Posts

New Amazon Deal Praised As Improvement On Deal, Not Backtracking

When all was said and done in the announcement Thursday that Amazon will collect sales taxes in Tennessee beginning in 2014, the state was in a different place from its original agreement with the online sales giant.

The original plan had been that Tennessee would get hundreds of jobs from two distribution centers in the Chattanooga area, so in return the state would let Amazon avoid collecting sales taxes on purchases. The deal was subject to debate almost from the time it became known.

Now, with a commitment that will bring the total number of Amazon jobs to 3,500 in the state, Amazon will have to collect sales taxes, although it is not soon enough for some critics of the deal.

So by negotiating a new deal with the company, taxes included, does that mean that in the big picture Tennessee went back on its word?

“No, absolutely not,” said Speaker of the House Beth Harwell, pointing to the efforts of Gov. Bill Haslam and Commissioner of Revenue Richard Roberts. “I’m proud the governor and the commissioner were able to sit down with Amazon and work out an arrangement that is pleasing not only to Amazon but also to the taxpayers of this state.

“I think it is a fair way to bring a large number of jobs to the state of Tennessee.”

Lt. Gov. Ron Ramsey, R-Blountville, called the announcement Thursday a “big win for unified Republican government on the jobs front.”

“The governor has negotiated a deal that promotes economic growth and jobs creation while protecting the interests of brick-and-mortar businesses who are the backbone of our economy,” Ramsey said in a formal statement.

“This is a good solution for the state of Tennessee, and I commend the governor for resolving this.”

Deputy Gov. Claude Ramsey said the deal simply means an improvement on what the state had before.

“It didn’t go back on its word. It just worked out a better deal,” Claude Ramsey said.

The deputy governor was asked if the new deal would in any way be detrimental to future negotiations with other companies.

“No, sir,” he said. “Because I think it shows that there is a solution. We worked to a solution.”

The original deal was struck by a Democratic governor, Phil Bredesen, who told Haslam of his plans and the reasons behind them: Get the jobs and collect no taxes, or lose the jobs and collect no taxes. Haslam, a Republican and newly elected when Bredesen told him of the deal, told Bredesen he would honor the agreement.

But ultimately, the Haslam administration engaged Amazon in an entirely new discussion. The result was an arrangement where Amazon not only would be collecting the sales tax but would be adding jobs to the point its total commitment had grown to 3,500 jobs and $350 million.

The entire scenario involved a Democratic administration sacrificing a substantial amount of revenue and a Republican administration doing everything it could to collect owed taxes — shifts from the stereotypical depictions of Democrats as tax-and-spenders and Republicans as advocates of revenue reduction.

Republicans did so in the name of tax fairness, yet other retailers were not satisfied that Amazon still gets until 2014 to start collecting and remitting.

In the Legislature, it was a Republican duo, Sen. Randy McNally of Oak Ridge and Rep. Charles Sargent of Franklin, who had contemplated legislation to force the tax collections.

Sen. Bo Watson, R-Hixson, speaker pro tem, said the new deal does not go against the original deal.

“I don’t think you can say it’s anything against the original agreement,” Watson said. “I think this is a continuation of dialogue that’s been going on between the administration and Amazon since the original agreement was discussed.

“All along, as this whole debate has been occurring, many of us, me being one, have been saying that conversations have been continuing, and this is just a continuation of that conversation.”

Democrats held a press conference Thursday, calling for $15 million toward a jobs plan. When they were asked about the Amazon deal, House Democratic Leader Craig Fitzhugh did what Haslam did and emphasized the part of the deal that was about jobs, not taxes.

“I think the primary focus is on the jobs, the jobs that the Bredesen administration brought here through Amazon, and through an agreement that has to do with the revenue, that there’s going to be another 2,000 jobs on top of that,” Fitzhugh said.

“So I think that’s the key thing we have to focus on in these times, which as everybody has said, is jobs.”

Mike Turner, the House Democratic Caucus chairman, said, “The law is already on the books. You’re supposed to be paying that tax as it is now.

“There’s no new taxes being added to the books because of what we’re doing.”

Andrea Zelinski contributed to this report.

AMSF: Claims Amazon.com Deserves Special Treatment ‘Intellectually Insulting’

Press Release from The Alliance for Main Street Fairness in Tennessee; Oct. 4, 2011: 

Tennessee Attorney General States Amazon Has Nexus; If Internet Retailer Can Collect In Golden State, It Can Collect In Volunteer State? 

Nashville, TN – The Alliance for Main Street Fairness (AMSF) in Tennessee today issued the following statement in response to an opinion issued by the state’s attorney general demonstrating under current law Amazon.com clearly has nexus or a physical presence in Tennessee and therefore must abide by the law just as retailers in the state do every single day. This opinion follows news from California where Amazon has conceded it can and will collect sales taxes.

“As more facts and information are made public, it is becoming increasingly clear that Amazon.com’s argument against sales tax collection is evaporating. A recent opinion by Tennessee’s attorney general proves that under the law as written Amazon has a physical presence in the state and should be collecting sales taxes when its distribution centers open,” said Mike Cohen, spokesperson for the Alliance for Main Street Fairness (AMSF) in Tennessee. “Amazon first stated they couldn’t collect sales taxes, then stated it was unconstitutional, and now, in California, they have conceded they can, should and will collect. Amazon is building the same distribution centers in California that they are in Tennessee, and they should play by the same rules in our state. Any claim by Amazon that they merit a special deal in Tennessee is intellectually insulting and just plain wrong. Amazon must follow the law and collect sales taxes just like every other retailer in the state.”

To view the attorney general’s opinion, click here.

