published Sunday, May 8th, 2011

Amazon raises stakes with 3 more centers

NASHVILLE — Amazon.com is ready to double down on its economic and political bets in Tennessee by building three more distribution centers in Nashville or Knoxville — or possibly splitting the centers between the them.

According to an April 29 state filing, the Internet retailing giant would invest $180 million and employ about 1,700 full-time workers and 2,000 part-time or seasonal workers within two years.

That would more than double the $139 million investment Amazon is making with distribution centers in Hamilton and Bradley counties.

The revelation that Amazon is considering building more distribution centers in the Volunteer State dramatically could raise the stakes as some top Republican legislators push to make the company collect sales taxes on Tennessee sales.

Amazon recently pulled out of South Carolina and Texas over similar sales-tax disputes, and company officials indicated last week that they wouldn’t hesitate to do the same in Tennessee.

The legislation’s sponsors, Senate Finance Committee Chairman Randy McNally, R-Oak Ridge, and House Finance Committee Chairman Charles Sargent, R-Franklin, could not be reached for comment Saturday. They have scheduled hearings this week on their legislation.

But Republican Gov. Bill Haslam has said his administration is committed to the deal made by his predecessor, Democrat Phil Bredesen, that would not require Amazon to collect sales tax.

Late Friday, Dave Clark, vice president of Amazon’s North American operations, said the company is “looking at expanding our commitment to Tennessee because the state is committed to Amazon.”

House Majority Leader Gerald McCormick, R-Chattanooga, an Amazon supporter, said the company’s willingness to locate more centers in Tennessee “might blunt” criticisms.

“I think people in the Legislature will be happy to see more jobs coming to Tennessee,” McCormick said.

Amazon told Hamilton County officials last year its average wages are expected to be “at least $30,500” annually. The company also offers health insurance, paid vacation, a 401(k) and annual stock grants.

Still, McCormick acknowledged a coalition of retailers including Wal-Mart is unlikely to back off their opposition. They say it’s unfair that they have to collect taxes while Amazon doesn’t.

Under U.S. Supreme Court rulings, states can’t compel out-of-state retailers to collect sales taxes from in-state customers unless they have physical presence such as a store or, in legal jargon, “nexus.”

Amazon says its fulfillment centers, where orders are processed and merchandise shipped, are “separate and apart” from its retail business. The company is fighting similar battles in a number of other states.

But McNally and Sargent said they think that under current law, the distribution centers do constitute nexus, and their bill is intended to clearly establish that.

The legislation is expected to raise $10.6 million for state and local governments, according to a legislative analysis.

Last week Paul Misener, Amazon’s vice president for public policy, said the legislation is unconstitutional and the company uninterested in staying around for a court battle.

On April 27, South Carolina lawmakers voted down a sales-tax collection exemption for an Amazon distribution center near Cayce, S.C.

The next day, Amazon canceled the $52 million center.

Then on April 29, the company filed documents with the Tennessee Department of Economic and Community Development saying it was eyeing three new centers in Tennessee.

Tennesseans for Fair Taxation, a group that advocates for various changes in state tax laws, has sharply criticized Bredesen’s Amazon deal.

“The administration waiver of sales tax collection by Amazon is especially outrageous, as well as unfair, because it was made in secret behind closed doors without any public comment or action by the state legislature,” John G. Stewart, the group’s former chairman, said in a statement Saturday.

Tennesseans for Fair Taxation has estimated Amazon has been able to avoid collecting some $30 million to $35 million in state and local taxes. Tennesseans are supposed to pay sales taxes on Internet purchases, but few do.

“This is a sell-out of Tennessee businesses, as well as a denial of legitimate tax revenue at a time of serious budget shortfalls and program cuts,” Stewart said.

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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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.
ninjapirate said...

Amazon has no other place to run... don't believe their blustering about running away, they are desperate. Just look at all the states that are starting to flip them off(Not just SC and Texas). They need to be taught a lesson about doing tax dodging economic development deals with lame duck governors.

That being said, I'm opposed to an internet sales tax, but they must be forced to compete fairly in other ways...

May 8, 2011 at 2:48 a.m.
joepulitzer said...

So, Amazon should take its hundreds of millions of dollars and thousands of jobs out of Tennessee on a rainy night to Georgia. Is that what you're saying, ninjaparrot?

