State senators debate Amazon sales tax deal

Tuesday, May 10, 2011 at 1:15pm

State senators are debating whether to balk at a secret deal with Amazon under which the Internet retail giant could operate warehouses in Tennessee without making its online customers pay the state sales tax.

The Senate Finance Committee heard testimony Tuesday on legislation aimed at forcing Amazon to collect the sales tax, despite last year’s agreement with the Bredesen administration. The committee postponed voting on the bill until next week.

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, or nexus, in that state.

Senate Finance Committee chairman Randy McNally, R-Oak Ridge, said his 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. “Unless you have retail store in the state, then you’re not required to pay the sales tax,” Amazon lobbyist John Lyle told the committee.

Representatives of AutoZone and Best Buy testified it is unfair to let Amazon do business without collecting the sales tax.

With 157 stores in Tennessee and 4,000 employees, AutoZone collected $19 million in state sales taxes last year, the company’s Brian Campbell said.

“An equal playing field is all we’re asking for,” he said. “The state should not be in the business of picking winners and losers, cutting secret deals to give one entity an advantage over another. If this deal is as it is portrayed, it will be millions and eventually billions of dollars in lost revenue over time.”

Lyle said he understands “the frustration” of other retailers, but he added: “I know every one of them has a retail store located in this state. Amazon doesn’t.”

Senators expressed irritation about the deal cut in the waning days of the Bredesen administration to bring Amazon to Tennessee. Whatever arrangement was made has never been made public.

McNally asked Braden Cox, Amazon’s director of state public policy, whether the deal exists.

“We have talked with the previous administration and there were commitments made,” Cox acknowledged. “I can’t speak to the legal nature of those commitments in Tennessee, but they were commitments made to the company that there would be an effort made to provide some certainty to the sales tax collection issue based on building these distribution centers here in Tennessee.”

Sen. Bill Ketron, R-Murfreesboro, said, “Was this deal just cut with the governor? Was there any guarantee that the legislature would support this? I’d like to have an answer to that. We come in in January and, bang, here it is.  I have a real issue with the legislature being circumvented in any process where we’re obligated to spend money.”

19 Comments on this post:

By: drewjohn on 5/10/11 at 3:01

screw Best Buy, Auto Zone and Walmart. If you want the same deal than you close all your stores and only ship online. I'm not going to be able to go down the road to the closest Super Amazon store. it's not the same so eat it!

By: chasbeard2 on 5/10/11 at 4:52

This was a bad deal that should never have been made. If it were a good deal, the administration would have been touting it and probably held a news conference. This makes me suspicious. TBI should check into this, as kickbacks were probably part of the deal. It is a shame that the great state of Tennessee wants anything to do with Amazon, since it is a company that regularly sells material published by NAMBLA - an organization that tries to legalize child molestation. Why would anyone be proud to have Amazon in their midst, let alone give them a deal that steals money from our tax coffers.

By: willtw on 5/11/11 at 2:54

Chas.....and I suppose you think 9/11 was an inside job also?

By: tpaine on 5/11/11 at 4:16

This "deal" stinks to high heaven. A "level playing field" is not an unfair request.

By: axelhose on 5/11/11 at 4:53

What does Sen Bill Ketron mean by " I have a real issue with the legislature being circumvented in any process where we’re obligated to spend money.”

Is this politician speak for "forgone taxes (which we don't have now) are expenditures by the state"? Is there also some clever political phrase for forgone jobs, forgone property taxes & forgone spending by those workers in local stores?

axelhose

By: govskeptic on 5/11/11 at 5:41

It appears that more taxes(from Tn. consumers) is just as important to the
Republican Senate as it is to the Democratic members. It's more taxes on
those of High Income and Wealth that both parties agree not to implement!

By: BenDover on 5/11/11 at 7:45

Holy crap... Amazon just shut down a new facility before opening it in South Carolina because of stupid legislators wanting to jack taxes on their own state consumers. Leave Amazon alone. We need the jobs!

By: drewjohn on 5/11/11 at 8:09

The politicians, and the big box stores are trying to trick the public into thinking that Amazon is getting some kind of special break. The only reason they are going after Amazon is because the big box store are lobbying against them. you don't see them going after the smaller websites. Amazon only wants to be able to ship faster so they need distribution warehouses centers in the south. Instead of waiting 5 days for your order you will wait 2 days. These are not stores for people to go shopping in like best buy and walmart have. iI not the same!

The internet has always been tax free. DONT let the big box stores take that away from you!!! its all a trick to get more of your business. They figure if you have to pay taxes on Amazon.com they you will buy at TV a there store instead.

By: tedhitt on 5/11/11 at 8:27

Amazon is totally correct, they have no retail physical presence in the State of Tennessee and therefore have no obligation to collect or pay our rediculous sales tax. The size of the business done in the State is a plum that all the other retailers would like to have a piece of. If they had done the supurb job of selling just about everything that Amazon has done they might have something to holler about but that is not the case. I have to admit that I am a dedicate Amaazon customer all the way from 2 Kindles to conventional books to electronics and just about everything else. The service is excellent and the prices are right. Just what most of us are looking for; if our state senate is whining about not getting a peice of the Amaxon pie, that's just plain tough.

By: chasbeard2 on 5/11/11 at 8:31

willtw,
Seriously, is that the only thing you can say in response? That is very sad that you feel the need to belittle people for no reason. I assume you have no reason, since you gave none, and, in fact, did not speak at all to the subject. I guess that you don't know anything about it. Do you work for Amazon, or are you just trolling, trying to stir up trouble?

