Lawmakers want details on Amazon sales-tax deal

Lawmakers want details on Amazon sales-tax deal

April 7th, 2011 by Andy Sher in News

Some of the walls are being raised Tuesday at the Amazon warehouse facility under construction at Enterprise South industrial park. Staff photo by John Rawlston/Chattanooga Times Free Press

NASHVILLE - Several influential state lawmakers say they want to know what sales-tax break Tennessee is offering Amazon to entice the Internet-retail giant to build two distribution centers in Hamilton and Bradley counties.

"I think a number of people, representatives, would like to see what transpired, how it's going to work, what are the consequences of this particular situation - and what consequences there could be for the future," said House Finance Committee Chairman Charles Sargent, R-Franklin.

Traditional brick-and-mortar retailers contend the state has already or plans to exempt Seattle-based Amazon from collecting sales taxes on Tennesseans' purchases from the company as part of the state's incentive package.

"We want competition to be fair," said Roland Myers, president and CEO of the Tennessee Retail Association. "Tennessee's consideration of a plan to exempt Amazon from collecting state sales tax does the exact opposite and retailers across the state are justifiably upset."

House Speaker Emeritus Jimmy Naifeh, D-Nashville, said he supports Sargent's effort.

"I still haven't found out how we're going to go about giving them this excuse from [collecting] taxes. That's the first thing I want to find out."

Amazon only collects sales taxes in five states. In doing so, the company relies on U.S. Supreme Court decisions that say states cannot compel out-of-state retailers to collect the tax if they have no actual physical presence or "nexus" in the state.

House Majority Leader Gerald McCormick, R-Chattanooga, took a dim view of lawmakers making a fuss over the Amazon deal.

"I'd say we need to spend our time trying to create jobs rather than running them out of the state," McCormick said. "And that's what they'll do if they run Amazon away and try to tax them as if they were a retail business.

"It'll run them out of the state and kill thousands of jobs, and I'd hope they wouldn't want to kill that," McCormick said.

Amazon is spending $139 million to construct the Tennessee centers and create more than 1,400 full-time jobs and more than 2,000 seasonal slots.

Standing by deal

Former Gov. Phil Bredesen struck the deal to lure Amazon as he was leaving office.

His successor, Gov. Bill Haslam, has stood by it, saying in February that "I don't think because Amazon decides to build a distribution center here that should change their tax status."

Haslam spokesman David Smith said "the governor believes that a larger, national discussion on Internet sales tax collection needs to occur, but he has said that it should not impact the project."

Amazon spokeswoman Mary Osako said via email that "we have never opposed collecting sales tax under a constitutionally permissible system that is applied even-handedly."

Back in late February, Amazon policy director Fred Kiga told Southeast Tennessee lawmakers that the distribution centers are set up separately from Amazon. They serve as "drop shippers," providing services to out-of-state retailers that do not have a physical presence in Tennessee, he said.

"The out-of-state retailer still does not have nexus in the state of Tennessee and as a result it is not required to collect sales tax online for Tennessee residents," Kiga said.

He said Amazon supports the national Streamlined Sales and Use Tax Project, an attempt to streamline states' sales tax laws and thus persuade Congress to enact legislation permitting states to compel out-of-state vendors to collect taxes.

Sargent, who previously talked about holding a hearing on the matter, said Wednesday he is looking instead at setting up a meeting with Revenue Commissioner Richard Roberts to discuss the issue.

Secrecy troubles

But Roberts recently told Naifeh during the department's budget hearing before the House Finance Committee that "we're prohibited by law from talking about any specific taxpayer or arrangement with any specific taxpayer."

Asked Wednesday by a reporter whether such secrecy would apply in instances where it has been offered prospectively as part of an incentive package, Roberts said it would.

Senate Finance Committee Chairman Randy McNally, R-Oak Ridge, said he thinks such secrecy is problematic.

"That certainly doesn't seem like it should be" kept secret, he said.

South Carolina woes

In South Carolina, The Associated Press reported Wednesday, Amazon is threatening to pull the plug on a proposed new distribution center in Lexington County if state lawmakers don't pass legislation ensuring Amazon can continue to sell items to South Carolina residents without charging sales tax.

In Tennessee, officials have never pursued legislation. The Tennessee Revenue Department at one point scheduled a hearing on a proposed rule change that critics said would affect Amazon.

It exempted "any dealer operating as a distribution center" from collecting Tennessee state sales taxes if 50 percent of its gross receipts come from shipments on behalf of another vendor "to destinations outside this state."

Officials, who refused to say whether the rule was for Amazon, later canceled the hearing, claiming it was part of Haslam's 45-day freeze on new regulations. That deadline has passed. The rule has not been proposed again.

Retailers and lawmakers speculate that Revenue officials plan or already have issued a private "letter ruling" exempting Amazon from collecting sales taxes. The department issues these types of rulings to provide advice to companies. They are binding on the department.

The department until 2008 made public redacted versions of these types of rulings provided they could strip them of any information identifying specific taxpayers.

Sen. Bo Watson, R-Hixson, is sponsoring legislation that would make the department again make the rulings public provided they are redacted. He said he "have no idea" whether the department has or plans to issue such a ruling for Amazon.

"Again, if this bill passes, the answer would be if it can be redacted out so no specific taxpayer can be identified, that information should be made available," said Watson, noting that can be a "challenge."

"I think everybody understands that. At its base, the taxpayer, whomever it might be, big or small company, has the right to have their information protected."