TFT: Amazon-Style Tax Incentives Drain State Resources

Press Release from Tennesseans for Fair Taxation, Sept. 27, 2011:

Revenue with Justice: State Must Hold Corporations Accountable for Tax Obligations

Sept. 27, 2011: Three billion dollars in potential state revenue and 10,000 Tennessee jobs are projected to be lost if Amazon.com is granted a proposed exemption from collecting Tennessee sales taxes, according to a study released last week by the Alliance for Main Street Fairness. Tennesseans also learned last week that Amazon employees allege some of the corporation’s distribution centers resemble sweatshops, with this report from the Allentown, PA, Morning Call: “During summer heat waves, Amazon arranged to have paramedics parked in ambulances outside, ready to treat any workers who dehydrated or suffered other forms of heat stress. Those who couldn’t quickly cool off and return to work were sent home or taken out in stretchers and wheelchairs and transported to area hospitals. And new applicants were ready to begin work at any time.”

Tax incentives like the one Tennessee officials are proposing for Amazon drain the state of millions in revenue every year, with little accountability for the reality or quality of the jobs the companies purport to create. It was reported last week by the Commercial Appeal that closed-door meetings resulted in over $300 million in similar tax breaks to the Electrolux corporation there, including an agreement by state and local governments to not recover taxpayer money in the event the corporation fails to meet its job creation and investment promises to the state.

Concerned Tennesseans will gather in Nashville, Tenn., Oct. 1 at Tennesseans for Fair Taxation’s Annual Meeting to strategize the organization’s work for tax fairness, including holding corporations like Amazon and Electrolux accountable for meeting the same tax obligations our small, local businesses adhere to every day and for giving back to the great state of Tennessee by contributing to its revenue stream.

“Anyone concerned with budget cuts in Tennessee and anyone who wants millionaires and corporations to pay their fair share in taxes is invited to attend our meeting Oct. 1 and join the fight for revenue with justice for all Tennesseans,” says Elizabeth Wright, Executive Director of TFT. “We all support job creation and employment opportunities for Tennesseans, but the Amazon and Electrolux deals are not good for Tennessee. These are not the working conditions Tennesseans deserve, and these corporations should certainly not be rewarded with tax exemptions and incentives that aren’t available to our homegrown, job-creating neighborhood businesses and retailers.”

In fact, there is no justification for requiring only some retail sellers to collect and remit state sales taxes from their buyers.  “Amazon appears to be the worst offender because its sales volume is so huge and is growing every year,” says Phil Schoggen of Nashville, Tenn., a member of Tennesseans for Fair Taxation. “The proposal to exempt the online giant from collecting sales taxes is particularly disastrous to Tennessee which relies so very heavily on the sales tax to fund the state’s vital public structures. In addition, Amazon also follows very selfish and unusual labor practices with workers in their distribution centers, like the ones they are building in Tennessee, according to the American Rights at Work organization.” Amazon workers’ complaints include that they are required to work in room temperatures where the heat index can reach 114 degrees, the company demands such speed in the work of employees that they suffer injuries and are threatened with termination for being too slow, and Amazon relies on temporary workers to drive down wages and to make it hard for workers to collectively stand up for their rights.

Amazon reports large profits every year, even while Tennessee’s small businesses close their doors and lay off their employees, with the corporate practice of bullying states into such sales-tax exemptions as Tennessee is considering, and with the shoddy labor practices alleged last week by its own employees.

Let’s be fair and quit coddling corporations like Amazon and Electrolux.

For more information about holding corporations accountable for tax obligations or for information on attending the TFT Annual Meeting Oct. 1 in Nashville, Tenn., please contact Elizabeth Wright at Elizabeth@fairtaxation.org or 865-687-9600×14.

Haslam Promises Openness On Amazon

Gov. Bill Haslam insisted Friday he has not changed his position on negotiations with Amazon.com on the collection of sales taxes and said whatever agreement might be struck with the retail giant the people of Tennessee would be informed about it.

Meanwhile, former Commissioner of Revenue Charles Trost, on whose watch the original Amazon deal was made in Tennessee, declined to comment Friday on details of the state’s current arrangement with the company. Current commissioner Richard Roberts, whom Haslam said is leading the talks for his administration, declined to comment on any talks as well.

Haslam says he wants Amazon to collect sales taxes on its transactions in Tennessee in the future, and his administration is involved in talks with Amazon on how to settle the issue of whether the company should have to collect the tax.

But Haslam’s predecessor, Phil Bredesen, struck a deal last year before leaving office where Amazon would not have to collect sales taxes as the company established large distribution centers in Hamilton and Bradley counties, bringing more than 1,000 jobs to the state. Amazon has since announced the addition of a distribution center in Lebanon

Haslam has said he planned to honor the Bredesen agreement, which was handled with little transparency and has stirred interest among some legislators concerned about the erosion of the state’s sales tax base. Legislators from the Chattanooga area, home of the first two distribution centers, have generally supported the Bredesen deal because of the jobs it creates.

Negotiations between the Haslam administration and Amazon have raised questions on exactly what the arrangement might become and whether it represents a shift in the state’s policy.

“Nothing has changed from the state’s commitment at all,” Haslam said Friday. “We are in ongoing discussions with Amazon. Everybody knows that. We’d love to see them grow more. Number two, there is quite a bit of discussion in the Legislature about exactly how that should work out.

“I wouldn’t be being honest if I didn’t say I’d love for them (Amazon) to collect sales tax.”

The governor has said all along he would like to get the definition of the state’s long-term relationship with Amazon nailed down. He has also said there needs to be a national solution to the issue of online retailers collecting sales taxes, and Amazon officials have said they believe a national approach is best.

