State Sen. Bo Watson is rightly advocating greater transparency in the state's Revenue Department's rulings on the application of Tennessee's tax laws and statutes for businesses of all sizes. To achieve transparency, he has introduced a bill that would require the Haslem administration to resume publishing the Revenue Department's advisory "letter rulings" and "revenue rulings" on tax policies and compliance issues. His initiative merits support. Without such transparency, citizens and businesses simply cannot know if the state's tax codes are being uniformly and impartially applied.
One current, high-profile case stands out as an example of the public's right to know whether and how its tax laws are being applied: Amazon.com. The company has said it will not collect state sales taxes from the two new distribution facilities it is erecting here, and the Haslem administration has canceled a hearing on the matter and refused to say what its policy on that issue will be. If the state won't publish its rulings or explicitly state its tax policies, Tennesseans may never know if Amazon ultimately will be required to collect sales taxes on its sales out of the new facilities, which are now under construction. This murky stand-off should be transparently resolved.
Officials of Amazon, which is receiving a host of tax abatement and other taxpayer-supported incentives, have said they will not collect Tennessee's sales taxes from their new facilities because their new "distribution centers" do not actually make sales. That is a semantic evasion.
Critics, particularly owners of the brick-and-mortar retail stores that pay property taxes and that collect Tennessee sales taxes on sales to all customers here from any state, correctly maintain that sales made by online retailers operating in Tennessee should also collect state sales taxes as a matter of equity and fair competition. Their grievance is legitimate.
As it now stands, however, the chances that Tennesseans will be told anything about the application of state tax policy with regard to Amazon - and other businesses with which the administration cuts tax deals - are slim to null. The department quit posting its Revenue department's rulings and letters in 2008 under former Revenue Commissioner Reagan Farr, and the Haslem administration is now trying to devise a "compromise" to keep Watson's bill from reaching the Senate floor.
In a word, this is absurd. Application, enforcement and compliance regarding state tax codes and regulations should be absolutely consistent and wholly transparent. To deny transparency in tax policy matters and rulings is to breed contempt and mistrust.
State tax and compliance policies have wrongly existed too long under a blanket of secrecy. As a result, the present - and past - administrations have developed a sense of arrogant and inappropriate entitlement about keeping state tax rulings secret, and keeping businesses, citizens and even lawmakers in the dark. So the chances that Watson will get his proposed bill to require posting of the Revenue Department's ruling through the Legislature and signed into law aren't great at the moment.
This isn't right. It opens the door to a host of potential giveaways, sweetheart deals, political favors and possibly fraudulent practices and kickbacks for political favors in awarding tax breaks. Lawmakers in the both the House and Senate would serve the public well to rally around Watson's bill, to strengthen it, and to push it into law.
Revenue officials say the issue isn't as black-and-white as the public might see it. They cite "taxpayer confidentiality" as the reason they are reluctant to resume posting their advisory letter rulings (which respond to a business' specific facts and circumstance) and revenue rulings (which are advisory in nature regarding the substantive application tax laws and procedures). Before the state quit posting its letter rulings and revenue rulings, it redacted information that might have identified a specific taxpayer or business.
Even if the state resumed posting of its letters and revenue rulings, it likely would be reluctant to publish even a redacted ruling in the case of Amazon, for example, because information regarding its unique circumstances might effectively identify the company. Watson is overly sensitive to that misguided excuse for secrecy: He says his bill does not attempt to bar redactions of information that would identify a specific taxpayer or the payer's circumstances.
The state's larger duty, however, is to assure transparency in its application and enforcement of tax codes and compliance procedures. Its policies in all circumstances should be crystal clear to all businesses and citizens, and so should the result of its audits and rulings.
Tennesseans should know exactly what rules apply, to Amazon and to any other company, with regard to compliance with state tax laws and codes. The state should explicitly post its policies, and grant no exceptions, especially in secret. Anything less is unacceptable, and probably unfair and inequitable to competitors. If state officials are afraid or ashamed or embarrassed to say how they are, or are not, enforcing the state's public tax laws, they shouldn't be in office.