Lawmakers spent much of last year riding a political roller coaster to define Amazon.com’s role in collecting sales taxes from online shoppers. This week they made their first move to approve a deal reached between the state and the online retail titan.
Just a day before Gov. Bill Haslam toured the new Amazon warehouse in Chattanooga Thursday, a House Finance subcommittee easily approved legislation to seal a deal with Amazon to collect sales taxes from its online shoppers beginning in 2014. It will amount to about $23 million a year, according to legislative analysis.
“These sales taxes are already due,” House Majority Leader Gerald McCormick, R-Chattanooga, told the committee as he pitched the bill. “This simply is a collection issue, and they have agreed to collect the sales tax.”
The deal means Tennessee taxpayers who shop online will get to hold on to about $40 million in revenue that could be collected between now and 2014, according to legislative staff.
Haslam and Amazon.com executives announced a deal in October where the Internet retailer would make a $350 million investment by opening distribution centers in Hamilton and Bradley counties. The Internet retailer is opening additional centers in Lebanon and Murfreesboro.
The arrangement, which was called “Project Tango” by officials, grew out of a deal struck between outgoing Gov. Phil Bredesen and Amazon executives just weeks before Haslam took office.
Lawmakers quickly split on the issue. Although they liked the prospect of Amazon creating thousands of jobs in the state, some argue the company ought to be forced to collect money from Tennesseans for the government just like any other business located here.
One of those critics, who says he is satisfied with the current deal, says he doesn’t see the bill hitting any snags making its way through the Legislature, even though Amazon has brokered deals in other states that require the company to collect sales taxes as soon as September.
“There are a number of states that are not collecting a penny, and this is something we were able to work out, plus the benefit that we are going to have four distribution centers in the state of Tennessee. I think that’s a good thing,” said House Finance Committee Chairman Charles Sargent, R-Franklin.
The issue is one of national significance. Amazon has argued there is no uniform law that requires it to collect sales taxes and that the company doesn’t meet a legal threshold called “nexus” for collecting the taxes because it doesn’t have brick-and-mortar sales facilities in many states seeking the tax.
Giving the Internet retailer a pass on collecting sales taxes is unfair to Tennessee business with a physical state presence because they have to charge customers the tax, says critics with the Tennessee Alliance for Main Street Fairness, a fierce opponent to the Amazon deal in Tennessee and across the country.
Only a federal law requiring the retailer collect sales taxes in all states would trigger Amazon to collect sales taxes any earlier than 2014.
House Speaker Beth Harwell, who met with Amazon executives Wednesday, said she too sees no trouble writing the deal into state law, but wants a national solution from Washington.
“Our federal government has got to take action on this issue, and until they do, all of our hands are tied,” she said.
The state legislation is up again for discussion in both the House Finance committee and the Senate tax subcommittee Tuesday.