published Thursday, May 5th, 2011

Sales tax demand could drive Amazon away

  • photo
    Katherine Braun sorts packages toward the right shipping area at an fulfillment center in Goodyear, Ariz., in this Associated Press file photo. Some Tennessee lawmakers object to Amazon not paying sales taxes on products that will be shipped from its Hamilton and Bradley fulfillment centers.

NASHVILLE — An official said Wednesday that legislative efforts to make the Internet retailer collect sales taxes on its Tennessee customers are unconstitutional and, if approved, could cause the company to abandon fulfillment centers it is building in Hamilton and Bradley counties.

“You need only look at South Carolina and Texas,” said Amazon’s vice president for public policy, Paul Misener, alluding to two states Amazon says it is leaving in response to similar situations.

“Here’s the thing: Sure, they can pass a bill and we can go and litigate it, and we’re confident that we can ultimately win,” Misener said.

“But why would we want to come to a state that made a commitment not to harass us in this way and then, once we get there, the very first thing we face is a lawsuit? It just doesn’t make any sense. Why not go to Indiana where we’re welcome?”

Misener’s comments come as the House and Senate Finance Committee chairmen are pushing to amend a tax bill so that Amazon and any other “dealer” or an “affiliate” with distribution centers in Tennessee would have to collect state and local sales taxes from in-state customers.

Amazon is spending $139 million on its two regional fulfillment centers. They will employ 1,400 to 1,500 full-time workers and perhaps more than 5,000 part-time workers to distribute books, music and other products from Amazon and third-party retailers.

Under U.S. Supreme Court rulings, states cannot compel out-of-state retailers such as Amazon to collect sales taxes from in-state customers unless they have a physical presence or “nexus” in the state.

Amazon argues the fulfillment centers are not a nexus and thus cannot be compelled to collect sales taxes. The national fulfillment center business is “separate and apart from our retail business,” Misener said, and that was part of a “commitment” made by the state.

He said Amazon has no plans to create any retail operations “and therefore the tax officials, the government of Tennessee, certainly understood that and was committed to not try to force our retail business to collect.”

Then-Gov. Phil Bredesen recruited Amazon last year and the state’s apparent commitment was accepted by new Gov. Bill Haslam.

It infuriated traditional “brick-and-mortar” retailers ranging from mom-and-pop clothing stores to national giants such as Wal-Mart.

They argue the deal gives Amazon an unfair advantage because they still have to collect the state’s 7 percent sales tax and up to 2.75 percent in local option sales taxes.

The businesses are backing efforts by Senate Finance Committee Chairman Randy McNally, R-Oak Ridge, and House Finance Committee Chairman Charles Sargent, R-Franklin, to “make clear” Amazon would be required to collect sales taxes.

Sargent delayed consideration of the bill in the House Finance Subcommittee until next week.

McNally said Wednesday night he has asked Tennessee Attorney General Bob Coop-er for an opinion whether the legislation passes legal muster.

“I think that’s fair,” he said. “If there is a constitutional issue with the amendment, we’ll try to address it.”

As for Misener’s comments about pulling up stakes, McNally said, “I’ve been threatened before. If they say if the Legislature takes certain action they’re going to pack up and leave, I’d say it’s an attempt to control the Legislature and blackmail the Legislature.”

But House Majority Leader Gerald McCormick, R-Chattanooga, said he doesn’t see Amazon as bluffing and referred to its decision to pull out of a proposed center in South Carolina rather than collect sales tax.

“We made the deal,” McCormick said. “We’ve got to keep our word, and if we don’t, we lose all reliability.

“I’ll continue to talk to members of the subcommittee and try to make sure we hold together and defeat this thing,” McCormick said. “I think it’s bad for business. It’s a bad precedent. It will literally run jobs out of the state of Tennessee.”

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, ...

Comments do not represent the opinions of the Chattanooga Times Free Press, nor does it review every comment. Profanities, slurs and libelous remarks are prohibited. For more information you can view our Terms & Conditions and/or Ethics policy.
rolando said...

I hope Amazon moves its center to another state and takes their 6,000 jobs with them, along with all the added infrastructure that goes with them - restaurants, shoe and clothing stores, food stores, doctors, dentists, housing contractors, etc ad infinitum.

Then, come the next election, our House and Senate Finance Committee chairmen can explain to the voters exactly why they denied our workers those jobs -- and incidentally lost all the future sales taxes those 6,000 people would have paid. I sure hope all those "brick-and-mortar" businesses pay into their campaign fund -- they will need it.

Those two "Legislators" are about to get an instant education in what happens when you tax companies unfairly; and a higher education later after they screw the voting consumer out of good jobs.

