Tennessee Gov. Bill Haslam — with an Amazon executive and several state legislators standing with him — announced a new agreement between the state and the company Thursday calling for Amazon to collect sales taxes starting in 2014.
But the rumbling in what has been one of the state’s most controversial issues was not put to rest.
Other retailers, who have fought Amazon because of its advantage in not collecting sales taxes as an online business, immediately criticized the deal. They cited the time element, saying the deal still gives Amazon more than two years, including three holiday shopping seasons, of what brick-and-mortar retailers believe is special treatment.
“If Amazon can agree to start collecting the sales tax in one year in California, why should we have to wait one day longer in Tennessee?” asked Mike Cohen, spokesperson for the Alliance for Main Street Fairness in Tennessee, in a formal statement.
“How many Tennessee jobs are lost, how many Tennessee businesses will close because the state grants Amazon a huge price advantage by not having to charge sales taxes?”
The Haslam announcement, made at the Capitol, also brings a commitment from Amazon to create a total of 3,500 full-time jobs and thousands of seasonal jobs in the state in a $350 million investment by the company, which ups the number of 1,500 jobs originally announced.
The Haslam administration said there are some standard incentive dollars for job training and basic infrastructure for new sites Amazon will be building in the state as part of the new deal. But “there are no other incentive dollars involved,” Haslam said.
Haslam said the agreement applies unless a national solution, which would bring all states under the same framework on state sales tax collections, comes first. Many people believe Congress should act to make application of sales tax law the same for online and traditional retailers.
The new agreement is a dramatic shift from the original deal struck by the state with Amazon, in which former Gov. Phil Bredesen and his team evidently agreed to allow Amazon to forego collecting sales taxes in exchange for creating hundreds of jobs with distribution centers in Hamilton and Bradley counties.
Haslam had agreed to honor that original deal, and state officials Thursday insisted the new agreement does not mean the state has gone back on its word.
Paul Misener, vice president for global public policy for Amazon, appeared with Haslam at the announcement, as did Rep. Charles Sargent, R-Franklin, chairman of the House finance committee, who had led a legislative effort to force Amazon to collect the taxes.
“We are proud that this world-wide brand has chosen to make such a significant investment in Tennessee and that they’re committed to expanding their presence here as well,” Haslam said.
“This agreement balances several needs, the needs of the company and the needs of the state by providing certainty to Amazon and to brick-and-mortar retailers about the collection of the sales tax. And it means more jobs for Tennesseans.”
Haslam said the agreement reached with Amazon will be presented to the Legislature when it convenes in January.
That was seen as a possible nod to a state attorney general’s opinion issued in the last week that said sales made electronically do not change a retailer’s obligation to collect the tax, although the opinion acknowledged the commissioner of Revenue has wide discretion. But Haslam said the administration probably would have gone through the Legislature anyway. Haslam said the deal was 98 percent completed before the opinion was issued.
“I’ve been asked several times over the course of the last couple of months if working on an agreement like this is doing what we said we would do as a state. The answer is yes,” Haslam said. “The scope of the project has changed, with the addition of newly planned facilities here, and that conversation in the Legislature and in states across the country has had an impact.”
Misener said the announcement was “a really remarkable event.”
“It’s a big deal for us, and I’m happy that it is also is a big deal for Tennessee,” Misener said.
The Amazon executive said his company supports efforts to streamline sales tax collections nationally.
“The sales tax issue must be resolved in Congress,” Misener said. “It’s the only way the state of Tennessee will be able to retain all the sales tax revenue that can be collected for the state.
“We are committed to going to Washington with the state’s leaders, both here in Nashville and also in Washington, to obtain that sales tax legislation as soon as possible.”
Haslam and Misener complimented Revenue Commissioner Richard Roberts and Economic and Community Development Commissioner Bill Hagerty for their work in the negotiations. Hagerty had been scheduled to speak to the Rotary Club of Dyersburg on Thursday but cancelled to be at the Nashville announcement.
Sargent commended Amazon and the Haslam administration for negotiating the deal.
“This is very consistent with what the attorney general’s opinion has been,” Sargent said.
Sen. Randy McNally, R-Oak Ridge, the Senate finance chair who had also sought legislation forcing Amazon to collect the tax, was not at Thursday’s event but is recovering from recent hernia surgery, his office said. McNally had suggested a potential two-year grace period on Amazon as a way to resolve the tax issue.
Haslam, noting that Misener is an astrophysicist, said negotiating the deal was “almost like rocket science. It was incredibly difficult.”
Haslam said the Department of Economic and Community Development is working with Amazon on the locations of its future distribution centers. The company recently announced plans to add a plant in Wilson County and is expected to have a larger presence in Middle Tennessee. Haslam said there would be two facilities in the state in addition to what is already in the works, one of those as a “sorting” facility.
House Majority Leader Gerald McCormick of Chattanooga, representing the area that has stood to benefit most in terms of jobs, had been critical of efforts to force the tax collections. But McCormick made the same announcement of the new deal in Chattanooga Thursday, emphasizing the additional jobs involved.
McCormick said there was no “arm-twisting” and that Amazon voluntarily went along with the plan. The Chattanooga Times Free Press posted a video of McCormick’s announcement.
Haslam said he didn’t believe the new deal necessarily brings additional jobs to those already planned for Hamilton and Bradley counties, but McCormick said in Chattanooga that the additional jobs would be split between Hamilton, Bradley and Wilson counties, making no mention of new Amazon sites. Haslam said there have been several communities in talks with Amazon.
“This is a significant day for Tennessee,” Haslam told reporters after the announcement. “It addresses an issue about the collection of sales taxes. This isn’t a new tax. This tax was already due. This just is a question of Amazon collecting.”
Roberts characterized the negotiations with Amazon as “challenging but forthright.”
Haslam also put Amazon’s role in online sales tax collections in perspective.
“Of the online retail sales where tax is not being collected Amazon is only about 10 percent of it,” Haslam said, adding that that is why he has called for a national solution. “It’s not just about Amazon.”
William Fox, director of economics at the University of Tennessee’s Center for Business and Economic Research, told a regional legislative conference this summer that Amazon comprises about 5 percent of e-commerce.
California recently reached a compromise with Amazon that gives the company one year before collecting sales taxes. Roberts said the California development helped the Haslam administration’s case but that conversations had progressed substantially by that point.
“Our situation is not the same as California’s,” Haslam said. “They have an existing physical presence that has been there for years. It’s really not an apples and apples situation.”
Haslam said he and Bredesen had talked about Amazon once in the last month or so.
“I just gave him an update on where we were,” Haslam said. “We talk periodically, so it wasn’t necessarily just about this.”
Haslam characterized reaction in the Legislature to the new arrangement as being a “warm reception.”
But the Alliance for Main Street Fairness said the deal will cost Tennessee almost 8,500 jobs.
“How can that possibly be anything but bad policy?” Cohen asked in the formal statement. “Our state government shouldn’t be picking winners and losers. This is the same failed policy we’re getting from Washington, and it’s not something we ought to emulate in Tennessee. Every business should be treated the same.”
The group also raised the issue of Amazon being allowed not to collect the tax given the recent attorney general’s opinion.
“Lawmakers can expect to hear from their constituents, businesses they will put at a huge disadvantage and employers that do pay the sales tax every day,” Cohen said. “It’s time for government to stop meddling in the free market by giving companies like Amazon special treatment.”