Study: Tennessee could lose as much as $3B in tax revenue

Monday, September 19, 2011 at 1:48pm

A new study commissioned by brick-and-mortar retailers claims Tennessee could lose as much as $3 billion in tax revenue and more than 10,000 jobs over the next five years because the state cannot force online retailers to collect sales taxes from its customers.

The report released Monday by the retailers’ coalition — the Alliance for Main Street Fairness — employed a multiplier effect to arrive at those numbers, which were many times greater than any previous studies have found.

According to the coalition, the loss of online sales taxes would “also trigger losses of other types of state tax revenues as spending on taxable items such as gasoline, alcohol, tobacco and amusements decline.

“Revenues from taxes and fees on businesses would also decline as businesses downsize due to reduced consumer spending,” the report reads.

But the report’s author, Sharon Younger of Younger Associates, acknowledged her study didn’t take into account the economic effect of consumers losing buying power because they would be paying the state sales tax on all online purchases.

The coalition — an alliance of major retailers like Wal-Mart and independent store owners — is trying to pressure Amazon.com to start collecting state sales taxes from all its customers. That has been controversial in Tennessee since Amazon began opening distribution centers here this year after cutting a deal with the state that exempted the online retail giant from paying the tax.

“Perhaps worst of all, the sales tax loophole gives Amazon a huge advantage over existing merchants who do collect and pay taxes,” said Mike Cohen, spokesman for the Alliance for Main Street Fairness. “The Younger study is further proof that the Amazon deal is bad for existing Tennessee merchants, and our local and state governments. It may be good for Amazon, but it’s bad for everyone else.”

Amazon agreed to collect California taxes in one year in a deal with legislative leaders there this month. Cohen called on Gov. Bill Haslam to force Amazon to do the same in Tennessee.

“While we are glad to hear that Amazon has agreed to collect sales taxes just like every other business in California, we need action now in Tennessee, “ he said. “We hope Gov. Haslam can get Amazon to do in Tennessee what they now have conceded they are willing to do in California, which is play by the same rules as everyone else.”

The coalition held a news conference at Cumberland Transit, a bicycle and outdoor recreation shop on West End Avenue.

“We’re all about supporting the Main Street folks for just leveling the playing field,” said the store’s owner, Allen Doty. “I’m sure everybody listening has witnessed just about every locally owned bookstore in this town closing their doors because of folks like Amazon and other online folks not having to charge sales tax for items bought online. The few jobs Amazon might create by moving into the state of Tennessee — I don’t think that even compares to the number of losses from Davis-Kidd, Borders and every other bookstore that we all know about.” 

31 Comments on this post:

By: s10dd on 9/19/11 at 12:56

I am sure I will be corrected if wrong, the U.S. Supreme Court ruled if a company does not have a physical bldg in that state, they do not have to collect state sales tax, the reason states agree to not collecting these taxes is to keep the jobs.

By: harrystatel on 9/20/11 at 5:47

Who makes up Alliance for Main Street Fairness? Where can one find the members complaining?

Can't find the members on their website.

But spokesman Mike Cohen is the brother to Memphis Congressman and former State Legislator Steve Cohen whose love of taxpayer's money is legendary.

Seems Mike Cohen has his own problems.

http://www.knoxnews.com/news/2011/may/27/ackermann-pr-sues-former-exec-mike-cohen/

Before I do business with Alliance members, I'd like to know who they are.

[Mike Cohen] "Do the right thing. Get on a level playing field. Nobody's afraid of competition. ... We just don't want government saying someone can have an advantage."

This comment, coming from individuals, politicians, and Alliance members who have constantly sought government protection and government welfare for advantage and to eliminate competition, is hilarious.

I'm buying from Amazon and underground markets whenever possible.

By: treehugger7 on 9/20/11 at 6:33

Yes, isn't that patiotic. Let your state go to hell because you don't want to pay sales tax on a book or CD. If we were an intelligent state, we would have an income tax and Amazon's presence wouldn't effect the state so much.
Haslam needs to go!