But given the continuation of talks with Amazon, the future of the state’s arrangement continues to be scrutinized.

Trost, a Nashville attorney who replaced Reagan Farr as commissioner of Revenue last Sept. 10, would not comment on details of the Bredesen deal.

“I really am not in a position where I can,” Trost said. “The taxpayer confidentiality rules have put me in a position where I just don’t even want to start down the road talking about it.”

Trost said he is not even in a position to confirm that the deal was struck while he was commissioner.

“What’s in the public record out there, if you looked at the timing on it, when I was in office, you can draw your own conclusions,” Trost said.

“It’s just not a topic I feel comfortable talking about to the press or anybody else. It’s just … I’ve thought about this … I’m no longer the commissioner. There is a new administration. There is a new commissioner. The issue is still in the public domain for discussion. I think my best policy is not to add myself to the discussion.”

The Amazon arrangement was made late in Bredesen’s time in office. Bredesen informed the incoming governor, Haslam, of the deal with the explanation that if Amazon were not given the break on tax collections, the company might have put its facility in Georgia.

“I have the utmost regard for Governor Haslam, Governor Bredesen, my successor as commissioner and my predecessor as commissioner,” Trost said. “There’s a new group dealing with these issues, and I’m just not going to get into it. That’s the only position I can take.”

Roberts had a similar response.

“I can tell you that the state statutes prohibit me from discussing any taxpayer, whether it be you or Billy Bob’s Bait Shop or an unnamed major Internet retailer,” Roberts said. “Just as a matter of policy we simply can’t comment on individual taxpayers.”

Roberts said he cannot confirm that the administration is talking to Amazon.

“Our policy here requires that we maintain confidentiality. The reason is we have to give any taxpayer the confidence that what they file with us and their dealings with us will not wind up in the public domain. Until the legislature changes that — and I also believe it’s the right policy — I just simply can’t confirm or deny,” Roberts said.

Sen. Andy Berke, D-Chattanooga, speaking to reporters Friday, picked up on the issue of discussing the talks.

“I can’t quite tell what the governor’s position on this is, but we are making a mistake by talking about our discussions with Amazon without having some kind of firm agreement with them,” Berke said.

“One of the rules of economic development over the last several years is that we don’t talk about ongoing discussion. Now, if there’s going to be an agreement, we should have an agreement with them before we start talking about it.”

Two lawmakers have filed legislation that would require Amazon to collect the sales tax. When one of the sponsors, Sen. Randy McNally, R-Oak Ridge, suggested a two-year grace period on collecting the tax might be an answer, Haslam said that would leave the arrangement uncertain.

Haslam said Friday he has not personally had any direct conversation with Amazon, with Roberts taking the lead.

“We’re going to honor our commitment to them, but we would love to figure out a way long-term for them to pay (collect) sales tax and to build an employee base here,” Haslam said.

The issue has become ticklish for the state since it is highly interested in increasing the number of jobs in Tennessee, but there is a concern that it creates a double standard that hurts other retailers who collect the sales tax.

An opinion from state Attorney General Robert Cooper said distribution centers, like the ones Amazon is constructing, would present enough physical presence to require the tax collection and that the legislation sponsored by McNally and Rep. Charles Sargent, R-Franklin, would be constitutionally defensible.

Lt. Gov. Ron Ramsey has expressed frustration that he cannot learn the specifics of the Amazon deal, and at one time Ramsey attempted to meet with Matt Kisber, commissioner of Economic and Community Development under Bredesen, about the arrangement. But Ramsey has said he never got his answers from Kisber.

Haslam was asked Friday if, when an arrangement with Amazon is reached, the public would be informed what it is.

“Sure,” Haslam said. “You bet. You bet.”

Haslam was also asked about the time frame for a deal.

“It’s too early to say that,” he said. “We’re in discussions with them. I’d love to have some sort of agreement with them where we all do that by the time the Legislature comes back (in January). Remember, in the context of all this, there’s quite a bit of controversy in the Legislature about how this should go forward. So it’s not solely an administration decision what happens here.

“We’d love to come to an agreement that works where the Legislature says, ‘OK, that’s the right approach for the state of Tennessee long-term,’ and Amazon says, ‘Great, we can live with that, and we will grow and expand in Tennessee.'”

A call Friday to the media office at Amazon’s corporate headquarters was not returned.

Haslam said he does not believe the attorney general’s opinion has changed the administration’s approach to the issue.

“Obviously, the Legislature is a major factor in what gets worked out with anything in the state of Tennessee. It’s not different with Amazon than any other item, and so I think Amazon is aware of that,” Haslam said.

“We’re continuing to have conversations. I’m not going back at all in what the state has told Amazon. I’d like to work out something where we took this issue off the table, and Amazon says, ‘Great, we can live with that,’ the state of Tennessee says, ‘Great, we can live with that, too,’ and we have a great relationship.”

Haslam said he did not believe the recent announcement of the distribution center in Lebanon changed the dynamics of the negotiations with Amazon, and he noted that the company has talked of even more distribution centers in the state. Haslam also pointed out that individuals who buy an item online are supposed to pay the tax regardless of the business’s status.

TNReport.com is an independent, nonprofit news organization supported by generous donors like you!

Amazon’s Tax Treatment Draws Barbs from Women’s Business Group

Advocates for small retail businesses say instead of focusing on big splashy job creation announcements, Tennessee policymakers should wake up to potential job losses resulting from those splashes.

As Tennessee launched its latest back-to-school sales tax holiday for the weekend, the president of a national nonpartisan group supporting women-owned businesses and a Tennessee small business owner held a teleconference Friday trying to draw attention to the adverse impact of e-commerce on the state.

