published Tuesday, May 10th, 2011

Senate panel hears Amazon bill today

Katherine Braun sorts packages toward the right shipping area at an Amazon.com 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.
Katherine Braun sorts packages toward the right shipping area at an Amazon.com 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 — A bill that could impact Amazon.com and its decision to proceed with building two planned distribution centers in Southeast Tennessee is scheduled for a hearing in the Senate Finance Committee today.

The sponsor of the bill, Finance Committee Chairman Randy McNally, R-Oak Ridge, said Monday afternoon he did not know whether he has the votes to pass the bill.

“I’ll present the amendment, and it’ll definitely get some discussion,” McNally said. “I think that [a vote] probably depends on where that discussion leads [as to] whether to proceed or not.”

McNally said he has not lobbied colleagues on the bill.

But lobbyists for Amazon and its business rivals Wal-Mart and Best Buy plied legislative corridors Monday afternoon in search of votes or the latest news on the issue.

Among those expected to testify in support of McNally’s bill are a former Knoxville bookstore owner as well as a Nashville jewelry store owner, according to several lobbyists involved in the issue.

Others include Best Buy’s senior director of government relations, Laura Bishop, and Memphis-based AutoZone’s vice president of investor relations and tax, Brian Campbell.

Former Tennessee Attorney General W.J. Michael Cody, of Memphis, is also working with AutoZone and could testify. AutoZone officials have previously said it is unfair that they have to collect Tennessee’s 7 percent sales tax and up to 2.75 percent in local option sales tax while Amazon will not.

Lobbyist John Lyle is expected to speak for Amazon.

McNally’s bill seeks to “clearly” establish that Internet retailing giant Amazon’s centers, when open, will constitute sufficient physical presence to compel the company to charge and collect sales tax on items sold to Tennessee-based customers.

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, a “nexus.”

Amazon says its Internet sales will not be handled in Tennessee. Its distribution or “fulfillment centers, where orders are processed and merchandise shipped, are “separate and apart” from its retail business.

The company is fighting somewhat similar battles in a number of other states.

Amazon is spending $139 million to build two fulfillment centers with one in Chattanooga and the other in Bradley County. They would provide nearly 1,500 full-time jobs and several thousand seasonal or part-time positions.

The company, meanwhile, has also told the state it is looking at locating three more centers in Knoxville, Nashville or in both cities. But Amazon has also warned it could abandon Tennessee if the state does not meet its commitments on tax issues.

Sen. Bo Watson, R-Hixson, a Finance Committee member, said he hasn’t seen McNally’s latest amendment.

“I’m saying that 1,200 full-time jobs, 2,000 seasonal jobs is an awful difficult balance to unseat,” Watson said of the 1 million-square-foot center that Amazon is building in his district. “But I’m still learning about all the intricacies of the sales tax law as it applies to these kinds of businesses and who else might be affected.”

Or, Watson said, what other companies might seek to take advantage of the situation.

Sen. Mike Bell, R-Rice-ville, who represents Bradley County, said, “I hope it doesn’t pass. We don’t need to do anything to endanger the jobs, the construction project that’s benefiting both Hamilton and Bradley and the state of Tennessee.”

But he said that going forward, state economic development agreements must be more open, noting, “everybody needs to know about them.”

Rep. Tommie Brown, D-Chattanooga, said, “I want to keep them because I know what it means to us for jobs. But I also know we need to generate some revenue.”

But noting the state’s reputation is also at stake, Brown said, “I would just tread lightly at this point, because if we send this signal and this business pulls out of Tennessee, that’s just like putting a nail in our coffin because other businesses will say not us, because we don’t have time.”

One of the issues involved is over what action the state took with regard to Amazon. The deal was struck by former Gov. Phil Bredesen as he was going out of office. His successor, Gov. Bill Haslam, said he supports the commitment.

But officials are vague on what the state did because of state secrecy laws involving individual taxpayers. Lawmakers including Senate Speaker Ron Ramsey, R-Blountville, have chafed over the lack of information.

Amazon has called McNally’s bill unconstitutional in terms of previous U.S. Supreme Court decisions.

Some of lawmakers’ concerns could be “easily addressed,” McNally said.

“If there’s not a commitment, I don’t see anything wrong in proceeding ahead,” McNally said. “It’s an issue of fairness and if we’re adversely impacting our sales tax base.”

Moreover, McNally argued, other companies that are not benefiting could march into court and accuse the state of treating different companies unequally in terms of taxation.

The House sponsor of the bill, Finance Committee Chairman Charles Sargent, R-Franklin, chuckled in response to Chattanooga Times Free Press reports over the weekend that Amazon was looking at locating additional centers in Knox County, a portion of which McNally represents.

“I think they’re smart business people to turn around and try to get as many votes as they can get,” Sargent said. “I haven’t heard of a distribution center for Memphis yet. That’ll probably pick them up a lot of votes.”

McNally smiled and called the choice of Knoxville “interesting.”

Contact Andy Sher at asher@timesfreepress.com or 615-255-0550.

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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timesfreepress said...

Do you think Amazon should have to pay sales tax in Tennessee?

May 10, 2011 at 12:29 a.m.
ninjapirate said...

"Do you think Amazon should have to pay sales tax in Tennessee?"

The Feds really should fix this but until they do there should be a lower sales tax rate for companies with nexus in Tennessee who ship products directly to the customer's home.

This should not ever happen...

Barnes & Noble's $259 Nook costs more than Amazon's $279 Kindle. Why? Tax.

http://blog.farhadmanjoo.com/post/218772189/barnes-nobles-259-nook-costs-more-than-amazons

See also:

<p>Amazon.com Accuses Barnes & Noble of Tax Avoidance(not charging sales tax when they have brick and mortar stores)

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

May 10, 2011 at 1:25 a.m.
ninjapirate said...

BTW, another very popular online retailer is newegg.com... and they charge sales tax for Tennessee customers. Will they be getting the amazon deal too? Should all the newegg customers who had paid the sales tax get a rebate?

May 10, 2011 at 2:29 a.m.

"Do you think Amazon should have to pay sales tax in Tennessee?"

Yes......because the state needs the money and they are a big enough company with lots of cash so they can afford it.

May 11, 2011 at 1:49 p.m.
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