Local lawmakers chilly to Amazon tax delay

Local lawmakers chilly to Amazon tax delay

July 25th, 2011 by Andy Sher in News

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

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Tennessee state representative Gerald McCormick

NASHVILLE-Southeast Tennessee lawmakers are balking at a proposal that calls for Amazon.com to begin charging Tennessee sales taxes two or three years after it opens distribution centers in Hamilton and Bradley counties.

One even warned he might stop cooperating on projects in the districts of the proposal's sponsors.

House Majority Leader Gerald McCormick, R-Chattanooga, said the proposal by the House and Senate finance committee chairmen to sunset the company's present sales tax exemption goes against the state's commitment to Amazon.

Former Gov. Phil Bredesen forged a deal saying the Internet retailer would not have to collect the taxes if it built the centers in Southeast Tennessee.

"The state has to keep the deals it's made," McCormick said. "Maybe we have to make better ones in the future, but we need to keep the deals we've made. We don't need to get the reputation of changing deals after we've signed off on them."

House Assistant Leader Kevin Brooks, R-Cleveland, agreed, saying that what should be "driving this whole discussion is jobs, not taxes."

Amazon officials did not respond Friday to a request for comment.

The company is spending $139 million on the Southeast Tennessee facilities, which are expected to employ 1,400 full-time workers and another 2,000 or so part-timers.

Amazon officials have threatened to abandon those centers if the company is required to collect Tennessee tax. But they also have discussed building three more centers in the state if the exemption holds.

States collectively are losing millions in revenue from Internet sales. In Tennessee alone, state and local governments will lose nearly $411 million in 2012, according to research by Dr. William Fox at the University of Tennessee's Center for Business Research.

But traditional retailers, ranging from Wal-Mart to mom-and-pop operations, say they are unfairly disadvantaged because they have to collect a 7 percent state sales tax and up to 2.75 percent in local taxes and Amazon doesn't.

A time to tax

Gov. Haslam

A 1992 U.S. Supreme Court decision states that retailers must collect sales taxes if they have a physical presence in a state.

Senate Finance Chairman Randy McNally, R-Oak Ridge, and House Finance Chair Charles Sargent, R-Franklin, contend the two Southeast Tennessee warehouses constitute such a physical presence.

They have a bill to eliminate Amazon's sales tax exemption but are offering a "moratorium" of a few years. The bill is scheduled to be heard next year pending an state attorney general's opinion on its constitutionality.

Tennessee Attorney General Bob Cooper ruled last month that lawmakers legally could require an online retailer with a physical presence in Tennessee, such as a warehouse, to collect tax on in-state sales.

"He didn't say we should be collecting the tax [already], but if we pass the bill it would be constitutional regardless of what agreements have been made or what [the state revenue department] wants to do," Sargent said.

He said he could go along with a two- or three-year postponement of tax collections and he'll talk to Gov. Bill Haslam and House Speaker Beth Harwell, R-Davidson, as well as McCormick and other leaders.

"I think that's a workable compromise as far as that's concerned," Sargent said. "It does fit Amazon's business model since they're doing it in five or six states already."

Amazon collects sales taxes in its home state of Washington as well as Kansas, Kentucky, New York and North Dakota, where it has operations.

The company threatened this spring to leave South Carolina, where it was building a distribution center, after Gov. Nikki Haley and lawmakers balked on a sales-tax deal made by the previous governor. A compromise requiring Amazon to collect sales taxes after five years saved the center.

Haslam has supported the deal Bredesen made, saying issues about e-commerce fairness need to be settled nationally.

Earlier this month, Haslam was asked whether a tax moratorium for Amazon would put the distribution centers in Hamilton and Bradley counties in limbo.

"I think it does," he said, but he noted his administration still is discussing Amazon building more centers. Haslam said the state and the company need to "define exactly what [their] relationship is going to look like" going forward.

"Then the legislature can then make a decision about whether or not they want to pursue that. Amazon obviously will have to go into it knowing that's part of the business risk that they take," he said.

Warning shot

Andy Berke

McNally said if his bill requiring Amazon to collect tax can't pass as is, he could live with either with "a delayed effective date or a termination of their ability not to collect the sales tax."

Sen. Andy Berke, D-Chattanooga, said he is opposed to that.

"The attorney general opinion indicated what we can do, not what we have to do," Berke said. "We examined the issue during this legislative session, took no action. If you drive by Enterprise South [industrial park in Chattanooga] you see four large walls where Amazon's going to be. As far as I'm concerned this is a settled issue."

McCormick sounded open to the idea of letting Amazon's exemption continue for a specified time.

But absent such an agreement, he said, Sargent needs to remember corporate headquarters relocation incentives McCormick sponsored for Haslam that will likely benefit Williamson County, which Sargent represents.

He also noted that McNally's district has hundreds of jobs dependent on nuclear waste disposal, including some waste imported from overseas.

"So I would hope Charles Sargent would appreciate that and concentrate on bringing jobs to Williamson County instead of running them out of Hamilton and Bradley counties," McCormick said.

"[I]f I were Randy McNally, I would be very concerned about saving jobs in Oak Ridge rather than running them out of Hamilton County."