Barbara Kasoff, president of Women Impacting Public Policy, and Maggie Jetter, owner of the Tweed Baby Outfitters store in Nashville, made their pitch for economic fairness and fielded questions from reporters Friday about the sales tax holiday. The looming figure in the discussion was Amazon.com.

Amazon has become a white knight in the eyes of people trying to create lots of jobs in a short amount of time, with the online retail giant recently launching three large distribution centers in the state, and the possibility of even more. But at least some small businesses don’t see Amazon that way.

“I know they’re speaking about creating 1,500 new jobs, but you also have to keep in mind that with Amazon bringing a large company to Tennessee that’s not paying sales tax, you’re definitely coming close to putting out a lot of small businesses and losing even more than 1,500 jobs,” Jetter said.

Jetter and Kasoff offered no numbers in Friday’s conference call to back up the claim that job losses match the job gains, but Kasoff said small businesses create 93 percent of all new jobs.

“If small business retailers such as Maggie are not able to add jobs, that’s going to have a far-reaching and very significant impact on the economy,” Kasoff said.

Small retail advocates say it’s not simply that the brick-and-mortar stores are losing business to big online retailers but that losses in small businesses can hurt an entire community. When online retailers are exempt from collecting sales taxes, it puts a dent in the revenue streams for small governments and by extension, the services they provide.

Jetter said she can literally see the impact of online retailers on her store, which carries apparel for children, diaper bags and other baby products. She sees people come in so they can look, touch and feel the merchandise, then exit to go buy it online with no sales tax.

“I see it especially with this generation of parents,” she said. “A lot of the grandparents do shop here, but a lot of parents have all the online blogs and websites to find their deals, to register on Amazon, to get their diaper bags on there, which are one of our higher-priced items, which helps us pay the rent.”

Jetter said she is aware of Tennessee Gov. Bill Haslam’s offer to lead the call for national action urging Congress to level the playing field for states. But Kasoff was asked if it’s realistic to believe Congress would act to force handing over more taxes.

“Now that the (debt-reduction) votes of the past week are behind us, we hope that focus is going to be on building economic stability,” Kasoff said. “I think they’re going to take a hard look at this. I think the state legislatures across the country are going to be taking a hard look.

“We have to stabilize the economy. We have to bring some sense of stability and confidence back to consumers.”

Kasoff said sales tax holidays are an example of putting small retailers on a level playing field. While there is constant debate as to whether people are boosting business or simply shifting the timing of their purchases, Jetter said she definitely expected to see more business because of the brief sales tax break.

“This is just our second year as a brick-and-mortar store, but I do expect to see a lot of families here,” Jetter said. “I expect to see a good 10 to 20 percent more shopping because of tax-free items.”

TNReport.com is an independent, not-for-profit news service supported by generous donors like you!

Washington Can’t Ignore Amazon Sales-Tax Issue Indefinitely: Haslam

Bill Haslam may be the one person in Tennessee who has full faith and confidence that Congress will act.

No, not on the national debt or debt-ceiling. Gov. Haslam sounds as frustrated and bewildered as anyone else about that.

But Haslam, unlike many people, believes Congress will deliver a remedy for the states on what has gradually come to be known simply as “the Amazon issue.”

Amazon.com, the online retail company, does not want to collect sales taxes in Tennessee on its transactions. This is a problem for a state, particularly a state like Tennessee that relies heavily on the sales tax for its revenue.

Tennessee does not have an income tax, so its reliance on the sales tax is one of the more pronounced aspects of the state budget.

And the Amazon issue just got bigger in Tennessee. The company had already struck a deal with the administration of Haslam’s predecessor, Phil Bredesen, to establish large distribution centers in Hamilton and Bradley counties without a requirement to collect the state sales tax.

On Thursday, Amazon announced it is setting up another Tennessee distribution center, in Lebanon in Middle Tennessee. So as Amazon’s presence grows, the sales tax issue intensifies.

A plan has been in place since 1999, and supported by more than 40 states and the District of Columbia, where a level playing field would be applied in order to capture sales taxes from “remote sellers” on the Internet. The Streamlined Sales Tax idea is to make those sales play out in a way that is fair to traditional “bricks-and-mortar” retailers, who feel letting online sales go untaxed is wrong.

Hundreds of online retailers in the country do collect taxes in those states on a “voluntary” basis, but they don’t come near collecting what is “owed,” and it’s almost impossible for states to try to collect taxes in a piecemeal fashion. States have already seen how a mere threat by Amazon to pull out of a state — and take its job opportunities with it — can bring a legislature to its knees. It happened in South Carolina, where the legislature blinked and granted an exemption.

The U.S. Supreme Court has said Congress can act under the Commerce Clause of the Constitution and force a level playing field on the states. To many observers, that notion is laughable, because if Congress were to take that step it creates the appearance that Congress is raising taxes, although in reality it wouldn’t raise a penny in new tax.

Further, Congress would risk the appearance while never receiving one cent for federal coffers. So it might look politically foolish to members of Congress to boost revenue streams for states.

Haslam believes Congress will act. He says so with a straight face.

In an interview with TNReport recently, Haslam said emphatically that he believes Congress will do the right thing and help the states.

“Ultimately, they’re going to have to,” he said. “It’s not just the states. If you’re a mayor, it’s killing you, too. You also get property tax revenue. If you’re a mayor, you have to have new growth, but am I going to build a shopping center in today’s world? Probably not, because I used to think I would get a store, like a Barnes & Noble, to be an anchor.

“That new growth is what helps local governments. I think eventually the cost will be so big it will have to be looked at.”

But would a member of Congress go anywhere near such a thing? Why look like a tax-raiser when you’re not getting any of the tax?

