House rep ends effort to compel Amazon to collect sales taxes

Wednesday, May 18, 2011 at 5:44pm

Defusing one of the hottest controversies in the legislature, a state House leader announced Wednesday he is dropping his attempt this session to compel Amazon to collect sales taxes from Tennessee customers.

House Finance Committee Chairman Charles Sargent urged Amazon “to do the right thing” by voluntarily charging and collecting the tax. If the Internet retail giant refuses, he said he will bring back his legislation in 2012’s session.

“Exempting Amazon from our sales tax is unfair to our existing businesses, who are then at a disadvantage, and it’s unfair to the citizens of our state,” said Sargent, R-Franklin.

Amazon is spending $140 million to build two distribution centers in southeast Tennessee — one in Chattanooga and the other in Bradley County. The company would hire 1,500 full-time workers and several thousand people at Christmas. Amazon also has talked about building three more warehouses in Tennessee, possibly one of them in Nashville.

Under U.S. Supreme Court rulings, a state cannot force out-of-state retailers to charge sales taxes unless those companies have a physical presence in that state.

Sargent’s bill would establish that Amazon’s warehouses will constitute sufficient physical presence to compel the company to charge and collect sales taxes on merchandise sold to Tennessee customers.

Amazon argues its warehouses, which process orders and ship merchandise, are separate from the company’s retail business. The company maintains the Bredesen administration, in its last days, agreed not to force Amazon to charge the sales tax in return for locating the warehouses in Tennessee. But the agreement apparently was informal and no documentation has been produced. In remarks to the Senate Finance Budget Subcommittee, Sargent referred to the agreement as “the alleged deal.”

By next year, he said, he hopes “Amazon might be doing the right thing and collecting and filing the tax. I believe they should and hope they are. If not, we will address that next session. In the meantime, Amazon, you have the opportunity to show you are ready to do the right thing.”

“Tennessee is a great place,” he added. “We want to welcome you here but we need you to understand that the Volunteer State will treat everyone fairly.”

House Republican leader Gerald McCormick, who represents Chattanooga, disagreed with Sargent. McCormick said it’s important for economic growth for Tennessee to follow through on agreements with businesses.

“We absolutely must keep our word and go through on the commitments we have made when we bring companies in here and they build facilities and hire Tennesseans,” McCormick said. “If we don’t do that, it will affect future economic development projects. Other states will be gleefully pointing out that we don’t keep our word. I hope we spend our time creating jobs instead of discouraging business and investment in Tennessee.

“Certainly, we will be ready next year to fight this. It’s not good legislation. It’s not good public policy.”

12 Comments on this post:

By: JeffF on 5/18/11 at 3:58

Pretty sad of Amazon to do this. Its not like they don't already collect sales tax in some states and this would be a burden. I would bet that Amazon has a larger than normal following in Tennessee and does not want to lose those customers. I know I was averaging 12 or so orders per year before I found out about their attempt to shirk responsibility.

By: TNCitizen on 5/18/11 at 8:54

This is a temporary setback for the people of Tennessee. Whenever one group (in this case, Amazon's Tennessee customers) gets a tax break, everyone else must take up the slack, either in higher taxes or impaired government capacity to do what the people want. The people will demand justice next year.

By: capt4chris on 5/18/11 at 9:14

This is wonderful news! We just have to be ready for him to bring this up again because he surely will!

By: WickedTribe on 5/18/11 at 10:49

Glad to hear it. Republicans want this because sales tax is regressive. But anyone with common sense should be glad Amazon isn't charging sales tax. Tennessee citizens (you voting people) are ones paying the tax, not Amazon. Why would anyone want to pay tax on something they have not previously been paying tax on?

By: BenDover on 5/19/11 at 7:34

Any person in Tennessee who is pushing for online retailers to collect sales tax has forgotten the boon we get from online retail by having a huge shipping company headquartered in the lower western part of the state.

If there's a loophole to allow Amazon to not collect taxes from Tennessee customers on products shipped to Tennesseans then, by God, we should allow it. Let the people keep the money rather than flushing it through the legislature so that politicians can use it to buy favor with their favored constituents and special interests.

By: caholt on 5/19/11 at 7:43

Another loss for the citizens of Tennessee. How can a company claim to be a 'retailer' at the same time that they claim their warehouses and shipping facilities are not a part of the business? And all those wonderful jobs which will be paying minimum wage or slightly above - wow, what boon!

All the people who are pushing a 'buy local' process to encourage more money spent and taxes collected in Tennessee for support of local governement can kiss that project goodbye. Also, all the people who think they are saving money should keep in mind that if at anytime the state wants to audit Amazon's sales they can probably locate the cheaters who are buying on line and sue for tax evasion. Afterall, eventhough the store doesn't collect the taxes, you are still liable and responsible to pay them.

Cyn in TN

By: P-Dude on 5/19/11 at 8:09

Everyone who thinks this is some tax break needs to think again. State law is very clear that if the company does not collect and send in the sales tax on your behalf (like Amazon), you are required by law to send the state the money. This bill or lack thereof in theory is revenue neutral. But we all know most people will not send the state their 9.5%. That makes all Tennesseans who do not do this the lawbreakers, not Amazon. Nice.
Just another problem with the sales tax. Not only is it regressive, it also creates a legion of millions of lawbreakers.
I rarely agree with a Republican, in fact the thought of doing so makes me shiver just a little, but in this case Sargent is right. We can't let the lure of a thousand warehouse jobs (oh boy, more $9.00 jobs!!) cause us to violate our principles. I disagree with McCormick -there was no deal on paper, no agreement to break really. And every ED deal is different. I don' think most companies would look at us going back on Amazon as a bad sign. In fact, just the opposite. They think Amazon gets an unfair break too.

By: localboy on 5/19/11 at 10:55

Good, now he can focus on more important issues like keeping wine out of grocery stores...:)

By: Tatang on 5/19/11 at 12:37

Any consider how much revenue will be collected from taxes paid by the 3000 or so employees Amazon will put to work?

By: caholt on 5/20/11 at 7:36

Tatang, just what taxes are you talking about? It certainly won't be income taxes and if these are the typical $9.00 an hour wages then they will just barely make it above the poverty line, so sales taxes won't be much either.

Cyn in TN

By: shef2 on 5/20/11 at 7:32

C'MON, Amazon-! Yes, for Nashville-!

By: MamaD on 5/29/11 at 10:41

I believe that the people who get those jobs won't think of them as being close to worthless as many of you do.