Deal makes Tennessee forgo $22 million in Amazon taxes

Deal makes Tennessee forgo $22 million in Amazon taxes

February 1st, 2012 by The Knoxville News Sentinel in Business Around the Region

Employees working in the intake section sort merchandise arriving from trucks while inside of the Amazon distribution center at Enterprise South in Chattanooga, Tenn., on Thursday, January 5, 2012. The neighboring Chattanooga and Cleveland based Amazon distribution centers opened in the Fall of 2011 and employ between two and four thousand workers depending on the season.

Employees working in the intake section sort merchandise...

Photo by Dan Henry /Times Free Press.

POLL: Are you glad Amazon will be collecting sales taxes in Tennessee?

By Tom Humphrey, Knoxville News Sentinel

NASHVILLE -- Legislation that will cement Gov. Bill Haslam's deal with will cost the state $22.8 million per year in "foregone revenue" while in effect, but bring a like amount afterwards, according to a legislative staff estimate.

The "fiscal note" on House Bill 2370, introduced at Haslam's behest, does not mention the Internet retail giant by name, but observes that "one taxpayer will meet the criteria specified in this bill exempting such taxpayer from collecting and remitting sales and use tax."

The "qualified taxpayer" had $34.2 billion in online U.S. sales in 2010, the Fiscal Review Committee note says, and given that Tennessee has 2 percent of the national population, that would translate into $684 million in Tennessee sales.

The document goes on to project $22.84 million in "foregone" state sales tax revenue in a full year and to peg the lost revenue for local government sales tax collections at $9.65 million.

Haslam announced in October that a deal negotiated with Amazon exempts the Internet retailer from collecting Tennessee state and local taxes until 2014 or until Congress enacts a federal law authorizing states to require sales tax be collected on Internet sales.

In exchange, Amazon said it would invest another $350 million in Tennessee over a three-year period in addition to distribution centers already under way in Southeast Tennessee at the time. Since October, Amazon has announced plans to build facilities in two Middle Tennessee counties.

It is already operating centers in Hamilton and Bradley counties.

The bill will fulfill Haslam's end of the bargain. It is up for its first subcommittee hearing today in the House.

Haslam made a brief mention of the bill in his "state of the state" address to the General Assembly.

"I am proud that we worked with Amazon to expand the company's presence in Tennessee to include, in addition to Hamilton and Bradley, Wilson and Rutherford counties too, creating thousands of jobs," he said in the prepared remarks. "And through that process we were able to reach an agreement with the company that gives certainty to them and us moving forward."