May 8, 2011 at 7:27 a.m.
rolando said...

Gee. You suppose the two additional centers proposed for the Nashville [Franklin] and Knoxville [Oak Ridge] areas just accidentally [wink, wink] happens to lie in or near the home districts of the two Finance Committee chairmen? Oh, surely not! Horrors! Oh, dastardly politics! LOL

Nice move, Amazon. Slickly and well done.

Now we will see how all those jobs coming to the Finance Committee chairmen districts affects their push for more taxes and fewer jobs.

Ah, yes...politics at its finest -- "Give to me or get out".

May 8, 2011 at 7:27 a.m.
rolando said...

Then again, perhaps the fix is in and this is the cost of Amazon doing business in Tennessee. Ya think?

Those two aren't Finance Committee Chairmen for nothing...

May 8, 2011 at 7:34 a.m.
rolando said...

More objectionable, in-your-face, screaming commercial advertising on the forum.

How about removing that crap, Times Free Press?

May 8, 2011 at 7:36 a.m.
ninjapirate said...

joepulitzer, Amazon can't run forever... why didn't you mention Kentucky? I know why, they already pay sales tax there... they can't run to North Carolina... or South Carolina... or Arkansas... and probably not Missouri in the near future... why are you so intent to playing "race to the bottom"?

BTW IIRC, Amazon built a huge facility in Georgia in 1999 and then closed it down 2 years later...

I'm OK with letting Amazon not collect sales tax... in fact I prefer it that way... but every last one of their other incentives should be taken away in return.

May 8, 2011 at 7:50 a.m.
LamontCranston said...

Note: "to make Amazon collect sales taxes on Tennessee sales". It sounds like the legislators are only interested in making their constituents pay. If anything here sounds unfair, this is it. Tennessee needs capital investment and jobs. Let Amazon bring good jobs to TN, and let Tennesseans enjoy the benefits. They will spend money on taxable items, since everything they physically purchase (hand their money across the counter and walk away with merchandise) in TN is taxable, and the state will enjoy increased sales tax revenue.

May 8, 2011 at 8:10 a.m.
donpagejr said...

So Walmart is complaining about unfair business practices are they? How many businesses have they put out of business by THEIR unfair practices??

May 8, 2011 at 8:14 a.m.
WhitesCreek said...

Amazon will only come to Tennessee if they can help their customers cheat on paying their taxes? Nice people. I say we help them come into the light of being good citizens and obeying the law. Let the state start going after sales tax cheats...Oh wait...that would be us.

May 8, 2011 at 8:20 a.m.
ninjapirate said...

" It sounds like the legislators are only interested in making their constituents pay. If anything here sounds unfair, this is it. "

By your reasoning all taxes are unfair...

"So Walmart is complaining about unfair business practices are they?"

Do you honestly think it's just Walmart that has a problem with Amazon? Keep dreaming...

Here's an article from 1997 where Amazon pressed Barnes & Noble to charge sales tax on their website because they have brick and mortar stores... the incentives involved here are perverse... B&N actually contributes to the communities they are built in and Amazon gets to dominate by avoiding taxes.

http://www.pcworld.com/article/5230/amazoncom_accuses_barnes_and_noble_of_tax_avoidance.html

People need to stand up to Amazon before it's too late... the federal government should fix the sales tax problem so give Amazon the sales tax exemption... but take away the rest of their incentives.

May 8, 2011 at 8:30 a.m.
LamontCranston said...

Most state income tax forms require you to report all merchandise you purchase without paying state sales tax, and require you to pay it at that time. Unfortunately that doesn't work in TN since TN has no state income tax on earned income.

May 8, 2011 at 8:39 a.m.
Humphrey said...

