Senate Finance Committee members peppered an Amazon official today with questions about a secret sales-tax exemption agreement state officials struck to persuade the company to build two distribution centers in Southeast Tennessee.
The Internet retailing giant also came under fire in Nashville from traditional brick-and-mortar retailers who asserted it was unfair to let Amazon avoid charging state sales taxes to its in-state customers while they continue to be required to collect the taxes.
Finance Committee Chairman Randy McNally, R-Oak Ridge, who has a bill that seeks to force Amazon to collect sales taxes, asked the company's director of state policy, Braden Cox, whether the previous Bredesen administration "made a commitment in order to get Amazon into Tennessee?"
Cox said Amazon officials had negotiated with state officials "as you know and there were commitments made."
"I guess I just don't know the legal nature of them," said Cox, noting he was not involved. "Whether they're actually something that can be upheld in state court. I don't know that. But I know they were made in a business context, an inducement for us to want to come to Tennessee."
In response to more questions, Cox said "it was a decision that was negotiated in more of a business-type context" between a state economic development leader" and "also people at our company on the business side."
Sen. Brian Kelsey, R-Germantown, questioned whether it was "more of a handshake deal" than a legal written contract.
Replied Cox: "To the extent that a handshake deal matters - and I think they should - yes."
He said he would check with his bosses at Amazon to see if the company can release whatever agreement was struck.
John Lyell, a Nashville attorney and contract lobbyist who has been retained by Amazon, told lawmakers that "a deal is a deal - if one party goes out relying on that deal and expends funds digging a hole to start building or moving then it's a little late."
Amazon is spending $139 million to construct two fulfillment centers - one in Hamilton County, the other in Bradley County - that will employ an estimated 1,400 to 1,500 full-time employees and several thousand more part-time workers.
Action on McNally's legislation was delayed until next week. Earlier, Lyell questioned the constitutionality of McNally's legislation in light of prior U.S. Supreme Court rulings that 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, company officials have said.