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.
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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