I love shopping at Amazon. And I can understand their point of view, they are in business and they want to get the most advantages they can. Indiana wants them if we don't. What this whole story tells me is two things. First, this is what happens when big mega companies take over. Nobody is going to give these kind of breaks to you or me if we try to open up a little store down on the corner. As we've let the walmarts and amazons and so on take over and crowd out the little mom and pop stores, now they want even more. Look at the incentives that costco got to build a store in Georgia. Amazon wants no sales tax, companies like walmart and home depot and so on want them to pay sales tax to even the field. They see it as unfair competition (and they have a point) but they have already drowned out the little guys. We'll all be working for a corporation. Second, this points out the fundamental flaw of Tennessee's regressive tax system. If we want the state to provide services - schools, roads, etc., then they have to have some revenue to pay for them. They get that through taxes. In Tennessee we have no state income tax, and everyone is terrified to even mention such a thing. But we pay out the nose in sales tax. Our sales tax is so much higher. Just because we don't have income tax doesn't mean we don't have taxes. But sales tax has problems. One, it is less dependable, because people can order things or just go across the border to buy things with lower sales tax. Tennessee has a lot of borders, no one is really that far from one. It is also really regressive. Poor working people and rich people both have to buy things like food, but it makes up a bigger percentage of the income of poor and working class and middle class people than it does rich people. Rich people can just decide not to buy extra things when the economy is tight, they can put their money in the stock market things like that. And not pay any state tax on it. And buy expensive luxury goods tax free through the internet or from other states. That hurts are state. That's why fluctuations in the economy are so hard on our state. We'd all be better off if the state sales tax was reduced by half (and maybe gotten rid of all together for food) and a small income tax was added. There are mathematicians smart enough to figure out the percentages to do that in a way that for middle class people in balances out to the same. Rich people would pay their fair share of taxes whether they spent their money in Tennessee or not. And poor and working class families would pay the same amount - what was reduced in sales tax would be made up in income tax. For the state, it would be a more dependable form of income. They wouldn't have to scramble to predict how much sales are going to be made. It would be more fair to all of Tennessee's citizens. The problem is people here "income tax" and they get scared. You are paying taxes already folks.

May 8, 2011 at 10:42 a.m.
nowfedup said...

Seems score is Amazon can afford to buy out legislators whom have zero morality/ethics as this so wipes out small business as to be a criminal act. Just another example of corp USA taking over, buying legislators, and screwing the public. This is a very slippery slope, as fair for Amazon, fair for WM and then who else? WM got lots of same sort of bennies, wiped out local small business, now imports 95% from China, same of others. Time to end the corp welfare, or TN must admit money bought TN. I would love to see DETAILED breakdown of wages, Health Ins, 401's etc as other areas where AM went in do not report such. Simple enough, either ALL play by tax rules of none. USA is so starved for jobs since imports took over, quite willing to fun at low wages for most. Sad that these folks can buy as needed, destroy small business with 10% corp tax welfare advantage, not pay fair taxes, no wonder TN is at bottom or most meaning full lists, as other then elected, most folks not doing well, kind of a Corp Plantation State, TN!

May 8, 2011 at 11:59 a.m.

There is little room for discussion about Amazon locating in Tennessee. It's really all about jobs for the folks who don't sport much more than a high school diploma. We are not even near the top 30 in states who have a well educated population hence give Amazon what they want. Seeing them locate in key areas of our state will do nothing but benefit our economy and citizens. Many who have posted are simply not viewing the whole picture. Wake up people.

May 8, 2011 at 12:11 p.m.
nucanuck said...

Maybe it's time for Tennessee to take the lead for all states that are slowly losing their sales tax base to internet sales and damaging their long time retail sector at the same time.

DROP THE SALES TAX altogether...back to zero...and switch to an income tax base. Problem solved and Tennessee retailers would have a head start against all neighboring states.

As it now is, the sales tax base swings wildly with economic cycles and with a down future almost assured with reduced consumption due US economic hard times, the switch could be quite timely.

May 8, 2011 at 4:49 p.m.
MasterChefLen said...

Tennessee would be crazy to drive Amazon away.

May 8, 2011 at 8:31 p.m.
rolando said...

Two things, humph and nuca:

First -- Humphrey, there is absolutely no such thing as a "small income tax". It may start out that way but quickly grows as the Legislature is given a free hand in raising it...hence our "fear" when the words are mentioned. They directly control it, we don't...and they no longer fear us.

Second -- nucanuck, there are [at least] two major differences between a sales tax and an income tax: the former is controlled by the voters and the latter is controlled by the Legislature. Big -- no, monstrous -- difference. You might defend the latter up north but I don't trust the Legislature any further than I can see them.

Let us not forget that the voters passed the heavy [yeah, right] sales taxes we enjoy here in Tennessee. Each and every time it is raised we voted it in. That will never, ever happen with an income tax.

