published Thursday, May 19th, 2011

Amazon tax bills quashed

NASHVILLE — Lawmakers on Wednesday abandoned efforts to force Amazon.com to collect sales taxes on its Tennessee transactions, but they threatened to take the issue up again in 2012 if the situation is not resolved.

The decision appears to give the Internet retailing giant a green light to continue building its two giant warehouses — known as “fulfillment centers — in Chattanooga and Bradley County with plans to hire 1,200 full-time workers and 2,000 seasonal or part-time employees.

Amazon also has filed notices with the state that it is interested in building three additional centers in Knoxville and Nashville.

“We’re grateful to the Tennessee government for recognizing the jobs and investment Amazon will bring to the state,” said Dave Clark, vice president of Amazon’s North America Operations, in a statement.

He said there is a potential for nearly 3,000 full-time jobs with benefits, another 4,000 seasonal jobs and an estimated $300 million total investment in Tennessee. He noted “this will be a partnership we intend on growing for many years.”

In moving his bill until January earlier in the day, House Finance Committee Chairman Charles Sargent, R-Franklin, charged that “exempting Amazon from our sales tax is unfair to our existing businesses, who are then at a disadvantage, and it’s unfair to the citizens of our state.”

He then put the Internet retailing giant on notice, saying company officials ought to be “doing the right thing” and collect sales taxes. If they don’t, he warned, “we will address that next year.”

A short while later, Senate Finance Committee Chairman Randy McNally, R-Oak Ridge, took his version of the bill off notice following a hearing in which members grilled Paul Misener, Amazon’s vice president of global policy.

McNally, Sargent and other critics, including former Tennessee Deputy Attorney General Bill Hubbard contended Amazon would have to collect sales taxes under current law if it builds the warehouses and establishes a physical presence in Tennessee.

The bill was intended to make that clearer and send a cautionary note to state officials in offering incentives.

Misener repeated statements previously made to the Chattanooga Times Free Press that Amazon cannot be compelled to collect the sales tax under U.S. Supreme Court decisions.

Those decisions require retail presence, Misener said. But the assertion was contested by Hubbard, who has been retained by the Retail Industry Leaders Association. The national association’s members include Wal-Mart, Best Buy and other major retailers battling Amazon on tax issues across the country.

Asked by Sen. Douglas Henry, D-Nashville, if McNally/Sargent bills would put a “cloud” on Amazon operations in Tennessee, Misener replied, “a dark cloud.”

He previously had said in a Times Free Press interview the company could very well pick up stakes and leave Tennessee.

Later, reporters asked Misener whether a cloud was hanging over Amazon’s plans with threats to bring the bill back. He sought to downplay the issue, saying, “I don’t know. I haven’t given that any thought.”

“We’re grateful for the committee recognizing the importance of the jobs and investment that Amazon can bring to the state,” Misener said. “I think that’s a great success for Tennessee. It was a good day.”

During testimony, Misener also revealed for the first time that Amazon in fact still is negotiating with the Haslam administration over an “alternative arrangement” for items shipped to its Tennessee customers.

Revenue Commissioner Richard Roberts told the panel that the state’s secrecy laws regarding taxpayers “prohibit me from discussing” the matter.

Later, Roberts and Haslam’s legal counsel, Herbert Slattery, fled reporters who sought to ask additional questions.

Before putting his own bill off until next year, McNally lectured officials, saying “the people of Tennessee have a right to know details and terms of such agreements that would limit or nullify the collection of sales taxes when it’s clear the statute mandates it.”

Southeast Tennessee lawmakers saw Wednesday’s move as a victory for the area.

“It got put off because they didn’t have the votes to pass it because it’s bad legislation,” said House Majority Leader Gerald McCormick, R-Chattanooga. “I think it would only appear to be worse next year after thousands of people will be hired and their jobs really would be at risk.”

House Judiciary Committee Chairman Eric Watson, R-Cleveland, said, “while I understand and respect the perspectives of a few of my colleagues, I believe it is more important that Tennessee is always able to keep her commitments.”

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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rolando said...

How transparent is this? Let Amazon build their warehouses, hire people, then hit 'em with the sales tax law... If Amazon fires everybody and packs up and leaves, they become the bad guys.

Either way, it looks like a no-win situation for Amazon. They would be better off just to walk away from the threats and let Tennessee lose the jobs.

May 19, 2011 at 7:54 a.m.
nucanuck said...

The Amazon deal is done. Now the door has been opened for Tennessee retailers to seek legal redress...to level the playing field...to seek equal treatment and free them of the burden of collecting and remitting sales taxes to Nashville.

Why should someone ordering from Amazon on-line with a Tennessean address not pay tax when someone from Tennessee ordering from Best Buy on-line is required to pay tax? The simplest mind can see that is not fair. So will the judges who hear the class action law suit that is about to hit the State of Tennessee.

The conflict between the emerging on-line retail sector and state sales tax revenue is a nationwide problem for states already suffering from declining revenue. The truth is the sales tax model is broken, it has been for several years, but now the problem is getting to big to ignore.

What will Tennessee do when the courts rule in favor of equal treatment for all merchants, on-line or on our streets? Will that be the end of the sales tax? Stay tuned,this has just begun.

May 20, 2011 at 1:10 a.m.
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