Amazon.com's Tennessee sales tax deal includes over 1,500 new jobs

Amazon.com's Tennessee sales tax deal includes over 1,500 new jobs

October 7th, 2011 by Andy Sher in News

House Majority Leader Gerald McCormick, R-Chattanooga, speaks about Amazon on Thursday at the Chattanooga Area Chamber of Commerce.

Photo by Angela Lewis/Times Free Press.

NASHVILLE - Gov. Bill Haslam announced an agreement Thursday in which Amazon will start collecting sales taxes upon Tennesseans in 2014 and double the company's distribution centers and workers in the state.

The deal calls for the online retailing giant to build two new centers and hire 1,500 to 1,700 full-time workers to staff them.

That comes on top of Amazon's current investment in Hamilton and Bradley counties, where the company has spent $139 million on two soon-to-open distribution centers employing 1,500 full-time workers.

Amazon also recently announced plans to open a warehouse in Lebanon, Tenn., with 300 to 500 workers.

But the Alliance for Main Street Fairness, a Virginia-based coalition of mom-and-pop stores and major retailers including Wal-Mart, immediately criticized the agreement. Letting the Internet retail giant wait until 2014 to begin collecting sales taxes is too long, said the group's Tennessee spokesman, Mike Cohen.

He pointed to the recent agreements Amazon struck with California.

"If Amazon can agree to start collecting the sales tax in one year in California, why should we have to wait one day longer in Tennessee?" Cohen said.

The location of the two new facilities hasn't been determined, but Middle Tennessee communities including Rutherford and Montgomery counties as well as Loudon County in East Tennessee already are reportedly in the running and are offering various local incentive packages.

As for the deal's impact on full-time jobs at Amazon's Southeast Tennessee facilities, Haslam said, "I don't think there's anything necessarily envisioned there because of this agreement. It just obviously confirms what they've done. Now we're all in agreement about exactly what Amazon's agreement is going to be in Tennessee."

Haslam spokeswoman Alexia Poe said the deal might increase the number of part-time seasonal jobs. Amazon already had announced plans to hire about 2,000 such workers.

When built, the two new centers would bring Amazon's total investment in Tennessee to about $350 million.

Haslam, a Republican, made the announcement in a news conference where he was joined by Amazon's vice president of global public policy, Paul Misener.

Construction continues on the Amazon distribution center at Enterprise South.

Photo by Jake Daniels/Times Free Press.

The deal changes the original, controversial one struck by Haslam's predecessor, Democrat Phil Bredesen, in which Amazon would have enjoyed a permanent exemption from collecting sales taxes despite establishing a physical presence in the Volunteer State.

That agreement drew attacks in the General Assembly's last session from some Republican lawmakers who said it eroded the state's sales tax base.

Brick-and-mortar retailers said it put them at a competitive disadvantage because they have to collect sales taxes up to 9.75 percent and Amazon does not.

The governor said the agreement "balances meeting the needs of the company and the needs of the state by providing certainty to Amazon and brick-and-mortar retailers in Tennessee."

"This isn't a new tax, this tax was already due," Haslam told reporters following the announcement. "This was just a question of Amazon collecting it themselves."

Under the agreement, Amazon would begin collecting sales taxes of Tennessee transactions starting in 2014, provided Congress does not act to resolve long-standing issues over tax issues involving online retailers across the country.

"The sales tax issue must be resolved in Congress," Misener said. "It's the only way the state of Tennessee will be able to obtain all the sales tax revenue that can be collected for the state."

Michael Lebovitz, executive vice president for development for Chattanooga-based CBL & Associates Properties, which operates malls nationwide, said the company is "pleased that a compromise is on the table to provide a more level playing field for all of Tennessee's retailers - whether online or brick and mortar."

But, he said, "We believe a more reasonable solution would reduce the delay to one year, similar to the agreement reached in California. We hope this will be considered as the discussions progress."

Haslam said he intends to introduce legislation in the General Assembly codifying the sales tax agreement and it will take effect absent any type of action by Congress.

But Main Street Fairness plans to lobby against the bill, Cohen said.

"If they run a bill, at this point we plan to fight it," he said.

House Majority Leader Gerald McCormick, R-Chattanooga, said he is confident lawmakers will approve the agreement. The retailers he spoke to Thursday are willing to accept it, he said.

"It was a good compromise," McCormick said. "I can assure you as majority leader that this is going to pass the House and I think it will pass the Senate as well."

Earlier in the day, Senate Speaker Pro Tempore Bo Watson, R-Hixson, joined Haslam, Misener and other officials in announcing the agreement. He called it a "win for Amazon and a win for the people of Tennessee."

State Economic and Community Development Commissioner Richard Roberts told reporters that Amazon's new distribution centers will be eligible for standard incentives in areas such as infrastructure and job-training grants but no special enticements.

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