Majority Leader McCormick is the only one of the three Legislators with his head outside his backside.

May 5, 2011 at 4:59 a.m.
jopeck said...

AMEN Rolando! We are counting on the state of TN to 'protect' us from and unreasonable and intrusive federal government, and we need all the JOBS and ancillary benefits we can muster. MORE IMPORTANTLY, TN is one of the few 'states' that apparently will take a stand for old fashioned values; a deal is a deal, and for these two 'weaselly' legislators to attempt to void the deal at this juncture just tells me they need to find another profession. Perhaps in Illinois?? We'd certainly be willing to assist in their defeat when the time for their re-election comes up.

States that have Amazon fulfillment centers have reaped the benefits; I LOVE our Mom and Pop stores as well as the giants like WalMarts.... but this apparently met the criteria of 'non-retail' when the deal was made. We ALL need each other now just to survive the coming economic armageddon, and we expect our legislators to get some spine here.

Bravo Gerald McCormick!

May 5, 2011 at 6:54 a.m.
rockman12 said...

Good-bye badly needed jobs. Please remember it wasn't the residents of Tennessee, just a couple of stupid Republican legislators that have Walmart in their pocket. Please reconsider coming here when we put Democrat's back in office in a couple of years. To the Republican morons: Amazon does not have a retail presence and therefore they are exempt from sales tax collection. All that you will accomplish is to chase away decent paying, desperately needed jobs. Stop driving away the jobs that pay a living wage. People cannot survive on the pittance that Walmart and others consider good pay.

May 5, 2011 at 7:40 a.m.
WhitesCreek said...

5000 part time jobs won't be paying any living wage. Why are we even considering a business model that helps people not pay the taxes that pay for schools, libraries, police and fire protection, state parks and everything else? These particular jobs come at the cost of an increased burden on the folks who do pay their taxes and have to parasitize existing retail jobs and the businesses that created them. I am not convinced in any way that there will be a net gain of jobs in TN because of Amazon unless they collect and pay their taxes like everyone else.

May 5, 2011 at 8:36 a.m.
Leaf said...

The sad reality is that Amazon will exist and take jobs away from Main Street retailers whether or not it is located in TN. Whether the shipping center is located next to a Mom-n-Pop shop or 500 miles away makes no difference to the amount of money lost by M&P to Amazon. The Web is shipping-location agnostic.

We might as well forgive the sales tax and have an Amazon shipping center here. It would clearly be a net gain for TN.

May 5, 2011 at 9:06 a.m.
ahbrannon said...

Typical politician. Amazing how they can not see the benefits of Amazon being located here and not somewhere else. These guys are beyond stupid.

May 5, 2011 at 10:16 a.m.
LibDem said...

It's time for Tennesseans to be good little Libertarians and knuckle under to Amazon's threats. Let's be proud to out beg South Carolina.

May 5, 2011 at 11:12 a.m.
eastridge8 said...

I don't care if jobs are full time or part time! SOME JOB IS BETTER THAN NO JOB! Let Amazon have their tax exempt status...we will make up for it with jobs to BUY things and pay taxes on them...The three legislators who are sponsering this in Nashville will be sorry next election...I WILL VOTE AGAINST THEM OR NOT AT ALL IF I DON'T LIKE THE OPPONENT...THAT IS A PROMISE!!

May 5, 2011 at 11:31 a.m.

All I had to read was the two who want Amazon to do the tax thing are Republicans. I hush NOW.

May 5, 2011 at 11:35 a.m.
eastridge8 said...

I am a registered Republican but my Grandmother ALWAYS said "Vote the man NOT the party"...and that's what I intend to do...if a Democrate or Independant is a BETTER choice, SO BE IT!! THEY WILL GET MY VOTE!! If these 3 clowns get their way I will VOTE AGAINST THEM NEXT ELECTION!!!

I am SO mad about hard as it is to find a good job this day and time and some STUPID IDIOT comes along and makes such outlandish and ignorant statements as this doesn't deserve to SERVE the good citizens of Tennessee!!!

May 5, 2011 at 11:56 a.m.
eastridge8 said...

Sorry...I meant 2 CLOWNS...not 3....

May 5, 2011 at 12:01 p.m.
obama4president said...

If not paying sales tax gives an unfair advantage to Amazon, or if it hurts the state by reducing revenue then the agreement should have never been made. To renege on a deal already made is despicable and totally wrong. Republicans claim to be the reducers of taxes, yet here we are able to see their true colors... claim to reduce taxes and claim to be all about creating jobs while actually raising taxes and stifling job creation and simultaneously reneging on promises already made. Republicans claim to be pro-business but, apparently, only if it helps the businesses that have won their favor. It is so obvious that he who lobbies the hardest (and donates the most to election campaigns) will have the loudest voice, without regard to what is best for the voters or the economy. Lower taxes, smaller government and job creation are all Republican rhetoric, and even outright lies.

