Haslam: We're keeping our word to Amazon

Haslam: We're keeping our word to Amazon

August 25th, 2011 by Mike Pare and Andy Sher in News

Gov. Bill Haslam speaks during the Chattanooga Area Chamber of Commerce's annual meeting Wednesday afternoon at the Chattanooga Convention Center.

Photo by Dan Henry/Times Free Press.

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Tennessee Gov. Bill Haslam said Wednesday the state is keeping its word to Amazon over sales tax collections and people in other states are "dead wrong" if they say otherwise.

Speaking in Chattanooga, he also said he'd like to have a long-term agreement with Amazon on the issue by the time the Legislature meets in January.

"We'd love to be able to have something wrapped by the time the Legislature comes back so we'd have something to present to them, but I can't give that as a hard timeline because I don't know that we're there," he said.

Amazon currently is building two distribution centers, one in Hamilton County and one in Bradley County, and plans to lease another location in Lebanon, Tenn. Some local and state retailers have said it's unfair that Amazon doesn't have to collect state sales tax on the items it sells that are shipped out of those distribution centers.

Haslam, in remarks prior to speaking at the Chattanooga Area Chamber of Commerce's annual meeting, said he's having "very fruitful discussions" with the online retailing giant over collecting taxes.

"We're having discussions with them about what the long-term relationship looks like," he said. "My job is to create jobs but also to make a fair playing field."

Haslam said he's hopeful of coming up with a solution that will work for everybody, though he knows how important Amazon's jobs are for Hamilton and Bradley counties.

Amazon plans to hire more than 1,400 full-time workers and more than 2,000 part-timers at an Enterprise South industrial park site and another center in nearby Bradley. Amazon is to invest about $139 million in the two Southeast Tennessee sites, which are to open this fall.

In addition, the company said it will employ several hundred at the Lebanon location.

Haslam said Wednesday that, while a lot people thought the original agreement made under former Gov. Phil Bredesen was "a bad deal," the state will honor it. However, the governor said, estimates are that uncollected sales taxes in Tennessee reach about $400 million.

"Any governor would be disingenuous if they said they wouldn't be interested at some point in time in collecting revenue," he said.

Meanwhile, an Atlanta-based site selection consultant said the state is seeking Amazon's voluntary compliance with the governor's wishes.

"It's not uncommon for companies or states to want to revise these agreements and, as long as a mutually acceptable path forward is found, that's fine," said Robert L. Price, director of Herron Consulting. "Some may conclude at first blush that this smacks of bait and switch, but the available information does not support that view."

Price said he didn't believe companies who consider locating or expanding in Tennessee are likely to change their plans based only on whether Amazon must pay sales tax.

Construction continues on the Amazon distribution center at Enterprise South.

Photo by Jake Daniels/Times Free Press.

If Tennessee was one of only a few states tackling difficult budget issues, then the move might have greater effect, he said. But the most likely effect is that companies and consultants such as himself who may be considering Tennessee as a candidate for investment projects will factor the Amazon situation into their thinking when it comes to the wording and execution of future development agreements they negotiate with the state, he said.

"If the draft agreement does not meet a company's risk threshold, then that might impact their location decision, but that's a company-specific determination," Price said.

State Sen. Bo Watson, R-Hixson, told The Associated Press he sees no reason not to be in discussions with Amazon over the tax question.

House Majority Leader Gerald McCormick, R-Chattanooga, said ongoing talks with Amazon concern potential future expansion.

Haslam added that he continued to eye a federal solution to the sales tax collection issue and said that Amazon is serious about it, too.

"I've said that's the answer," the governor said.

Don't bet on that happening anytime soon, said Dean Zerbe, managing director of the consulting company Alliant Group and a former counsel to the U.S. Senate Finance Committee.

"I'd say Tennessee might want to hold off counting those chickens," Zerbe said in a telephone interview. "I don't think they're going to hatch."

The Associated Press contributed to this story.