Tennessee's Amazon.com deal is no tax hike, Gov. Bill Haslam says

Tennessee's Amazon.com deal is no tax hike, Gov. Bill Haslam says

October 12th, 2011 by Andy Sher in News

Gov. Haslam

Katherine Braun sorts packages toward the right shipping area at an Amazon.com fulfillment center in Goodyear, Ariz., in this Associated Press file photo. Some Tennessee lawmakers object to Amazon not paying sales taxes on products that will be shipped from its Hamilton and Bradley fulfillment centers.

NASHVILLE - Gov. Bill Haslam is finding support among area lawmakers for his argument that Amazon's voluntary agreement with the state to collect sales taxes doesn't constitute a tax increase on the company's Tennessee customers.

In announcing last week's renegotiated deal with the online retail giant, Haslam declared "this isn't a new tax; this tax was already due. This was just a question of Amazon collecting it themselves."

With Amazon building two distribution centers employing 1,500 people in Hamilton and Bradley counties, local lawmakers during this year's legislative session fought efforts by critics to undo former Gov. Phil Bredesen's original agreement with Amazon and force the company to collect sales taxes.

But they are going along with Amazon's voluntary agreement to begin collecting sales taxes on Jan. 1, 2014. Several lawmakers agreed with Haslam's contention that it does not constitute a new tax.

"There's no question the tax is due," said Sen. Andy Berke, D-Chattanooga. "The question is, whose duty it is to pay it?"

Berke said most of his constituents "are concerned with jobs walking out of our state. I think they will understand that, if Amazon feels comfortable with this deal and it secures 3,500 jobs, it is something we should do."

"I'm sure there'll be some people that will say it is a new tax -- you're going to be paying taxes on something you didn't have to before," said Rep. Richard Floyd, R-Chattanooga. "But, the sales tax is the way we generate revenue to run state government, and we pride ourselves on the fact that we don't have a [general] state income tax. And we'll certainly never have one on my vote."

Under the agreement Haslam cut, Amazon, which already has plans to open an additional distribution center employing 300-500 people in Lebanon, Tenn., has agreed to open two more facilities employing another 1,500 full-time workers.

Under U.S. Supreme Court rulings, Tennessee and other states cannot compel out-of-state retailers, including online sellers, to collect sales taxes unless they have a physical presence in the state.

The original deal struck by Bredesen allowed Amazon to avoid collecting sales taxes indefinitely although it was establishing a physical presence with the centers in Hamilton and Bradley.

But Bredesen's agreement with Amazon drew opposition from several powerful lawmakers, who argued it was eroding Tennessee's sales tax base. Traditional brick-and-mortar retailers argued it was unfair to them because they have to collect the state's 7 percent sales tax and local sales taxes of up to 2.75 percent.

While the tax on items such as food, cars and clothing is owed by consumers, states such as Tennessee have to rely on retailers to collect it. And the reality, said Dick Williams with the advocacy group Tennesseans for Fair Taxation, is that consumers often don't know it still is owed, and the state has no practical way to collect it from them.

Under the state's agreement with Amazon, the company would begin collecting sales taxes absent action by Congress to address the issue of online retailers' collection of sales tax nationally.

Noting Amazon is just one of many online retailers that haven't been collecting sales taxes, Rep. Vince Dean, R-East Ridge, said, "I think this is an issue that needs to be addressed at the federal level so everybody will be on the same playing field."

Getting Amazon to agree to collect the tax is not drawing objections from Ben Cunningham with the tax-watchdog group, Tennessee Tax Revolt. The "trend" of online sales "is so strong that some allowance is going to have to be made," Cunningham said.