“That’s the problem,” Haslam said. “I’m afraid the problem will get so severe Congress will say, ‘Oh, wow, these folks are getting hit with a double whammy. Number one, we’re sending them less money from Washington as we start to cut the budget. Two, a bigger piece of our economy is now transacted online, not subject to the sales tax. These local and state governments are getting smeared.'”

Haslam does insist he sees both sides of the issue.

“It’s a hard issue,” he said. “I understand why people think, ‘I’ve got a book store here. I’m paying property tax, sales tax, I’m supporting local government and state government. They’re not doing either.’ Believe me, I really get that.

“I also understand Governor Bredesen’s point. If you don’t let them build here, they’re going to build in Georgia or South Carolina. That’s a pretty compelling argument, too.”

Tennessee feels the crunch in ways many other states may not, Haslam said.

“Ours is a little more stark, because we live off the sales tax. We have no income tax. If I’m talking to the governor of Virginia on his list of priorities, it’s probably No. 52. It’s not that big a deal to him.

“One of the issues is in Tennessee if you look at our tax base, we live off the sales tax. There are a lot of exceptions and exemptions to it. As Internet sales pick up, a smaller piece of our economy is subject to the only tax we have in the state (not having an income tax). That’s an issue.”

And the problem is likely to get bigger, not smaller, Haslam said. “Amazon doesn’t just sell books anymore. You can buy a refrigerator from them if you want to. You know what I mean?”

TNReport.com is an independent, not-for-profit news organization supported by generous donors like you!

McNally Seeks Compromise on Amazon Deal

Sen. Randy McNally, R-Oak Ridge, chairman of the Senate Finance Committee, is suggesting allowing Amazon.com a two-year “grace period” on collecting Tennessee sales taxes as a possible compromise on the issue of the state’s arrangement with the Internet sales giant.

McNally still prefers his original proposal — forcing Amazon to collect sales taxes like other retailers in the state. A recent opinion by the state attorney general gives McNally what would appear a green light for his legislation, which is carried by Rep. Charles Sargent, R-Franklin, in the Tennessee House.

But McNally, recognizing the political obstacles of getting the legislation through, sees putting off the sales tax collections as a possible way to help solve the matter.

Lawmakers interested in making Amazon collect the taxes put their legislation on hold this year, pending Attorney General Bob Cooper’s opinion, which came down last week in their favor.

Amazon has become a complex issue for state government. Its two distribution centers being established in Hamilton and Bradley counties are seen as tremendous job creators at a time the state desperately needs them. Yet the arrangement that allows Amazon off the hook for collecting sales taxes has become an item that won’t go away, since it means forfeiting the revenue that could be derived from its sales and creates an uneven playing field with Amazon’s competitors.

McNally said he feels a strong responsibility to protect the state’s revenue stream. But the deal struck by the administration of former Gov. Phil Bredesen with Amazon has complicated the issue.

The Bredesen team decided it was more important to bring the jobs accompanying the two distribution centers to the state than to see the company go elsewhere, where the state would end up with nothing. Many members of the current Legislature, especially the contingent from the Chattanooga area, support the no-tax deal.

McNally told TNReport he knows the Haslam administration is negotiating some with Amazon, which has indicated it might bring even more distribution centers to the state, and that he believes the current administration will be forthcoming on whatever terms are negotiated.

“I’d like to see what the administration is able to negotiate,” McNally said Tuesday. “Given what’s happened, if they allowed them to be exempt from collecting the sales tax for a couple of years, I think some type of arrangement like that would be in the best interest of the state.”

McNally also said he believes a strong possibility could be a lawsuit brought by other retailers who do not get the same luxury as Amazon. The Haslam administration has said it wants to honor prior commitments made to the company.

The attorney general’s opinion bolstered the concept — at least from a legal standpoint — of forcing Amazon to collect the taxes. Cooper said the presence of distribution centers, which some have simply called warehouses, creates “nexus” under state law, meaning there is a substantive retail presence of Amazon in the state, even if it is not a conventional retail center. Amazon calls the facilities “fulfillment centers.”

Cooper also said legislation that would require the tax collections would be constitutionally defensible.

Under other circumstances, Cooper’s opinion might prompt lawmakers to proceed, and McNally and Sargent could still do so, if they choose. But McNally called that strategy an “uphill battle.”

“Amazon has lobbied pretty well on this issue,” he said.

Several lawmakers have expressed frustration in being unable to learn exactly what Amazon got from the Bredesen administration. Lt. Gov. Ron Ramsey had attempted to talk to Matt Kisber, the commissioner of Economic and Community Development under Bredesen, about what deals were made in the last weeks of the Bredesen administration. But when asked last month if he ever was able to have that conversation with Kisber, Ramsey said no.

McNally continues to express frustration.

“My concerns are, No. 1, (the deal) is a secret incentive nobody else knows about or gets,” McNally said. “I think the public at some point should have a right to know: What are the terms of some of these incentives that state and local government give companies to come in and build the facility?

“Second, it treats one out-of-state retailer with nexus different from other out-of-state retailers with nexus. Eventually, we could see a court case come down on that issue.

“Third, it erodes the tax base. We can invest a little into industries that come into the state, and Amazon has received a pretty good deal as far as local and county property taxes. It also received a jobs tax credit. This was sort of the Cadillac of deals.”

He sees long-term ramifications from such arrangements.

“I think, eventually, if we keep doing things like this, we would be in trouble as far as sales tax revenues in the state,” McNally said.

Tennessee is not alone in dealing with the Amazon dilemma. Several states have grappled with the issue, and South Carolina actually reversed course after sensing that Amazon would leave, granting the company the ability to operate without collecting sales taxes.