Amazon is bad, for their lack of concern for children's innocence, and for their lack of willingness to be a good corporate partner with the state. If they don't come to Tennessee, other companies will. If they are stupid enough to spend money on warehouses, then shut them down because we forced them to play by the rules, let them take the losses. If they don't tuck tail and run, then we get the taxes rightly due us, and all businesses are on an equal playing field. Oddly enough, Tennessee has survived over 200 years without them.

If Amazon is able to get a backroom deal, then you can bet the other big corporations -- e.g., Wal-Mart, Nissan, etc -- are going to be knocking on the governor's door, soon. Tennessee has to be fair to all participants, or the jobs we already have could be lost, in addition to the tax revenue.

By: chasbeard2 on 5/11/11 at 8:44

drewjohn,
I believe that a fair playing field for all competitors is not such a crazy idea. All businesses, web-based or not, should be collecting sales taxes. The reason given for not forcing them to do so, is to give the mom-an-pop websites the chance to grow. Now, billions (with a "b") of dollars are lost annually to tax revenue. The states create smaller budgets, which is not so bad, if there was waste in the budget. However, the state governments don't just create smaller budgets, they also raise the tax rates, to make up the difference. So, first, needed services are reduced to those most in need of help. Then, sales taxes are raised on the non-web purchased items. So, the little old lady barely making it on a fixed income pays more taxes on her groceries and household items. I guess it is no big deal though, if you can log on to the internet, and steal a few dollars from the tax coffers, to buy a book or whatever. Oh, and don't forget about those jobs of the companies with stores in the state, who are losing money trying to compete with Amazon. They will just lay off as many workers as they can, your neighbors and mine, to stay profitable, while attempting to sell items for which they are forced to charge 9+% more (in sales tax) than their competitor, Amazon.

By: chasbeard2 on 5/11/11 at 8:49

tedhitt,
All is being asked for is a fair playing field. Amazon is not a great company; they sell materials promoting child molestation. For them it is ALL about the bottom line. If Amazon getting a sweet deal results in other companies, such as Dell, moving out Tennessee, Amazon could not care less, and taxpayers and people needing to work for a living, are the losers.

By: JohnGalt on 5/11/11 at 10:25

Grant exemption: Lose online sales tax collection; gain thousands of jobs.

Refuse exemption: Lose online sales tax collection; lose thousands of jobs.

Looks like lose/win versus lose/lose.

Your choice?

By: Dhack on 5/11/11 at 12:27

Newegg.com has no retail outlets in Tennessee. They are required to collect taxes. I'll admit thousands of jobs are enticing. But most of these jobas are 9-10 per hour picking orders and packing boxes. Since only kids and illegals will want htese jobs in the long run, its just not worth it.

By: argus on 5/11/11 at 1:35

One thing I don't understand:
If Amazon is so dead set against collecting tax on sales to Tennessee customers, why do they collect tax on Kindle e-books sold to Tennessee customers? It just doesn't make sense that one arm of their business collects tax and another doesn't.

By: bbwegl on 5/11/11 at 5:02

I own a small business in Nashville, and wish all companies had to collect sales tax. It does put us at a close to 10% disadvantage. Please remember that the local stores have to collect sales tax, pay business tax, pay personalty taxes, county business liscense, etc., that the online companies do not. Does Amazon pay any local money to repair our roads? To educate our children? I do. Who do you go ask when your child is selling candy for the school or looks for donations for sports, etc? Amazon? I think not. You go see your local companies. I know I am asked almost daily for sponsorships from some local group. Amazon may bring in jobs to their warehouses, but how many small business jobs will be lost?
I think many of the people who think buying online is great are the same ones who complain about the economy. Well duh! The money you spend with them goes to some other states, or Country, economy.

By: tomba1 on 5/12/11 at 9:50

I also operate a small gift business partially online but with no retail store outlet. Contrary to bbwegl's remark that online operations pay none of the taxes he mentioned, I and others like me, pay all of those taxes. And in recent years the State has forced us to charge sales tax on shipping and handling charges associated with a delivery to a Tennessee address. Since we have no storefront, everything we sell is shipped or delivered to somewhere.

As to the Amazon situation, I would contend that they are still collecting those same dollars built into their pricing but they disguise it by providing free or nearly free shipping. And with the volume discounts they receive from their shippers, UPS etc, they are probably making a profit off their shipping but neither we nor the State will be able to figure it out if they are exempted from collecting and paying the applicable taxes. I guess they wouldn't be subject to any tax audits either if they are exempted. Wonder if they will be paying Franchise and Excise taxes??

By: WickedTribe on 5/12/11 at 9:57

I don't see how any Tennessean could support this. If Amazon collects sales tax, that's your money, not their money. You're the one paying the tax. Why would anyone want to pay more tax than they already do? Because none of us pay tax on Amazon purchases right now.

By: ohplease on 5/12/11 at 1:00

We hear the promise of jobs, and we're ready to sell our souls and place longtime businesses at a disadvantage. How many jobs will really be gained? And what kind of jobs? Someone has already said that they will be low-paying -- probably without benefits. Then-Mayor Bredesen gave all kinds of benefits to Dell to locate in Nashville, and we thought it would turn us into a big technology center. Not hardly. The jobs were packing and shipping jobs. Shouldn't we be somewhat selective in what we give away for low-paying jobs?