NASHVILLE - A coalition of brick-and-mortar retailers contends a new Tennessee attorney general opinion clearly establishes that Amazon must collect state sales taxes once it opens two distribution centers in Hamilton and Bradley counties.
"The AG opinion effectively reverses the situation in the legislature," said former Deputy Attorney General Bill Hubbard, who has been retained by the Retail Industry Leaders Association, a group that includes Wal-Mart.
He said "the burden is on Amazon to have to pass a bill in order to have a sales tax exemption."
But House Majority Leader Gerald McCormick, R-Chattanooga, who has defended the state's agreement with Amazon against previous attacks, said Attorney General Bob Cooper's opinion is nowhere near as clear-cut as Amazon's foes would have it.
"You could drive a truck through that," McCormick said. "We've got to keep our agreements and the attorney general's opinion is just an opinion that other people can disagree with."
The opinion deals with Internet retailers in general and doesn't specifically mention Amazon. It was requested by two legislative critics of the deal then-Gov. Phil Bredesen struck with Amazon.
Bredesen agreed the state would not compel the Internet retail giant to collect sales taxes on items purchased by its Tennessee customers if it built the warehouses.
Traditional retailers say that is unfair.
In his opinion, issued Monday, Cooper said current law requires that retailers with a distributing house or a warehouse collect sales taxes. Such buildings constitute "nexus," or a physical presence in the state, a classification that requires a business to collect sales tax.
But the attorney general then inserts what appears to be substantial it-all-depends language when it comes to collecting sales taxes from a company operating through a subsidiary, which Amazon has previously said it is doing.
"On the other hand," Cooper wrote, "if the in-state distributing house or warehouse is owned by a retailer's subsidiary, instead of the retailer directly, nexus is established only if the subsidiary's in-state activities are significantly associated with the retailer's ability to establish and maintain a market in Tennessee for its sales."
During a March meeting with local lawmakers, Frederick C. Kiga, Amazon's director of tax policy, said the distribution centers are set up separately from Amazon. They serve as "drop shippers," providing services to out-of-state retailers, he said.
"The distribution centers are separate entities. They do not establish or maintain a market for an Amazon retailer there," Kiga said. "People cannot walk up to a facility and, you know, pick up their goods."
Amazon had no comment on Cooper's opinion, but critics of the Amazon deal hailed it as a major victory in their effort to force Amazon to collect sales taxes.
Mike Cohen, a spokesman for the Alliance for Main Street Fairness in Tennessee, said "as more facts and information are made public, it is becoming increasingly clear that Amazon.com's argument against sales tax collection is evaporating."
Asked about the impact of Amazon using a subsidiary for the warehouses, Cohen, whose group ranges from small retailers to Wal-Mart, shot back, "Did a subsidiary announce it was coming here? Negotiate with the state? Testify before the legislature?
"Amazon has been very clear that this is them," Cohen said. "An attempt to say otherwise is a tax dodge."
Cooper's opinion also notes the revenue commissioner "possesses substantial discretion in determining the best measures to take to enforce Tennessee's tax laws."
Amazon's advisers have included Loren Chumley, a former state revenue commissioner.
The company currently is putting the finishing touches on the two $139 million centers it is building. Amazon already has hired 1,500 full-time workers.
Gov. Bill Haslam has said he supports the Bredesen agreement but nonetheless is engaged in talks with Amazon to alter the deal and get the company to agree to eventually collect sales taxes on items sold to Tennessee customers.
Amazon has agreed to similar agreements in South Carolina and California.
Haslam told reporters he had not seen Cooper's opinion, "so I don't really have a whole lot to say new on that."
"We continue to have discussions with Amazon," Haslam said. "Hopefully, we can come up with something that works for everybody sooner rather than later."
If needed, the Amazon situation can be corrected "legislatively," McCormick said. "Hopefully, it won't be needed."
Asked whether that might prove difficult, he answered: "Amazon has hired 1,500 people at least in Tennessee already. I think I can make a pretty strong case that if you vote for this you're creating jobs and if you vote against it, you're literally killing jobs that are out there right now.
"I don't know how many politicians want to be on record as voting to kill jobs and break promises that the state made."