May 5, 2011 at 12:48 p.m.
TNCitizen said...

If you live in East Ridge, you can't vote against them. You're not in their district! Our legislators are sworn to act in the best interest of the whole state, not just Chattanooga. On the whole more jobs will be lost statewide because of Amazon's bullying and abetting tax evasion than Amazon will hire.

May 5, 2011 at 12:56 p.m.
LibDem said...

Amazon will build the distribution centers it needs somewhere and these will be American jobs. They need wait only for the best corporate welfare package they can get. Food stamps for big business.

May 5, 2011 at 1:06 p.m.
TNCitizen said...

The TN Attorney General issued an opinion that said the TN and US Constitutions already allow the state to require Amazon and other businesses to collect TN sales tax if they use third-party affiliates in the state to solicit business.

May 5, 2011 at 1:14 p.m.
TNCitizen said...

Lib4 is not paying attention. The bill under consideration would only apply to purchases made by Tennesseans.

May 5, 2011 at 1:30 p.m.
Bentley said...

I think the basic question to look at in regards to this Amazon deal is what do they gain from building a distribution center here? Nothing. I highly doubt that sales will skyrocket through the roof because of distribution centers in TN. Now what does the state get? They get to get some of the population into jobs. Because hey even a part time job is better than no job! So should Amazon choose to leave, what would the effect on their business be? Again, nothing. People who order from Amazon will continue. Meanwhile we lose out on a bunch of jobs just because our lawmakers are too inept to realize this detail.

May 5, 2011 at 1:34 p.m.
ibshame said...

Right away you blame Liberals for this latest TN debacle. How typical when it is CONSERVATIVE REPUBLICANS who control BOTH HOUSES OF THE TENNESSEE LEGISLATURE who are pushing for this move. Can't blame Liberals for this latest fiasco because it was under the leadership of Phil Bredsen who brought this job creating venture to Tennessee not the REPUBS in the House or Senate. Another example of the REAL agenda of those in control in Nashville. Just as they are about to renege on this promise so to have they done the same thing to the TENNESSEE EDUCATION ASSOCIATION who helped them get over $1/2 billion dollars in Race to the Top Funding last year by agreeing to 90% of their proposals for teachers. It would appear this group of yahoos are only concerned when they can get some personal benefit such as a campaign contribution so they can return to do more of this type of folly. And people like L4F want to blame Liberals? Get REAL!!

May 5, 2011 at 3:06 p.m.
esaletnik said...

You can't blame the liberals in Tennessee because there aren't any.

May 5, 2011 at 3:08 p.m.
NorthChatter said...

It would be interesting to know how much in sales Amazon generates in Tennessee each year (since that is the only part that would be taxed).

I would argue the net benefit in jobs (yes, many of them are part time, but there will still be over 1,000 full times jobs) will outweigh the sales tax additions.

If Amazon pulls up and goes to another state...Tennessee gets zip (no sales tax AND no jobs)

I am a "mom and pop" business owner and I support the original deal Bredesen made. Is it completely fair? No. But we give breaks to big companies all the time because the overall long-term benefit typically outweighs the costs.

I worry that those who want to change the deal are being penny-wise and dollar-foolish.

May 5, 2011 at 4:08 p.m.
jopeck said...

Some of you need to learn to read, CAREFULLY. This isn't a republican or democrat thing -- the two opposing it are republican legislators, but the governor has signed ON to it (also republican) and Gerald McCormick is fighting for us to honor the commitment we made when we initially agreed to the deal...he's also republican. Leaf and NorthChatter both made good points'll be built here or somewhere else, so we might as well reap the benefits.

May 5, 2011 at 4:08 p.m.
champ1 said...

Our Chattanooga representative needs to take care of this Michael Corleone style with a bullet to the eyes (figuratively that is). I would pull anything I had to in order to get this tax collecting effort squashed. Did anyone notice where the South Carolina jobs went? China! It's a sad day when Republicans shoot themselves in the foot this badly. I believe that there is some jealousy at the root of this, as the Chattanooga area got not one but two fulfillment centers. Not even a small warehouse was in it for poor Oak Ridge. What a bunch of losers! We are better businessmen here and their lousy efforts to stop the momentum in Chatt-town won't work. It would be terrible if we lost Amazon, but truth be told, we'd find a replacement.