By: govskeptic on 9/20/11 at 6:40

I don't understand where the author comes up with these numbers unless they
are from Mr. Cohen. This report, which is so suspicious on it's face raises the
number of 6,000 versus 10,000 in the story. Sure the brick and mortar are
jealous of the tax situation, but Congress and the Courts have provided this
exemption and it's 2011 not 1950. Gov. Haslam should stop picking and choosing
what agreements were in front of him when he took office and get on with his
plans to move this state forward. It gets old listening to Republicans asking
for votes because they will lower taxes, and at the same time attempting to raise
fees and taxes in other ways that don't seem hypocritical!

It appears neither party in this state cares a damn about the pocketbooks of
the underpaid citizens of this state nor protection of same through consumer protections
which are among the least in the nation!

By: nash615 on 9/20/11 at 6:45

"Let your state go to hell because you don't want to pay sales tax on a book or CD."

Nah, more like let your state go to hell by electing retards to office and giving corporate welfare until our coffers are dry.

By: treehugger7 on 9/20/11 at 6:48

Amen, Nash615!

By: Redbarron06 on 9/20/11 at 7:02

The state wont loose a dime, they just wont increase the amount of revenue. We dont have an income problem we have a spending problem.

By: Lab on 9/20/11 at 7:34

s10dd is correct on it's face...the Court did rule as such. However, as a former "brick and mortar" retailer in Nashville, I experienced regularly "browsers" who would come in, thoroughly handle the product we had paid to stock there, and be quizzed to the Nth degree on the product, only for them to go home and order the product online because they could save the sales tax. Believe me, I am a small government person, but our state's method of generating revenue is from retail sales, and if I purchase something at the corner store, or by going to some website, then I owe the state sales tax on that purchase. If an online retailer wants to sell products to persons who reside in Tennessee, then they should be required to collect the appropriate sales tax on that purchase. If they have to maintian a database of different tax rates for each state/municipality, then that is the price they must pay for doing business with residents of Tennessee. A change in law is necessary for the equality needed in today's electronic world.

By: C.A.Jones on 9/20/11 at 8:29

I'm not sure about all you folks, but I generally PREFER to shop and buy from a B&M store rather than an online retailer. The most important thing for me is I get the thing I want that day. I don't have to wait for jack! Plus you get the opportunity to handle the goods and quiz the shop owner about the stuff. Can't do that online can ya? Finally, I get a certain satisfaction from buying from a small business rather than a giant retailer or an online store. It's funny that Walmart is the big push behind this non-sense when they have done more to crush the mom and pops than anything else in this state.

Treehugger7, if you desire an income tax to desperately, Please feel free to move to a state that can accomodate your wishes. I'll even help you pack.

By: BellevueBill on 9/20/11 at 8:45

I tried to pay use tax on an Amazon purchase and the state's internet site did not accept Visa.

By: girliegirl on 9/20/11 at 9:14

Plus, consider that the book I just bought was "used" on Amazon, I managed to only pay $7.95 for it instead of $49.99 full retail. Most of us aren't able to afford full retail, ya know.

By: BenDover on 9/20/11 at 9:34

The Tennessee government could lose revenue.. not Tennessee. There is a distinction. Be careful about this protectionist non-sense that protects those who will not adapt. We've also got that great big Transportation company down there in Memphis who makes a fortune all of this delivery all over the country that comes back to the state.

By: localboy on 9/20/11 at 9:48

Perhaps Amazon could quiet opposition by making in-lieu of payments to the state...naahh.

By: harrystatel on 9/20/11 at 10:19

"Yes, isn't that patiotic. Let your state go to hell because you don't want to pay sales tax on a book or CD. "

I'd let the State government go to hell and open the fiery gates to ease their passage.

