published Tuesday, December 24th, 2013

Hamilton County seeks piece of Tennessee Internet sales tax

Hamilton County Mayor Jim Coppinger comments on a portion of his budget to county commissioners in this file photo.
Hamilton County Mayor Jim Coppinger comments on a portion of his budget to county commissioners in this file photo.
Photo by Tim Barber.
  • photo
    Workers process orders on an assembly line in the Chattanooga Amazon fulfillment center.
    Photo by Staff File Photo /Chattanooga Times Free Press.

Next week, Tennessee will start getting sales tax from online retail giant Amazon, and Hamilton County Mayor Jim Coppinger said he'd like to see the county get some of that new money.

On Jan. 1, a delayed 2012 state law will start requiring the company, which operates distribution centers in Chattanooga and Cleveland, to collect the 7 percent state tax and a 2.5 percent local option sales tax on all its sales.

Before the law, it was the responsibility of buyers to send sales tax to the state -- but few did. The sales tax rate is not increasing, but a large chunk of revenue that has eluded taxation will be taxed under the law.

Legislative analysts expect the collection to inject $17.5 million into state government coffers annually and to funnel an additional $7.4 million to the state's 95 counties and numerous municipalities, based on 2011 figures.

But Coppinger said it's a good time to look at how the Internet tax money is distributed.

"They are going to start collecting it. All I'm saying is when they make a distribution model for that money, county governments would like to be included," he said.

But Rep. Gerald McCormick said there likely won't be much pie to go around.

"The whole reasoning behind [the law] is that the state was losing -- and the local governments were losing -- money on the sales tax, because people started shopping on the Internet instead of at brick-and-mortar stores," McCormick said.

In Tennessee, counties and municipalities send collected sales tax to the state. Counties can get a small portion of local option tax back, but municipalities get the local option and a state-shared tax portion back.

In 2013, the county budgeted $3 million of local option sales tax revenue, according to County Finance Administrator Louis Wright. It received $2.9 million.

Meanwhile, the city of Chattanooga -- which has more businesses than the unincorporated county does -- collected a projected $39 million in local option tax, and received $11.5 million in state-shared sales tax, according to its 2014 budget.

David Seivers, executive director of the Tennessee County Services Association, said the Internet sales tax could help level the playing field.

"In Tennessee, counties don't get any sales tax -- they get the local option, but the majority of that goes into municipalities," Seivers said.

"That was great 100 years ago, but now the counties are the ones providing education, waste treatment and the bulk of the services. If Internet tax is collected, we're saying that's a perfect opportunity to say -- no harm, no foul -- let's look at how this new revenue is distributed."

Coppinger said the costs of government increase every year, but revenue -- except what has been gained from growth -- has not.

"Money could go toward improving infrastructure to make way for new developments like a new industrial park," Coppinger said. "When you look at just the costs of running government -- take fuel costs. If there's an increase in fuel that goes into other products such as asphalt."

He's not asking for special treatment.

"All counties have generally the same issue when it comes to revenues," Coppinger said. "I wouldn't ask for a private act or something like that. This would be something that could be done for all counties."

But McCormick said Amazon will be collecting a tax that residents should have been sending to the state anyway. It's not new money -- it's money the state should have been getting all along.

"In the short run, I really don't see the state taking that money that it was already owed and giving it out to the counties," McCormick said.

But Coppinger says it seems like a new revenue stream to him.

"The Internet users' fee is something that's new," he said. "It'll be new money, and I was just trying to get new money for the county. My only position on that was to say that there's new dollars that will be made."

Citing the sales tax revenue disparity between counties and municipalities, McCormick said the whole system might need an overhaul -- but again -- it's not likely to happen next session, which begins in January.

"Short of an overhaul of the whole system that took into account what the cities get compared to the counties, that would take some time, and I don't see that happening in the next few months of the session," McCormick said.

Contact staff writer Louie Brogdon at lbrogdon @timesfreepress.com or at 423-757-6481.

about Louie Brogdon...

Louie Brogdon began reporting with the Chattanooga Times Free Press in February 2013. Before he came to the Scenic City, Louie lived on St. Simons Island, Ga. and covered crime, courts, environment and government at the Brunswick News, a 17,000-circulation daily on the Georgia coast. While there, he was awarded for investigative reporting on police discipline and other law enforcement issues by the Georgia Press Association. For the Times Free Press, Louie covers Hamilton County ...

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