I'm sure that these representatives believe that their constituents are being asked to make a sacrifice with nothing in return from the Chattanooga region. Forget the great publicity for Tennessee in general, they want quid-pro quo, and they want it NOW. That's why we're on our way to being the best city in this state, because we cooperate and understand that in business what's good for one is good for all. I that what is happening may surprise most of you, but this is the way business is done (or better said not done) every day. Get used to it. This will not be the last time we see this sort of stupidity.

May 5, 2011 at 6:51 p.m.
rolando said...

Let's get our facts together and not throw out the baby with the bathwater.

There are only TWO Legislators in Nashville pushing for this "tax Amazon" craziness; the TWO are Senate Finance Committee Chairman Randy McNally and House Finance Committee Chairman Charles Sargent.

The THIRD Legislator mentioned in the article is on OUR side and wants Amazon to keep its sales tax-exempt status as approved first by Democratic Governor Bredesen and then by Republican Governor Haslam; Amazon does NOT meet the "taxable" criteria spelled out by the SCOTUS in its "nexis" decision; there is no nexis anymore than a trucking company's trucks passing through Tenn.

Those pushing for the tax-Amazon law and their supporters in the TN Legislature are in for a big surprise election day...

We need JOBS not taxes -- the JOBS will increase the sales tax revenue by themselves.

May 5, 2011 at 8:21 p.m.
rolando said...

Sorry, eastridge8...I just read your correction.

May 5, 2011 at 8:25 p.m.
rolando said...

TNcitizen said "...require Amazon and other businesses to collect TN sales tax if they use third-party affiliates in the state to solicit business."

It seems so. Amazon typically drops those 3rd part affiliates to avoid any possible nexis. They routinely do is not particularly in the citizen's best interest, however. Amazon still sells the items but use out-of-state affiliates..

May 5, 2011 at 8:30 p.m.
rolando said...

I STILL buy local...but I buy on-line also. Why? Two reasons: 1) If a big ticket item needs repair -- and those Chinese-made items usually do -- good luck with the on-line retailers, and 2) on-line is dramatically cheaper especially when the seller has an ongoing contract with UPS, et al.

Point is, I will continue to buy online -- just not through Amazon. E=ven then, I can always have the items shipped to my Mother-In-Law in Indiana...

May 5, 2011 at 8:40 p.m.
chet123 said...

that what we get for electing republican in office LOL LOL LOL republican have lol..really a stupid will give us a tax base.....cant they see make no sense...LIBERTARIAN..WHAT YOU SAY ABOUT THAT...OH I KNOW....OBAMA DID IT! LOL LOL

May 5, 2011 at 9:01 p.m.
alohaboy said...

I say make them provide a list of who they sell what to in TN and then let Revenue and Taxation knock on doors and force payment of taxes by the buyers. That's the law.

May 5, 2011 at 9:18 p.m.
twharr said...

Chet123, my pup can spell and use proper grammar better than you. Read what you post thoroughly prior to posting a statement. I beg you!! You make me cringe dude!

May 6, 2011 at 9:44 a.m.
Legend said...

Decades ago the state of Louisiana was on its way to becoming one of the wealthier states in the nation. Instead it's one of the nation's poorest. The state of Louisiana ranks right up there with the Mississippi Delta in poverty. What happened? Many employers were prepared to locate to the state of Louiiana and set up shop. However, they had to grease so many politician hands and jump through so many hoops that they said #@$! this *&^!! They gathered up stakes and took their businesses right across the border and into the state of Texas. Because of this, Texas became one of the most prosperous and self sustatining states in the nation. The state of Tennessee is on its way to becoming another corrupt, rogue, poverty stricketn Louisiana.

May 6, 2011 at 5:52 p.m.
chet123 said...

TWHARR....sorry every i is not (DOT) and every t is not(cross)..maybe you put too much stock in composition of writing.. most men dont care... long as you have an idea or for myself ..i dont give a get use to it...we have major issues american need to address and chattanooga have one of the lowest income in the nation,eventhough upper-middle class in chattanooga is only a couple of pay period from losing their homes..we have big problems...and all you can say is my spelling...are you a queer!...hope you are not the way ...i track all your are OK!! Just be careful poking a stick through a fence when you dont know who on the other side bro...hope you're ant angry...(pardon my grammer ..but i find it effective) LOL LOL LOL LOL

May 6, 2011 at 6:18 p.m.
xyzyra said...

chet123, don't pay any attention. I learned a long time ago such attacks on ones grammar and spellings are attempts to silence the truth(ever notice they never attack the bad grammar and spellings of those who agree with them?). When I read some of what our local reporters and news anchor persons put into print, and they're suppose to be professionals, yours and my writings appear scholastic in comparison.

May 7, 2011 at 8:44 a.m.
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