“Forever and ever not to have to collect sales taxes in the state, particularly when other retailers similarly situated have to, is just wrong,” McNally said.

Amazon does collect the tax in five other states — Kansas, Kentucky, New York, North Dakota and Washington — where it has offices or other physical presence.

TNReport.com is a nonprofit news service supported by generous donors like you.

Bredesen Busy Traveling, Lecturing, Promoting Health Policy Book

Former Gov. Phil Bredesen remains zip-lippped about what’s in the state’s deal with Amazon.com, although he has plenty to say about what he’s been doing since leaving office, which is traveling the country making speeches, mostly about health care.

“I’m not retired. I’m not vegetating,” Bredesen said. “I’m very active and trying to figure out how I can best use the next few years.”

Bredesen was at a campaign event Saturday in support of Nashville Mayor Karl Dean, who is running for re-election.

Nashville is still home base for Bredesen, but since leaving office in January he has traveled to various locations, from Chicago to Florida to the West Coast, to speak. He has primarily talked about health care, including one joint appearance with former Florida Gov. Jeb Bush, but he has also spoken on the state’s experience recruiting international businesses like Volkswagen and Wacker Chemie.

One domestic business recruitment with Bredesen’s brand on it, however, remains a point of controversy in the state. Amazon is building two large distribution centers in and near Chattanooga. The Internet sales giant is making a $139 billion investment, offering 1,400 jobs and comes in with the agreement that it will operate without collecting sales taxes as a retail outlet would.

A couple of key lawmakers have cried foul, presenting legislation to force Amazon to collect the tax, but that effort has met resistance and even a threat from Amazon that it might pull out if forced to collect. Lawmakers have even asked the state’s attorney general to weigh in on their effort. The bill has been deferred to 2012.

Among lawmakers’ questions have been to what degree the agreement with Amazon has even been in writing.

“I’m just not commenting on stuff that’s going on like that right now,” Bredesen said. “We had an understanding with Amazon, and it was really Matt Kisber (former commissioner of Economic and Community Development) who did all the detail work on the thing.

“I think it was the right decision. I think the current governor thinks it was the right decision to get them here. I think they will be an important piece of the economy.”

The Bredesen administration made the deal after Bill Haslam was elected governor in November but before Bredesen left office. The most widely reported explanation for the arrangement has been that Bredesen told Haslam the state could either grant Amazon the ability to avoid collecting the tax or see the company go a few miles down the road and build its facility in Georgia. The same issue has played out in other states. Bredesen wanted the jobs in Tennessee, and Haslam has publicly said the state will honor the commitment.

Bredesen said there were compelling reasons for striking such a deal.

“Part of what appealed to me about Amazon was I worked real hard to get some of the knowledge-based jobs that require a college education, where you’ve got good salaries and so on,” Bredesen said. “A lot of the Amazon jobs are a little different from that. They’re working in a warehouse. We need those jobs, too.

“There are a lot of people in this state who just need a job with a good company with good benefits, and they’re not going to go back to college to do it.”

When asked last week where the attorney general is on the Amazon issue, Sharon Curtis-Flair, spokeswoman for Attorney General Robert Cooper, said, “We’re working on it,” but she offered no elaboration on a potential opinion or when it might come.

Bredesen said getting a well-respected company like Amazon to build in Tennessee at a time when jobs are hard to come by seemed like the right deal to make. He was asked about the precedent, however, of setting up that arrangement, since Amazon is already making overtures of building even more distribution centers in Nashville or Knoxville.

“I think the governor has got to figure that out,” Bredesen said. “But in the scheme of things, if an Amazon were to be located here, ultimately these tax issues are going to be solved by the Congress.”

Haslam has also said no single state should have to work out the issue of collecting sales taxes on online sales. The issue is complex. Amazon is based in Seattle. Company officials point to the commerce clause of the U.S. Constitution and say the existence of a “fulfillment center,” as Amazon is building, does not create substantial presence, known as nexus, to qualify as a point of sale.

“The two facilities happened on my watch, I think we made the right decision, I think the governor has backed that up, and how he treats the next two or three is up to Gov. Haslam,” Bredesen said.

As for the former governor’s travels, they’re the kind of speaking engagements one would normally expect after the publication last year of Bredesen’s book, Fresh Medicine — How to Fix Reform and Build a Sustainable Health Care System.

“I had a lot of requests to do that after the book came out in the fall, and you really can’t do it as a sitting governor,” Bredesen said. “You can’t take off and go to California for a few days and give speeches.”

He said the topic in such settings is beginning to move more toward the future of the health care system, rather than just reaction to the health care reform law. Bredesen’s book is due for a paperback version this fall.

“I’m up to my eyebrows in health care,” Bredesen said.

The event with Jeb Bush was a health care discussion held by the venture capital group Health Evolution Partners, where they had a “D” and “R” program, with Bredesen the “D” as a Democrat and Bush the “R” as a Republican.

Bredesen said he has put the notion of trying to serve at the federal level on health care policy on the shelf, adding that when it came up it was probably given more attention than it deserved. He also said Saturday he has no intention of running for the Senate. Bredesen was at one time considered a candidate to be President Barack Obama’s secretary of Health and Human Services, which ultimately went to Kathleen Sebelius, a former governor of Kansas.

So for now, Bredesen is doing the speech-making tour and deciding what’s next. Bredesen was mayor of Nashville for two terms from 1991-99 and governor for two terms from 2003-2011.

“When I left the mayor’s office, after I left on Saturday, on Monday morning I was setting up my desk in a new office,” he said. “I’ve said this time, don’t do that, when you’ve got one more good career in you. Get a little space. Get some of these speeches done you wanted to do. Do a little writing, and let things gel a little bit.”

