Tennessee Republicans Alexander, Corker push Internet sales tax

photo U.S. Senator Bob Corker is seen in this file photo.
photo U.S. Senator Lamar Alexander speaks during a press conference in this file photo.

NASHVILLE - A bipartisan group of U.S. senators, including Tennessee Republicans Lamar Alexander and Bob Corker, introduced a bill Wednesday that allows Tennessee, Georgia and other states to require online retailers to collect sales taxes.

"It ends a subsidy for some businesses over others," Alexander said. "It ends a subsidy for some taxpayers over others."

Brick-and-mortar retailers hailed the bill and said the bipartisan effort by 10 senators gives new momentum to their attempts to "level the playing field" between traditional stores and the burgeoning e-commerce businesses.

Traditional retailers must collect sales taxes but, under U.S. Supreme Court decisions, states cannot compel e-retailers and other out-of-state retailers to collect tax unless they have an actual physical presence such as a store.

However, many online sellers oppose the bill. eBay contends the legislation "will unbalance the playing field between giant retailers and small business competitors."

"It does not make sense to expand Internet sales tax burdens on small businesses at a time when we want entrepreneurs to create jobs and economic activity," said Tod Cohen, eBay's vice president for government relations and deputy general counsel.

The bill also is supported by the Alliance for Main Street Fairness, a national coalition of traditional brick-and-mortar retailers ranging from Wal-Mart to mom-and-pop operations.

"This is exactly the kind of legislation we need to let everyone compete fairly," said Donnie Eatherly, owner of P&E Distributors, which as facilities in both Nashville and Chattanooga. "If we can get this legislation passed, it will, quite literally, save a lot Tennessee businesses."

Amazon, which is opening distribution centers in Hamilton, Bradley and Wilson counties, supports the legislation. Company officials said a national solution is required to address the issue of Internet sales collections instead of a state-by-state approach.

The act, which Alexander is spearheading along with U.S. Sens. Mike Enzi, R-Wyo., and Richard Durbin, D-Ill., is dubbed the Marketplace Fairness Act. The bill exempts small businesses with less than $500,000 in online sales from requirements to collect sales tax.

Alexander, a former Tennessee governor, told reporters Wednesday during a telephone conference call that the bill promotes fairness for both traditional in-state, brick-and-mortar retailers who must collect sales tax already and those consumers who don't purchase books, televisions and other items over the Internet.

Noting sales taxes on Internet purchases are already owed but go largely uncollected, Alexander said such taxes could provide Tennessee with up to $350 million in additional revenues.

"Tennessee could use that money to pay good teachers more," reduce college tuitions or "lower the highest sales tax rate in the country that we have," Alexander said.

With no general state income tax in Tennessee, sales tax collections account for about 60 percent of the state's general fund revenues.

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Corker said "most Tennesseans agree we are fortunate not to have a state income tax, and to help ensure this remains the case, it is appropriate for the state to have the option to put in place a process to collect the revenues that are already due under current law."

Amazon's initial verbal agreement to locate in Tennessee called for it to not collect Tennessee sales taxes despite establishing a physical presence with its distribution centers.

But after objections by "big-box" retailers and pressure from some lawmakers, Gov. Bill Haslam renegotiated the deal and Amazon agreed to begin collecting sales taxes from Tennessee consumers beginning January 2014. Collections would happen sooner if Congress acts.