clear — and I think under existing law is already clear — that having a location in Tennessee such as a distribution center would provide nexus.”

In a brief email statement, Amazon’s vice president for public policy, Paul Misener, said the company “is planning to bring thousands of jobs and millions of investment dollars to Tennessee because the state committed to uphold the U.S. Constitution and not require sales tax collection unless we establish a retail business in the state.”

Earlier this year, an Amazon official, Fred Kiga, told local lawmakers that the distribution centers are “drop shippers” and “provide services to an out-of-state retailer that does not have nexus. The out-of-state retailer still does not have nexus in the state, and as a result it’s not required to collect sales taxes for Tennessee residents.”

The company is spending $139 million to construct one “fulfillment” center in Hamilton County and a second one in Bradley County. A company official told local lawmakers earlier this year that the company would employ some 1,400 to 1,500 full-time workers and eventually more than 5,000 part-time workers.

The House companion bill is sponsored by House Finance Committee Chairman Charles Sargent, R-Franklin, who has also raised questions about the Amazon deal. The bill is scheduled to be heard in the House Finance Subcommittee today.

House Majority Leader Gerald McCormick, R-Chattanooga, whose district covers one of the Amazon “fulfillment” centers now under construction, said he’d “fight tooth and nail to prevent it.”

If it were to pass, McCormick said, the bill “will kill thousands of jobs in Hamilton County.”

“As they [Amazon] showed in South Carolina, they will move if we pass this legislation to tax their distribution business as if it were a retail business,” he said.

In South Carolina last week, Amazon dropped plans to build a $100 million distribution center after state lawmakers there refused to grant the company a sales tax break.

Ray Pohlman, AutoZone’s vice president of government and community relations, was in Nashville on Tuesday, working on the legislation.

“The brick-and-mortar retailers, the people who have been doing this business for years and years and provide thousands and thousands of jobs, feel that this is just unfair,” Pohlman said.

House Assistant Republican Leader Kevin Brooks, of Cleveland, defended Amazon, saying his colleagues should realize what would happen if they change the state’s commitments at this point.

In South Carolina, he said, the decision not to proceed with the tax break for Amazon resulted in two other companies choosing not to locate there.

“It’s astonishingly strange that you would want to go back on your word,” said Brooks.

about Andy Sher...

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, ...

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WhitesCreek said...

Why are local legislators supporting a business whose model is based on enabling tax cheats? I wonder how many local small retailers will go out of business as a result of amazon moving into the state and having an unfair price advantage because of people not having to collect the tax that everyone is legally supposed to pay? Every state needs to stand strong on this and put everyone on a level playing field.

May 4, 2011 at 7:54 a.m.
LamontCranston said...

Ask SC how it worked for them...and say "thanks, SC, for sending TN a few thousand more jobs."

May 4, 2011 at 11:31 a.m.
rockman12 said...

Yeah, the state is going to try to force Amazon to collect sales tax if it builds here. The only thing that will happen is that Amazon will abandon their distribution centers and move them and the jobs to a "friendlier" state. Then they can sell items to Tennessee residents and not collect the sales tax anyways. They are already doing that in Texas. The jobs are more important than the sales tax. Go ahead and chase the jobs away. Walmart, Bestbuy and Autozone can gain the same advantage. Just close all your stores and become an internet retailer. Amazon is not the threat that these big-box retailers claim it is. You cannot walk in the door of an Amazon distribution center and buy something, therefore it does not have a retail presence in Tennessee. People do not shop at Amazon just to get out of paying sales tax. They typically have lower prices so maybe Walmart and others need to match Amazons prices first, then they can complain.

May 4, 2011 at 11:34 a.m.
TNCitizen said...

Why would anyone pay sales tax on an out-of-state purchase? Because it's the law. If the seller does not collect sales tax on the purchase, it is the buyer's obligation to pay "use tax" at the same rate for the privilege of using the "tangible property" in their state of residence. Every state that has a sales tax has a corresponding use tax. Being a libertarian is one thing. Breaking the law is another.

May 4, 2011 at 10:57 p.m.
TNCitizen said...

Amazon is a bully and a predator, exploiting weaknesses in sales tax laws and eating its brick-and-mortar competitors' lunch. How do you relate to a bully? You stand up to them and the cowards will back down. Their days of tax dodging are numbered.

May 4, 2011 at 11:09 p.m.
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