Bredesen said former first lady Andrea Conte now “enjoys being out of the line of fire,” and she’s doing a lot of the same things as her husband is.

“She’s been out and active and around doing different things, giving talks to different groups. She is spending serious time in the garden, and we’re having a great time right now,” said former governor Bredesen.

Mike Morrow is a correspondent for TNReport.com, a not-for-profit news organization supported by donors like you.

No Sales Tax for Amazon in SC

South Carolina lawmakers have blinked in a stare-down with Internet sales giant Amazon.com over sales taxes, a development that could reverberate in Tennessee.

The House and Senate in South Carolina have voted to give Amazon a five-year exemption from collecting sales taxes, a move that comes after the company stopped a project in South Carolina because of the tax dispute.

Amazon has said South Carolina mistakenly thought the company was bluffing about stopping its activity in the state.

Amazon has reportedly made a similar threat to shut down new sites in Tennessee, where it is building distribution centers in Chattanooga and in Charleston in nearby Bradley County. The chairmen of the House and Senate finance committees in the Tennessee General Assembly — Sen. Randy McNally, R-Oak Ridge, and Rep. Charles Sargent, R-Franklin — proposed legislation this year aimed at requiring sales tax collections on the Internet sales, but both deferred the legislation until 2012.

Amazon, based in Seattle, has begun its Tennessee hiring process for its distribution centers, including a series of hiring events across the state this week.

Advocates for allowing Amazon to forgo sales tax collections are looking at the company’s presence for its value in creating jobs, which have been scarce in the troubled economy. Reports have put an estimate of 1,400 jobs on the two facilities in East Tennessee, after an investment by Amazon of $139 million.

The Tennessee State Funding Board on April 12 approved $4 million for infrastructure and $599,500 for job training for the Amazon site in Chattanooga. The same day the board approved $2.2 million in infrastructure and $102,500 in job training for Amazon in Charleston.

The original Amazon deals in Tennessee were struck during the administration of then-Gov. Phil Bredesen, although lawmakers have had difficulty finding out details of those agreements. Gov. Bill Haslam has said the state should honor its commitment to Amazon.

At issue is whether Amazon should have to collect the state sales tax of 7 percent along with the additional 2.5 percent local option sales tax, which combined make Tennessee’s sales tax among the highest in the nation.

Amazon says it is protected under the U.S. Constitution’s commerce clause from having to collect the Tennessee sales tax because its distribution centers do not constitute substantial presence, or “nexus” in the state. The company’s position is that it does not have a retail presence in Tennessee, that its “fulfillment centers” simply distribute the goods and do not conduct sales.

Some Tennessee lawmakers believe the centers do create sufficient nexus to require collection of the taxes, as do a vast number of brick-and-mortar retailers in the state. Lawmakers have requested an opinion on the issue from Tennessee Attorney General Robert Cooper.

A compromise was struck in the South Carolina legislature that provides a five-year exemption but says Amazon must include language in confirmation emails to customers on sales that the customer may owe a state tax on the transaction. At the same time, an Internet link must be provided the customer by Amazon to the South Carolina Department of Revenue. In addition, Amazon would have to inform customers of the yearly total of tax they owe on their Amazon purchases.

Amazon officials have reportedly said they will renew their construction on their South Carolina site when the legislative action becomes law.

In its most recent annual report to stockholders (pdf), Amazon said its fulfillment centers and customer service centers could result in greater tax obligations. The report notes that Supreme Court rulings have protected Amazon from sales tax collections.

“However, a number of states, as well as the U.S. Congress, have been considering or adopted initiatives that could limit or supersede the Supreme Court’s position regarding sales and use taxes on Internet sales,” the company report said.

“If these initiatives are successful, we could be required to collect sales and use taxes in additional states or change our business practices.”

Amazon has voiced its support for federal efforts to create a streamlined sales tax system that would address Internet sales tax issues, an approach Haslam has said is a better answer than having a single state tackle the matter. But questions have been raised about the willingness in Congress to enact such a measure, because it would clearly be viewed politically as a large tax increase on consumers.

Amazon has had a similar spat with Texas, where the company has yanked an expansion operation in a disagreement over collecting taxes. Texas has said it is owed $269 million. According to Site Selection magazine, which covers economic development issues, Amazon collects taxes in several states, including Kansas, Kentucky, New York, North Dakota and Washington. It does not collect sales taxes in Arizona, Indiana, Nevada, Pennsylvania and Virginia. The company has cut off arrangements in Rhode Island, North Carolina, Hawaii and Colorado, the magazine reported.

Amazon has more than 50 fulfillment centers.

Amazon has said it hopes to bring several fulfillment centers to Tennessee, which it says could mean an additional 1,500 jobs in Nashville and Knoxville. Should the state agree to allow Amazon to avoid collection of sales taxes at its two East Tennessee sites, the precedent could factor in on future arrangements under the Haslam administration.

Amazon Sales-Tax Waiver ‘a Sell-Out of TN Businesses’: TFT

Press Release from Tennesseans for Fair Taxation, May 7, 2011:

Legislators move to reverse Administration’s Amazon exemption from sales tax collection.

Senate Finance Committee chair Randy McNally and House Finance Committee chair Charles Sargent will amend their bills SB 529 / HB 136 to clarify that sales tax be collected by businesses that have any physical presence in the State. These bills will be heard in Senate Finance Committee at 8:30 AM on May 10, 2011 and in House Finance Subcommittee at 10:00 AM the same day.

