Business and Economy Tax and Budget

Amazon Tax Question Set Aside Til Next Year

Amazon contends it is protected under the commerce clause of the U.S. Constitution. Some lawmakers say the online retailer is the beneficiary of an unfair advantage. The state attorney general is expected to weigh in.

Legislation geared toward forcing Internet sales giant to collect sales taxes on its business that goes through Tennessee was deferred until 2012 in both the House and Senate on Wednesday.

Rep. Charles Sargent, R-Franklin, had some of the harshest words for the arrangement with Amazon that was struck under the administration of former Gov. Phil Bredesen.

“We can find no legal basis for this alleged agreement. None,” Sargent said in a House Ways and Means Subcommittee meeting. “Nobody is above the law, and nobody can cut deals to circumvent the law.”

Sen. Randy McNally, R-Oak Ridge, chairman of the Senate Finance Ways and Means Committee, said after his committee meeting there were two reasons for the deferral — one being an anticipated report from the state attorney general on the sales tax collection issue, the other being whether there were enough votes to pass the legislation.

McNally also said word circulating that the bill would be deferred in the House was a factor in his deciding to defer the Senate bill.

“We wanted to make sure — and we weren’t sure — where all the votes were,” McNally said. “We thought we had a pretty good vote count. We thought it would be a close vote, but we thought we had the votes.

“This (deferral) gives us a chance to use the attorney general’s opinion to modify the bill and take a look at it in January.”

But there was plenty of debate before the Senate committee.

Paul Misener, vice president for global public policy for Amazon, told Senators the best approach to the sales tax issue is by addressing the matter on a national scale with federal streamlined sales tax legislation.

But representatives for retailers in the state told the Senate committee that current law already requires a business such as Amazon to collect sales taxes on purchases and that a new bill is unnecessary.

Amazon has launched two major distribution centers in the state with the understanding from the Bredesen administration that it could avoid collecting the sales tax on Internet transactions. While Gov. Bill Haslam has accepted that decision, some lawmakers have not. There is considerable concern that an exemption for Amazon is unfair to brick-and-mortar retailers, who have to collect the tax.

The incentives given Amazon are seen as a big boost in creating jobs, which is a priority in the state.

There has been considerable frustration among lawmakers trying to find out details of the arrangement between the Bredesen administration and Amazon. Attempts in the Senate committee meeting yielded little insight Wednesday.

“I have very strong feelings that the people of Tennessee ought to know what the deal was,” McNally said after the meeting. “We have a little bit better understanding of it but not a complete understanding.”

Amazon contends that its decision is protected under the commerce clause of the U.S. Constitution. The company says it has no retail presence in Tennessee, since it only distributes products through what it calls fulfillment centers, which are large warehouses for completing orders.

Complicating the issue even further is the reported potential of Amazon opening even more distribution centers in the state, which would lead to questions of whether the company would want the same sort of arrangement with the Haslam administration.

“Exempting Amazon from collecting sales tax is unfair to our existing businesses, who are then at a disadvantage” Sargent said.

“We rely on government to supply critical services like education. Without the sales tax, we lose our primary way to fund these programs.”

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