By: DREIFMA on 9/20/11 at 10:20

Thats what I love about this country. The Supreme Court has decided the issue! The newer companies have set their business model based on current business norms and tax laws! Then what do you know, the groups that are dissatisfied with another companies business model and also the way they set up their own business model feel like they need to SUE THE NEW COMPANIES TO FORCE THEM CONFORM TO THEIR OLDER BUSINESS MODEL. Those that feel strongly about it should not buy on line and should go to their local B & M. The B & M can always change their business model. Its like entertainment discs ie CD, DVD, and BR versus streaming. Some like streaming and I like the physical product. Take your pick and stop all this bloody litigation. The Superemes have decided, no physical presense, no collecting taxes. By the way folks, litigation is not free, its also passed along to you the customer, no matter what side of the fence you are on. Pass along your sentiments about duplicate litigation costs being built into the price of the product you are paying to your retailer whomever that may be. Cumberland, I bought one item from you and it was overpriced and still made in China. Never again. The "green, artsy crafty, and other small single proprietor shops" somehow think they deserve special priviledges or pass from the norms because they are special. I dont think so. Build a better mouse trap and the consumer will beat a path to your door. If you do not, you live with the consequences. I dont make my decisions to buy based on a few tax dollars, its based on quality, availability and service.

By: judyboodo@yahoo.com on 9/20/11 at 12:01

Welll now. I have a small service business and I decided long ago that I wouldn't put on parts that were not bought from me. To cut me out of any profit that I might make on selling items that I might install isn't why I get up and open the doors every morning. If you want to buy on line then you are on your on if you have problems. The reality is that I usually make more money from these kinds of people fixing what they thought they could do then I would have if they had bought from me in the first place. Will somebody please explain to me why a shipping facility in state doesn't constitute a physical presence in Tennessee.

By: judyboodo@yahoo.com on 9/20/11 at 1:00

Welll now. I have a small service business and I decided long ago that I wouldn't put on parts that were not bought from me. To cut me out of any profit that I might make on selling items that I might install isn't why I get up and open the doors every morning. If you want to buy on line then you are on your on if you have problems. The reality is that I usually make more money from these kinds of people fixing what they thought they could do then I would have if they had bought from me in the first place. Will somebody please explain to me why a shipping facility in state doesn't constitute a physical presence in Tennessee.

By: harrystatel on 9/20/11 at 1:26

judyboodo@yahoo.com wrote "The reality is that I usually make more money from these kinds of people fixing what they thought they could do then I would have if they had bought from me in the first place."

Then you should celebrate the idea that people will bring their problems to you to fix.

judyboodo also wrote: "To cut me out of any profit that I might make on selling items that I might install isn't why I get up and open the doors every morning."

I get up in the morning to spend my money where I perceive I get my best results. I never consider what I can do for you; only what you can do for me. If you can't meet my priorities, I'll find someone who can.

The free consumer is king; not those who think I owe them anything because of their demands I must buy from them.

Please tell me where your business is. I'd enjoy telling my friends.

By: William Michael... on 9/20/11 at 1:37

How many times can we be taxed on the same income? We get taxed by the FEDS on income, then when we pay our cable, phone, food, and fuel which more taxes are taken by the Feds, the State, and Locals. The same income is taxed a dozen times. I under stand the need to tax cigarets and alcohol, but not things we need such things as food, and clothing. I understand the transportation taxes on Fuel by the Government, but almost a dollar a gallon between all these groups? We need to get the government spending under control. We should start by cutting their pay by 33% and make them pay for their offices. These people are elected to work for us not them selves or some lobbyists. If I do not live in California and I purchase some thing from a California Company online, I should not have to pay a sales tax to that state. If I live in TN and I buy something from a TN company online, then I should pay sales tax. It is that simple.

By: William Michael... on 9/20/11 at 1:44

By the way physical presence means that you can go to their location and walk in and purchase those items with cash or credit cards. Warehouses do not count as they are for storage and shipping purposes.

By: judyboodo@yahoo.com on 9/20/11 at 2:57

Well Harrystatel, I can make more money if I send all my manufacturing overseas, let my call centers be in the Philippines. Use China for their child labor, etc, etc., all the while watching the standard of living in the good old USA go down, down, down till we live like our brown brothers in the third world. At the same time you will be "perceiving your best results" hope it all works out for you, it isn't seeming to be to good for the rest of the country. "I never consider what I can do for you" pretty much sums you up fellow.

By: Radix on 9/20/11 at 7:12

Why the heck to people think that taxes that are not collected equals "lost" money??