Most states, with a few exceptions, tax their citizens about 7 1/2 to 8 percent sales tax, including locality taxes. Difference is, we tax everything...

Sales tax is the great leveler -- if you don't buy it you don't pay taxes.

The "rich" pay more taxes because they buy more...and the items they do buy are more expensive so they pay more taxes. That includes houses, cars, clothing, cell phones, flat screens, food, etc.

May 9, 2011 at 8:56 a.m.
nucanuck said...

rolando, you ignore the basic point that allowing a (growing) flow of untaxed goods will eventually destroy the sales tax revenue base. If there is no way to tax on-line shopping, then changing the tax structure is the cure.

May 9, 2011 at 11:14 a.m.
rolando said...

Tell it to WalMart, nucanuck -- they invented the build-outside-city-limits methodology...thereby closing all the in-town city-taxes-paying stores. Plus all the city-tax paying infrastructure supported by the in-town businesses.

Your idea that Amazon will close down WalMart, BestBuy, Target, and all those stores surrounding those giants is absolutely laughable.

Buying local has a huge advantage -- you walk out of the store with your item in hand along with a strong return policy. Try that with an on-line outfit -- Getcha RMA here!

Your plan of an uncontrolled income tax is no cure, either. Just look at what Washington has gotten us into with its tax-everything schemes.

Businesses that cannon compete in the marketplace go under; happens all the time. Difference is, this time it is happening to the big boys who succeeded by bankrupting their competition...this time it is their turn and they don't like it and go whining to the Legislature about "unfair". I fly the BS flag to that.

May 9, 2011 at 11:22 p.m.
Humphrey said...

Rolando the problem with going with sales tax alone is that it dries up if people don't spend. The "rich man" does pay more, as you say, if he spends his money in Tn. But when he puts that money in the stock market or something he pays nothing. When he buys that lake house in Alabama (because property tax is lower) and that boat in Georgia (because sales tax is lower) and that vacation at disney world he pays nothing to support the operations of the state of Tennessee, nothing. Even though the state of Tennessee is providing support to him through highways, public education for his workforce, and so on. Working families, on the other hand, have to spend almost all they make - there isn't much room for working people to save anymore, many people live paycheck to paycheck. So those working families are paying a greater PERCENTAGE of their smaller income. Yeah, the overall amount is probably a good deal smaller, but as a percentage share of their income it is a good deal larger. A sales tax is absolutely NOT the "great leveler" as you say, an income tax is. Everybody pays the same percentage on the money they take in - whether working, business, investments, whatever. That's level. With sales tax only, working people pay a greater percentage of their income, that's the opposite of level. I don't think that we should get rid of sales tax completely - it is good when it catches people driving through the state. But the vast, vast majority of people in Tennessee would pay less in total taxes with a combination of sales tax and income tax. That is simple logic and math and there's really no argument there. Your fear of legislators upping the rate in the future is a non-issue, that can happen with sales tax too.

May 10, 2011 at 11:28 a.m.
rolando said...

Income tax doesn't work that way, humphrey; to avoid TN income tax, all one need do is move out of state and into that "second house" in Alabama.

Yes, working people are taxed to death and beyond -- literally -- here in the US...and the feds want even more of their money. We cannot control the fed income tax -- if the feds want it raised, it goes up -- nor would we be able to control one here. We CAN and DO control any and all increases in the sales tax.

Gasoline taxes pay for highways; the feds pay for our lousy, failing school system; I believe TN already has an income tax on capital gains or something other than ordinary wages; under federal law, boats must be registered in the state of main usage and not where purchased...registration includes sales taxes; anyone can buy a home with lower property tax today.

In short, everything you complain about is already either taxed or available to everyone -- provided they have the money...and I suspect that is your real complaint and you want to take one man's money and give it to another who didn't work for it.

Finally, we are told that with an income tax established, the sales tax will drop...yeah, right. You believe that, I have this land in Memphis-under-the-bluff I will sell you.
Taxes only go one way -- up. There is nothing more permanent than a temporary tax. When those who control the revenue collection are the ones who spend the money, it is Katy, close the door. If you cannot see that, you need to read a bit of Ayn Rand or some history.

Since when do taxes have to be equal, anyway. Life itself is based on greed; it is what made America great -- the "great levelers" are what is destroying it.

May 10, 2011 at 4:12 p.m.
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