Gov. Haslam’s administration has secretly ruled that Amazon, the giant Internet retailer, need not collect Tennessee sales tax from sales through its “drop shipping” warehouse operations being built in Hamilton and Bradley Counties. McNally’s amendment explicitly requires that “drop shippers” and other dealers who operate physically in Tennessee must collect sales tax on Tennessee sales.

At a time of deep budget cuts, the special exemption would forego several million dollars annually in state revenue. The amended bills would raise at least $11.6 million according to a preliminary fiscal note.

“The Administration waiver of sales tax collection by Amazon is especially outrageous, as well as unfair, because it was made in secret behind closed doors without any public comment or action by the State legislature,” said John G. Stewart, former chair of Tennesseans for Fair Taxation. “This is a sell-out of Tennessee businesses, as well as a denial of legitimate tax revenue at a time of serious budget shortfalls and program cuts. In our democracy the Governor should propose but the Legislature should decide and that is what is proposed here.”

Amazon has agreed to locate two distribution centers in Bradley County and Chattanooga, and has already received more than $30 million in tax incentives from the State of Tennessee as part of the deal. But Amazon.com also demanded an exemption on collecting the Tennessee sales tax and remitting these tax revenues to the state, as is required of all Tennessee businesses. This exemption is in addition to the significant subsidies and incentives it received from the Bredesen administration.

Gov. Haslam acknowledged last week that Amazon’s demands for an exemption had been accepted. An article in the Chattanooga Times Free Press stated: ‘Asked directly whether Amazon would not be required to collect sales taxes on purchases made by Tennessee customers, Haslam said, “That’s exactly right.”’

The sales tax exemption was initially proposed by the out-going Bredesen Administration in a public notice posted in the last days of December 2010. The notice scheduled a public hearing in February to consider a change to the Department of Revenue rule governing the taxation of drop shipments.

At the last minute, after Tennesseans for Fair Taxation had requested an opportunity to comment, the hearing was cancelled. Governor Haslam’s 45-day moratorium on rule-makings was cited as the reason for the cancellation. Rather than reschedule the hearing and receive public testimony, the Haslam Administration secretly granted the exemption without any public notice or involvement.

If the Administration’s decision is not reversed it will hurt local businesses that must follow the law and already struggle to compete with the online giant.

Attorney Brian Paddock, a TFT volunteer noted: “When I asked a Retail industry representative about the Amazon exemption he wrote me a note saying:

The retail community in Tennessee believes that any deal to exempt Amazon.com or any other online-only retailer from collecting state sales taxes is a bad deal.  We are working with the Governor and the state Legislature to convince them that all retailers deserve equal tax treatment.  We support new jobs in Tennessee but not at the expense of the existing businesses.

All Tennessee retailers want is a level playing field.  We want competition to be fair.  Tennessee’s consideration of a plan to exempt Amazon from collecting state sales tax does the exact opposite and retailers across the state are justifiably upset.

Why should Amazon be exempt from collecting state sales tax?  Why should the state government, which in Tennessee operates primarily off sales taxes collected by existing merchants, put those same merchants at a disadvantage?  Why does a Tennessean running a business in these challenging economic times have to include state sales tax on each purchase, collect it, track it and pay it to the state when the state says a competitor selling the same product does not?

Amazon.com wants to open distribution centers here and avoid collecting state sales taxes.  It’s wrong and it’s a bad deal. Tennessee’s retailers, big and small, deserve fair treatment and a level playing field.

“TennCare, higher education, and pre-K funding, among many other programs, are slashed in Gov. Haslam’s proposed budget, but revenue that could soften those cuts is not being collected by Amazon,” says Lorri Mabry of Antioch, Tenn. “It’s blatantly unfair and unwise. We need to collect all the revenue that is owed to the state – Tennesseans are hurting.”

Last week Gov. Haslam released his Jobs4TN plan with a focus on “assisting existing Tennessee businesses in expansions and remaining competitive.”

“The Amazon exemption flies in the face of the Administration’s professed objective of assisting Tennessee businesses,” said Katie Findley, a University of Tennessee (Knoxville) student. “All Tennessee businesses want is a level playing field and this decision gives a huge price advantage to Amazon.” Because of Tennessee’s high sales tax, small businesses already lose out to online and out-of-state competitors, and many retailers struggle to compete with Amazon, in particular.

Mabry and Findley also are members of Tennesseans for Fair Taxation, a statewide coalition of people and groups that support revenue with justice for all Tennesseans. TFT also supports the Out-of-State Sales Tax Act, sponsored by Sen. Beverly Marrero and Rep. Mike Stewart, which would require any out-of-state vendor selling more than $4,800 of goods annually to Tennesseans and using in-state affiliates to solicit those sales to collect the sales tax due on items sold.

The bill would override the administration’s backroom deal for Amazon, and would raise more than $100 million in additional revenue by requiring Amazon and any online or out-of-state vendor doing significant business with affiliate presence in Tennessee to collect sales tax.

Sen. Bo Watson has introduced a bill that would require “letter rulings” and “revenue rulings” like the one apparently made in the Amazon case to be open to the public. “Amazon can afford to collect the sales tax from its customers,” said Elizabeth Wright, executive director of TFT. “Tennessee can’t afford to exempt them from doing so. Any time one business doesn’t collect the taxes that are legitimately owed, other taxpayers must take up the slack, either in higher taxes or reduced government services.”

Lt. Gov. Ron Ramsey spoke out last week against the exemption, telling the Chattanooga Times Free Press, “It’s the one where you make an outright gift or do a sales tax exemption that no other business in the state has, those are the type of things that bother me,” Ramsey said. “This whole Amazon tax issue, that they’re not paying sales tax, I just don’t think that’s something that should ever have been agreed to.”