Not confiscating money from TN residents does not mean its "lost". Pathetic!

By: pswindle on 9/20/11 at 10:26

Did you read where the Union has signed a contract to bring workers back to Spring Hill. Who said that Unions killed jobs? TN GOP wake up and get with the program.

By: NilsOrion on 9/21/11 at 3:11

The problem seemingly not addressed by anyone arguing pros and cons re collecting sales taxes is that, in many cases, online retailers like Amazon can undercut the price a bricks and mortar store must charge. This fact was why I started Internet shopping years ago. So I think it's a two-pronged issue.

By: Loner on 9/21/11 at 6:17

I shclepped this over from the Up for Debate board that is discussing this same story:

Take everything that Doctor Sharon Young says with a large grain of salt; she is a professional zealot.

Here is the URL for her site, it includes an extended resume of her work and who she has shilled for in the past.

http://www.younger-associates.com/about/sharonbio.html

Brick & mortar restaurants despise the street vendors and brick & mortar retailers despise the strictly online retailers...it's dog eat dog and Sharon Younger is employed by the big dogs...she is a trained attack dog, available for hire.

It is rather unusual to see a group of retailers calling for a crackdown on tax revenue collection...they should be careful of what they wish for...are their own books legit, or are there two sets of books? (One set for the IRS and state tax collectors and another set for personal use.) I just don't like tattle-tale finger-pointers and whining fat cats who hire attack dogs to harass their competition.

Shop online and screw the big dogs, fat cats and guvmint rats...it's the American way.

By: DDG on 9/21/11 at 2:34

Good...We pay enough Fing taxes as it is.

By: pswindle on 9/21/11 at 5:20

Has TN ever collected taxes on-line purchases. If not, we are not losing, just not gaining. You can't lose what you have never had.

By: harrystatel on 9/22/11 at 6:42

"Well Harrystatel, I can make more money if I send all my manufacturing overseas, let my call centers be in the Philippines. Use China for their child labor, etc, etc., all the while watching the standard of living in the good old USA go down, down, down till we live like our brown brothers in the third world. At the same time you will be "perceiving your best results" hope it all works out for you, it isn't seeming to be to good for the rest of the country. "I never consider what I can do for you" pretty much sums you up fellow."

As a libertarian my advice is, "Ask not what you can do for your government; ask what your government can do for you!"

If the answer is "nothing but theft at the point of a gun," I don't need the government.

Work out your own problems, judyboohoo, or go out of business. I owe you nothing.

By: tomba1 on 9/22/11 at 10:48

Loner - you suggest: "Shop online and screw the big dogs..."

Merely shopping online doesn't constitute a screwing of the big dogs. They all have their own web sites in place to complement their brick and mortar operations. If you see something in their store and later decide to buy it, you can just go online and order it. The big dogs are perfectly fine with that. But beware, since these mean dogs are operating legally, they will charge you sales tax if they ship your order to a TN address.

Where you "screw the big dogs" is when YOU choose to do business with a company which is operating illegally in TN, ie. companies like amazon which have a presence in the state but do not tax items delivered to TN addresses as required by TN law (TCA 67-6-102).

Kinda makes me wonder, since they are voluntarily breaking the state law and you choose to do business with them knowing that they are operating illegally, are you guilty of aiding and abetting a lawbreaker in the committing of a crime? I think so, since TCA 67-6-102 also says that, since the transaction is taxable and the seller does not report and pay the tax, YOU are liable for it and must report and pay the tax to the state. I file and pay mine quarterly. How about you??

By: Shadow63 on 9/22/11 at 11:31

Looks like an eight pup litter and a four tit dog.

By: Ingleweird on 9/26/11 at 7:42

I'm just gonna go ahead and derail this fluff train.

Anybody seen the footage of the NYPD pulling, shoving, macing, dragging, choking, and otherwise beating the crap out of peaceful protesters?

Warning, the imagery is graphic:

http://www.youtube.com/watch?v=Y_7rZbVerlI

This is REAL news, and the media is not touching it. You have to dig for coverage on CNN and Reuters.