Amazon raises stakes with 3 more centers

Amazon raises stakes with 3 more centers

May 8th, 2011 by Andy Sher in News

NASHVILLE - Amazon.com is ready to double down on its economic and political bets in Tennessee by building three more distribution centers in Nashville or Knoxville - or possibly splitting the centers between the them.

According to an April 29 state filing, the Internet retailing giant would invest $180 million and employ about 1,700 full-time workers and 2,000 part-time or seasonal workers within two years.

That would more than double the $139 million investment Amazon is making with distribution centers in Hamilton and Bradley counties.

The revelation that Amazon is considering building more distribution centers in the Volunteer State dramatically could raise the stakes as some top Republican legislators push to make the company collect sales taxes on Tennessee sales.

Amazon recently pulled out of South Carolina and Texas over similar sales-tax disputes, and company officials indicated last week that they wouldn't hesitate to do the same in Tennessee.

The legislation's sponsors, Senate Finance Committee Chairman Randy McNally, R-Oak Ridge, and House Finance Committee Chairman Charles Sargent, R-Franklin, could not be reached for comment Saturday. They have scheduled hearings this week on their legislation.

But Republican Gov. Bill Haslam has said his administration is committed to the deal made by his predecessor, Democrat Phil Bredesen, that would not require Amazon to collect sales tax.

Late Friday, Dave Clark, vice president of Amazon's North American operations, said the company is "looking at expanding our commitment to Tennessee because the state is committed to Amazon."

House Majority Leader Gerald McCormick, R-Chattanooga, an Amazon supporter, said the company's willingness to locate more centers in Tennessee "might blunt" criticisms.

"I think people in the Legislature will be happy to see more jobs coming to Tennessee," McCormick said.

Amazon told Hamilton County officials last year its average wages are expected to be "at least $30,500" annually. The company also offers health insurance, paid vacation, a 401(k) and annual stock grants.

Still, McCormick acknowledged a coalition of retailers including Wal-Mart is unlikely to back off their opposition. They say it's unfair that they have to collect taxes while Amazon doesn't.

Under U.S. Supreme Court rulings, 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, "nexus."

Amazon says its fulfillment centers, where orders are processed and merchandise shipped, are "separate and apart" from its retail business. The company is fighting similar battles in a number of other states.

But McNally and Sargent said they think that under current law, the distribution centers do constitute nexus, and their bill is intended to clearly establish that.

The legislation is expected to raise $10.6 million for state and local governments, according to a legislative analysis.

Last week Paul Misener, Amazon's vice president for public policy, said the legislation is unconstitutional and the company uninterested in staying around for a court battle.

On April 27, South Carolina lawmakers voted down a sales-tax collection exemption for an Amazon distribution center near Cayce, S.C.

The next day, Amazon canceled the $52 million center.

Then on April 29, the company filed documents with the Tennessee Department of Economic and Community Development saying it was eyeing three new centers in Tennessee.

Tennesseans for Fair Taxation, a group that advocates for various changes in state tax laws, has sharply criticized Bredesen's Amazon deal.

"The administration waiver of sales tax collection by Amazon is especially outrageous, as well as unfair, because it was made in secret behind closed doors without any public comment or action by the state legislature," John G. Stewart, the group's former chairman, said in a statement Saturday.

Tennesseans for Fair Taxation has estimated Amazon has been able to avoid collecting some $30 million to $35 million in state and local taxes. Tennesseans are supposed to pay sales taxes on Internet purchases, but few do.

"This is a sell-out of Tennessee businesses, as well as a denial of legitimate tax revenue at a time of serious budget shortfalls and program cuts," Stewart said.