Gov. Bill Haslam said Wednesday that governors need to come together to find a solution on applying sales taxes to Internet sales, adding that the federal government won’t have the incentive to take action.
Haslam seemed to brush aside the matter of whether to hold the Internet sales giant Amazon to account on the collection of sales taxes as the company plans two large distribution centers near Chattanooga.
“My argument is it’s a bigger issue,” Haslam told reporters at a press availability after a Farm Bureau event in downtown Nashville. “I think Internet sales should be subject to sales tax for everybody, whether you have a distribution center or not.”
Amazon’s establishment in the state represents a $139 million investment. Traditional retailers object that they have to collect sales taxes while businesses like Amazon do not.
Haslam attended a National Governors Association meeting in Washington last weekend, but he said he told other governors they shouldn’t expect help from Washington on the issue.
“It doesn’t affect Congress’s pocketbook,” Haslam said. “The sales tax hits states.
“You’re not going to get leadership from Washington because it doesn’t affect them. It does affect us in every state — Republican, Democrat, north, south, east and west. I think it’s a place where governors have to, and will, lead.”
In Tennessee, the state sales tax is 7 percent, with up to an additional 2.75 percent applied by local governments. Since Tennessee does not have an income tax, the sales tax has more importance to Tennessee than most other states as a revenue source. Since Internet sales began, the issue of collecting taxes has been a problem for the state.
“We need to have a united effort,” Haslam said. “It’s too big a piece of our economy now to ignore. It’s not fair to those people who are investing in bricks and mortar.”
The nation has seen conventional bookstores suffer from the Amazon effect, and while many consumers lament the loss of traditional bookstores there is no dispute that consumers like the idea of ordering through online outlets, whether it be for convenience or to avoid paying sales tax.
“It affects everybody from real estate owners to small retailers to large retailers,” Haslam said. “It impacts too many for us to continue to ignore it.”
But the governor emphasized it will take a concerted effort to confront the problem.
“One state obviously can’t do it. That’s the whole issue we have now,” Haslam said. “I think it will take a large majority of governors saying they are going to band together on that.”
Tennesseans for Fair Taxation, a group that generally advocates on behalf of the government attracting more revenues — up to and including the implementation of a “broad based” personal income tax — has been critical of Amazon’s ability to avoid the sales tax issue.
In Congress, Rep. Dan Lungren, R-Calif., and Rep. Zoe Lofgren, D-Calif., recently introduced a resolution urging lawmakers to say no to congressional efforts toward imposing sales taxes on small retailers online. The resolution was presented as a way to protect small businesses and entrepreneurs.
The U.S. Supreme Court ruled in 1992 that retailers can’t be forced to collect sales taxes on out-of-state purchases unless they are established in those states.