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TFT: Where is the Revenue, Justice in Deal?

Press Release from Tennesseans for Fair Taxation, Feb. 24, 2011:

Revenue ?with? Justice ?Report

This “Revenue with Justice Report” inaugurates an occasional service by Tennesseans for Fair Taxation (TFT) to provide fact-based analyses of pending issues related to Tennessee’s state budget, public programs, and tax policy. Recipients are free to use this material, in whole or in part, with or without attribution to TFT.

TFT is a statewide non-partisan coalition of people and groups working to assure a balanced, just, and equitable tax system in Tennessee, one that provides revenue critical to economic growth, prosperity and essential citizen services. For further information about this “Revenue with Justice Report,” be in touch with:

The? Amazon? Fast ?Shuffle

Tennessee has chosen to rely on the retail sales tax as its principal source of public revenue. Thus, it is critical that this tax be administered in a just and effective manner. For this obvious reason, the under-the-table, backroom deal that is designed to relieve Amazon of its legal obligation to collect sales taxes from its Tennessee customers and remit those tax receipts to the Tennessee Department of Revenue is unacceptable for two major reasons:

  • Tennessee, like most states, faces a serious revenue shortfall and related budget deficit. Every legitimate tax dollar, as determined by Tennessee law and the U.S. Constitution, needs to be collected.
  • Relieving Amazon of its constitutional and legal obligation—while enforcing this obligation against Tennessee-based retailers—places homegrown and Tennessee operated businesses at a severe competitive disadvantage at a time many are struggling just to stay alive.

What is going on here?

In the closing weeks of the Bredesen Administration, Amazon agreed to construct two affiliated distribution centers near Chattanooga. Details of the deal have been declared confidential but, in addition to the expected incentives of job-creation and property tax credits, money for employee training assistance, and free land, it now appears that the deal includes promises to overlook constitutional principles and Tennessee law to determine whether Amazon will be required to collect and remit sales taxes in Tennessee.

  • The Department of Revenue is planning to change a regulation under Tennessee tax law that has been in effect since 1974 (Tax regulation 1320-5-1-.96) which imposes an obligation to collect and remit sales taxes on in-state distribution centers. The proposed change will carve out an exemption for Amazon while continuing to require existing distribution centers to keep imposing the sales tax on their customers.
  • Without this change in Tennessee’s tax regulations, it is clear that Amazon’s proposed distribution activities will meet the standards, defined by the U.S. Supreme Court and the Tennessee Court of Appeals, that require a business to collect and remit the Tennessee sales tax.
  • A public hearing on the proposed regulation amendment is scheduled for Friday, February 25, 2011, at 1:30 PM CST on the third floor of the Tennessee Tower, 312 Rosa Parks Avenue, Nashville, TN.

What are the costs to Tennesseans of this under-the-table, backroom deal?

  • The deal will cost Tennessee in excess of $64 million in revenue each year. ? The City of Chattanooga will give up an estimated $720,000 each year. Hamilton County will give up $435,000 in revenue (but Amazon will pay the school tax portion of its tax bill–$430,000). ? Local retail competitors of all sorts (Amazon sells a lot more than books) will be at a permanent price disadvantage since they are legally obligated to collect retail sales tax. (Amazon’s sales topped $24 billion in 2009—one of the worst years for U.S retailers.)

What about the jobs that Amazon will create with its distribution centers?

It is estimated that Amazon will hire 1400 full time workers and 2000 seasonal workers. Here is an interesting calculation in that regard:

  • On the assumption that full time workers will average $30,000 annually and seasonal workers will be employed for two months, the total annual payroll would be in the vicinity of $55 million.
  • This cost is roughly equal to the tax revenue lost to Tennessee. So, in one sense, the citizens of Tennessee end up paying the wages of all of Amazon’s Tennessee employees each year . . . and forever!
  • Any job created by Amazon’s under-the-table, backroom deal could well be offset by the loss of employees currently working at Tennessee’s existing distribution centers, due to the unequal playing field created for Amazon.

TFT? wants? to? know: In? the ?Amazon? deal,? where ?is ?the ?revenue?? Where? is ?the ?justice?

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