Opinion of Tennessee Attorney General Roy Cooper on taxation of AmazonView
A legal opinion by Tennessee's attorney general Tuesday affirmed the constitutionality of a proposed bill that could force Amazon to collect sales taxes on items the Internet giant sells to Tennesseans.
Also, the opinion appeared to support the contention that the building of distribution centers in the state by a company such as Amazon creates a physical presence or "nexus."
Under U.S. Supreme Court rulings, states cannot compel out-of-state retailers to collect sales taxes from in-state customers unless they have a nexus.
However, Attorney General Robert E. Cooper Jr. in the opinion declined to specifically make the nexus opinion relative to Amazon. He said his office has a longstanding practice "to not opine about the tax liabilities of particular taxpayers premised on detailed and individualized facts."
But Cooper said the legislation originally offered this past session of the General Assembly would be "constitutionally defensible."
Amazon is spending $139 million to construct distribution centers in Hamilton and Bradley counties and create more than 1,400 full-time jobs and more than 2,000 seasonal slots. It also has indicated an interest to build more such centers in the state.
State Sen. Finance Committee Chairman Randy McNally, R-Oak Ridge, who sought the opinion with House Finance Committee Chairman Charles Sargent, R-Franklin, termed the opinion "very favorable."
"The Amazon people contended this did not constitute a nexus," McNally said. "It's clear that the distribution center would constitute a nexus."
Wait and see
Concerning the legislation, which was postponed until next January, McNally said he's going to wait and see what happens in discussions between Amazon and Gov. Bill Haslam and the state Department of Revenue.
"It puts them in a strong position to negotiate" with Amazon, the state senator said.
David Smith, press secretary for Haslam, had no immediate comment.
An Amazon spokesman could not be reached for comment.
The Alliance for Main Street Fairness called the attorney general's opinion "encouraging news for the thousands of Tennessee small business owners who don't want our elected officials to give Amazon special treatment."
Mike Cohen with the Alliance, a national retailers group based in Arlington, Va., said state government has no business picking winners and losers by giving one company an unfair tax advantage over everyone else doing business in Tennessee.
"Amazon will need to play by the same rules as everyone else doing business in Tennessee," he said.
But, Amazon policy director Fred Kiga, in late February, told Southeast Tennessee lawmakers that the distribution centers are set up separately from Amazon. They serve as "drop shippers," providing services to out-of-state retailers that do not have a physical presence in Tennessee, he said.
"The out-of-state retailer still does not have nexus in the state of Tennessee and as a result it is not required to collect sales tax online for Tennessee residents," Kiga said.
He said Amazon supports the national Streamlined Sales and Use Tax Project, an attempt to streamline states' sales tax laws and thus persuade Congress to enact legislation permitting states to compel out-of-state vendors to collect taxes.
Matt Kisber, the state's former chief business recruiter under then-Gov. Phil Bredesen who helped lure Amazon to Southeast Tennessee last year, insists the Internet giant will help the state and its tax coffers.
"I think that the opportunity represented by Amazon is good for Tennessee, especially in the current climate," he said.
Kisber, who once chaired a nationwide effort to streamline sales tax collections on remote sales, said taxation of Amazon and similar companies "is an issue that needs to be settled on a national level and will never be successfully resolved on a state-by-state level."
Staff writer Dave Flessner contributed to this report.